4 Warning Signs Your Business Model Needs To Pivot ASAP

Kirsten Yurich

Pivot! A word that brings to mind the image of some young men shifting a couch to fit up a tight staircase.

How does this image relate to business?

Often in business, we have a target—a customer need, a society problem to solve, a future state to achieve—and determining the best way to reach our target necessitates that we design our businesses to pivot.

We pivot in areas such as what we do and how we do it. But never in the why we do what we do—our purpose. The purpose of our company stays the same.

I believe companies that embrace an "attitude of innovation" win the pivot war. When employees are rewarded for new ideas, trying things, even failing, as a normal course of action—when it comes time for a “BIG PIVOT,” say…Netflix style, it will be easy for the company!

There will be lots of reasons to PIVOT across the life of your business but if your workforce is not ready, willing, and feeling safe to ride the edge with you as a leader, it won’t matter if you have the next big idea for your company. Your inability to execute will render you irrelevant.

Kirsten Yurich is a former CEO and current Vistage Chair. As a clinician, professor, author, and executive, she leverages this unique blend and creates learning environments for executives to become better leaders, spouses, and parents.

Mike Thorne

Most business owners/CEOs know their key metrics (in their head vs. a dashboard usually) but, nonetheless, they intuitively know what the warning signs are and when it is time to “pivot.”

Below are four common structural ones.

• Declining revenue/consumer behavior change
• Reduced profit margin (product/service mix change, customer shifts)
• Slowing AR (potential customer financial issues)
• Overall order flow (competition, market shifts)

My experience is despite knowing which one is causing the issue, SMB owners play firefighter and react vs. getting in front of them. Why? Admitting that there is an issue to be dealt with is the most important step. Fear of being judged/emotional —you as the leader, in your gut, know that something is missing. Your heart/gut (emotion) to your brain (logic) is a very short distance, but for a leader, it is the longest and hardest journey to make. Get over yourself, and ask for help. Seriously, the organization is built to help you navigate this and it is times like these they will rise up. Empower them!

Here are some thought starters on what might be happening:

• Consumer Behavior - Online vs. brick and mortar or remote workers vs. office (local printing/restaurant/coffee shop, etc.). Have consumers' preferences changed? Experiences vs. things most recently.
  • Market research (actual or just speak to your consumers/customers).
  • Is something happening geographically?
• Profitability Challenges - Declining or stagnant profit margins, increasing operating costs (no pricing power), or reduced cash flow, increased days sales outstanding. OR are your suppliers shortening your terms? Has the customer mix changed? Product mix?
• Competitive Threats - Is your value proposition still relevant?
  • Spend time with your customers and suppliers to explain problems or challenges and you will likely get their support to help you. See it as a connection discussion vs. a confrontation. They NEED you as much as you NEED them. Build a road map with all the input costs and see where there is an opportunity to improve.

Bottom line: Make sure you “KNOW YOUR 5 C’S” at all times—what is happening to our costs, circumstances (consumer/customer/competitor), and capital, capacity, conversion (cash DSO, inventory turn, etc.).

Mike Thorne is a former CEO and current Vistage Chair. He leads and facilitates a group of trusted advisor entrepreneurs and a CEO peer group in New Hampshire and Maine.

Mark Fackler

Simply put, it is time to pivot when your product/service is becoming misaligned with your chosen market. Since there are two sides to this equation, the product/service and the market, you can choose to pivot either side of the equation. Pivot your product/service to match the market or pivot to a different market to match your product/service.

The Blockbuster debacle is a classic example of not pivoting your product/service. The market was stable, home-based viewing of movies. Blockbuster was a brick-and-mortar company. Customers came to them. Netflix innovated DVDs by mail, just a new delivery method. Customers did not have to leave their home. Same market, different product/service. Blockbuster sales dropped as DVD delivery took market share. They had plenty of time to see this and begin to pivot. Then Netflix innovated again with online/instant delivery. It should have been child’s play, not rocket science for Blockbuster. They should have not only matched the DVD delivery method but innovated the online delivery. Blockbuster watched, with flat feet. Netflix just crushed them. The loss in sales was an obvious warning sign. What killed Blockbuster was losing their creativity and courage to innovate.

Another example, a more approachable example, and certainly a subtler example, was my company. I started out selling software engineering services to defense contractors, a single service matching a single market. But I wanted to grow, so I added selling to commercial companies. I pivoted to a new market. Same service, new market. Some years later, I added hardware engineering services. I pivoted with a new service. Same market, new service. Notice the ping pong approach. You can pivot on either side, the product/service or the market. I continued to pivot, or innovate as I like to call it, forever. For me, the warning sign was stagnation. If I felt stagnant, it was time to pivot, time to innovate.

The difference between the Blockbuster story and mine is stagnation versus innovation. My advice is 1) scan the horizon and 2) never stop pivoting. Never stop innovating.

Mark Fackler is a retired CEO and currently leads the Vistage CEO group that he was a member of from 1991 to 2002. He is passionate about creating great ROI for his member CEOs.

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