Iterate or Pivot: A Business Dilemma
Hello friends and welcome back to another edition of my newsletter, where I share lessons from over 25+ years of experience as a product and finance executive, with $300M in product launches and over $800M in funding.
It was painful.
Everyone I respected was telling me to pivot to a dating site. But, my heart wasn’t interested in that kind of business. I wanted to help people build their business network, because I knew how valuable my network had been to my career.
I knew I was solving a universal need. You don’t get to members in 45 countries otherwise.
Still, the pressure to pivot to an online dating site was intense.
Instead, I spent my energy iterating on new features to add. First we added social sign-on functionality, so members could use existing profiles. Next, we added additional screening features.
Membership continued to grow. But, revenue wasn’t.
Iterate vs. Pivot - with examples
When a business “iterates” it moves through a process of building, testing, and refining a product or service. Iterations are small changes.
A pivot involves significant changes in response to new information or challenges. Once you pivot you are likely attacking a brand new problem. Pivots are larger, often sweeping, changes.
Some of the most recognizable companies in the world have gone through the iterate vs. pivot decision.
(Iterate) Amazon started out as an online bookstore and iterated to a full-service e-commerce platform.
(Iterate) Duolingo iterated to add podcasting and other storytelling methods to its language learning app.
(Iterate) Uber was originally just a replacement for taxis. Then they added Uber Eats.
(Pivot) YouTube was a video dating site. Why didn’t I think of that!
(Pivot) Slack was originally an internal messaging platform for a gaming company. Now look at it.
(Pivot) Instagram started as a Foursquare competitor.
When, and how, to iterate vs. pivot
Deciding between iteration vs. pivoting can be the difference between selling out to LinkedIn one day 🤔 or closing down your business.
Here’s how you decide.
You should iterate when your current business model has some traction but needs refinement to scale. Its the right choice when the feedback loop is telling you that minor changes are all you need to see some real growth.
To iterate successfully, you typically need to make slight adjustments to improve your messaging, optimize the product’s pricing structure, or add minor features that the market is demanding.
A pivot is warranted when you have little to no traction, your learn that your original assumptions are wrong, or you uncover an even better opportunity that you are capable of acting on.
With a pivot you are starting from scratch more times than not. Because you will need to define a new target market, position your product for a new use case, shift models (ex. B2B → B2C), or leverage an entirely new technology and/or platform.
The decision I should have made
Going back to the example of my first startup, GoGrabLunch, a pivot, to online dating, would have been plausible.
But, looking back, I believe we should have just iterated.
Why?
Because we had plenty of traction.
The model required users and vendors to make it work and we were not struggling there. We had plenty of users and were seeing wonderful growth. Vendors were also flocking to the app.
Were we struggled was the revenue model.
Although it made sense to us to align the cost to a vendor to their ROI for being on the platform, i.e. only pay us if we made them money, that model wasn’t something they were used to.
What we should have done was iterated to a different revenue model.
If I were to do it all over, I would have iterated to a membership model. That was a revenue model that the vendors understood.
Get a free product assessment
If your business is struggling with growth and you aren’t sure if you should iterate or pivot, we can help.
Click the button below to request a free, no-obligation product assessment.