When and How to Change Your Business Model

In the fast-paced world of entrepreneurship, adaptability is key to survival. Some of the most successful businesses today, including Netflix, Slack, and Twitter, started with completely different models before pivoting into what they are now. But how do you know when it’s time to pivot? And more importantly, how do you do it successfully?

What is a Business Pivot?

A business pivot is a strategic shift in a company’s business model, product, or target audience in response to market demands, competition, or financial challenges. A pivot is not a sign of failure; rather, it’s an opportunity to evolve and find a more sustainable path to success.

Signs It’s Time to Pivot

How do you know when to change direction? Here are some key indicators:

Declining Revenue or Stagnant Growth

If your revenue has plateaued or started to decline despite your best efforts, it may be time to reassess your business model.

Lack of Market Demand

Are customers showing little interest in your product or service? If so, it might be because you’re solving a problem that isn’t significant enough or the market is too small.

Strong Competition is Dominating the Market

If well-funded competitors are taking over your market share and you can’t differentiate enough to compete, pivoting to a niche or new offering may be the solution.

Customers Are Using Your Product Differently Than Expected

Sometimes, users find a different or more valuable use for your product than you originally intended. If this happens consistently, it may be worth pivoting towards that need.

High Customer Acquisition Costs

If it’s too expensive to acquire new customers and your customer lifetime value (CLV) isn’t growing, your business model may not be sustainable.

Feedback Suggests a Better Opportunity

Consistent feedback from customers, advisors, or market trends may indicate that an alternative approach could be more successful.

How to Pivot Successfully

Once you’ve identified the need to pivot, follow these steps to execute it effectively:

1. Identify What’s Not Working

Analyze key performance indicators (KPIs), customer feedback, and industry trends to pinpoint exactly why your current model isn’t working.

2. Determine the Core Strength of Your Business

What aspects of your business are working well? This could be your technology, brand reputation, customer base, or team. Keep these strengths intact while pivoting.

3. Research New Opportunities

Look at market gaps, customer pain points, and emerging trends to identify a new direction with higher potential.

4. Test Your New Idea Before Committing Fully

Before making a full shift, validate your pivot idea with a Minimum Viable Product (MVP) or pilot program. Gather feedback and adjust accordingly.

5. Communicate the Change Clearly

A pivot affects customers, employees, and investors. Be transparent about why you’re making the shift and how it benefits stakeholders.

6. Monitor Performance and Iterate

Once you pivot, track your progress through measurable KPIs. If necessary, refine your strategy further based on new insights.

Real-Life Examples of Successful Pivots

Netflix: Started as a DVD rental company and pivoted to streaming, then into original content production.
Slack: Began as a gaming company but pivoted into a workplace communication platform.
Instagram: Originally a location-based check-in app before pivoting into a photo-sharing platform.
Twitter: Started as a podcast platform called Odeo but pivoted into a microblogging social media platform.