An Overview of Business Strategy Pivots
The concept of strategically pivoting a business is HARD. Planning and running an effective business strategy is difficult in itself, let alone then having to be able to understand, recognize, and know what, when, and how to Pivot!
In this article I will cover:
- What pivoting is
- When it is needed
- How to do it
- An example of what happens when a business fails to pivot
- The 5 best strategy pivots by non-tech businesses I have ever seen!
Historically, business strategy has almost been considered as an afterthought. You only have to look at the search history for “strategy pivot” and you’ll see significant spikes in search volume after monumental global disasters such as the GFC and the initial few months of Covid-19.
Why is this the case? Do businesses not realize the importance of strategy? Do businesses not know how to develop a strategy? Is it just human nature to avoid recognizing the worst-case scenario?
Whatever the reason may be, the failure to strategically plan leaves businesses in damage control when the unthinkable happens. This doesn’t have to be caused by a globally significant event, most commonly a change in a business's environment creates the need to pivot.
The issue of businesses failing to pivot strategy generally stems from a poorly developed or nonexistent strategic plan. Thus there is understandable confusion about how to pivot a business, as pivoting is not an easy task even for strategically aligned businesses.
There are a number of factors to consider and tough decisions to be made, making it one of the hardest things a business can go through.
Business Strategy Pivoting, What, When & How?
What is Pivoting?
While the term 'pivoting' is not frequently used in big corporates who are generally focused on staying the chartered course, it has been ingrained within startup culture for a long time.
Whilst pivoting means to change direction to a new strategy, the change itself doesn’t always have to be monumental and groundbreaking. For example...
What a Pivot Must Be:
- Seeking long term alignment with consumer trends
- Reaffirming strategic intent through a lateral extension of existing capabilities
- Enhancing value through pursuing sustainable growth and profitability
When to Pivot?
Pivoting is generally the final option, businesses should exhaust all other avenues prior to making the decision to pivot strategy. Pivoting too early may result in missing an opportunity in the current situation that wasn’t initially identified.
Some common signs that indicate a business needs to adapt and/or potentially pivot:
- Constantly trailing competitors
- Too much direct competition
- Plateaued for an extensive period of time
- Only has one successful element, the rest fail
- Market unresponsive to product/service
- Unprofitable long term
How to Pivot?
There are a number of components that are required to quickly and effectively adapt and pivot the strategy of a business. Here at Cascade, we believe in an Alignment, Action, and Adaptation approach to strategy.
It is incredibly important during a pivot to make sure everyone is aligned. The next two stages are to act out the strategy with purpose and to adapt efficiently and effectively when required.
Aligning:
- A customer-centric approach to strategy, balancing what customers want with what customers need
- Culture/People, the businesses employees drive the change
- A data-driven response, people lie, numbers don’t
- Current and future visions with goals
What Happens When You Fail to Pivot? The Blockbuster story
The notorious example of a business failing to adapt and pivot in response to the dynamic business environment is Blockbuster.
In the year 2000 Blockbuster was approached by Reed Hastings, co-founder of a company you may now know as Netflix. Mr Hastings was laughed out of the room after he proposed digitizing Blockbuster into an online platform (Netflix).
Blockbuster is the case study for what happens when you fail to strategically pivot. In the space of 10 years, Blockbuster went from market dominance to bankruptcy.
Blockbuster had a strong, rigid strategy with a traditional management team and this is why they failed. Blockbuster didn’t consider or account for change and thus never felt the need to adapt or pivot their business strategy, making this is one of the worst business strategies I've seen.
Businesses that stay too rigid to their initial strategy do not survive, or in the words of HG Wells “Adapt or perish, now as ever, is nature's inexorable imperative.”
The 5 Best Non-Tech Business Strategy Pivots
Kutol Products Company (Play-Doh)
Play-Doh had an interesting journey to becoming one of the world’s most popular children’s toys. This journey started back in the late 1920s at Kutol Products Company, a soap manufacturer in Ohio when Cleo McVicker started working at Kutol.
Fast forward a few years and Kutol was close to going out of business until Cleo negotiated a contract in 1933 with Kroger grocery stores to produce and manufacture wallpaper cleaner to be sold in Kroger stores.
Cleo’s brother Noah developed a safe shapeable clay-like compound made from water, salt, and flour. The product was a success and kept Kutol in business for the following 20 years. Cleo passed away in 1949 and his son Joseph took over the business.
Sales of the Kutol Wallpaper Cleaner plummeted in the early 1950s as homes converted from coal to oil or gas based furnaces following World War II. This is due to the fact that oil and gas furnaces didn’t produce the soot that the coal furnaces did.
Kutol’s Wallpaper Cleaner was first used in the fashion of what we now know as Play-Doh in 1955 by Joseph’s sister-in-law, a school teacher who showed him what design her class had made using the Wallpaper Cleaner. The formula was then altered for the purpose of making a children’s toy.
Kutol made the pivot in 1956 as Joseph established the subsidiary Rainbow Crafts Company, which packaged what we all now know as Play-Doh. This is one of the most iconic business strategy pivots and it’s not even that well known.
How Play-Doh exists today is partly due to the McVicker’s creativity and willingness to explore different products and industries. The fact that this pivot came from an accidental open-ended innovation is special and provides a great example for other businesses in regard to product fit and pivoting.
Wrigley
Wrigley, the now iconic American chewing gum company was founded in Chicago by William Wrigley Jr in 1891. The Wrigley story showcases the potential that pivoting a business can have when consumer trends are recognized and aligned with.
Wrigley didn’t initially start off manufacturing and selling chewing gum. When William Wrigley Jr moved to Chicago in 1891 and started Wrigley’s, the business sold soap.
Wrigley was offering baking powder as a free incentive to buy soap, however, the baking powder quickly became more popular and desired by consumers than the soap.
This was Wrigley’s first pivot as in 1892 he started to sell the baking powder alongside his soap. The baking powder shortly became the primary product sold by Wrigley.
Wrigley continued his premium strategy offering free chewing gum packets with every baking powder purchase. As you can probably guess it didn’t take long for the chewing gum to become more popular than the baking powder itself.
So in 1893 Wrigley pivoted again, abandoning both baking powder and soap to manufacture and sell chewing gum.
Pivoting a business as drastically as Wrigley did twice in three years can be viewed as a high risk high reward situation. Normally that would be true, but Wrigley was in a unique situation.
His free offerings of baking powder and chewing gum were essentially product trials. This meant that Wrigley was pivoting his business in alignment with consumer trends, as consumers approved of his baking powder and then his gum.
These pivots were effective as Wrigley already had the existing capabilities to produce and provided the opportunity for greater sustainable growth.
The 2019 US Chewing Gum Market Share, Wrigley’s also own Orbit among other brands
Chipotle
Chipotle Mexican Grill is a great example of an effective business pivot by a non-tech business. Like quite a number of strategic pivots, Chipotle’s came off the back of disaster.
The prominent fast-casual taco & mission burrito restaurant experienced every restaurant chain’s worst nightmare back in the latter stages of 2015 into early 2016. Chipotle was responsible for two E. coli outbreaks that resulted in around 55 people being poisoned.
This along with a number of other food safety issues caused PR chaos as the public became scared to eat at Chipotle. This resulted in store closures, a drop in sales by approximately 20%, and a plummeting share price.
The events that had unfolded required Chipotle to pivot its overall strategy to align long term to the improvement of food safety standards and to regain and maintain consumer confidence.
Chipotle reaffirmed its strategic intent by adapting its food storage and preparation standards, prioritizing hygiene through strict employee protocols in conjunction with the installation of improved air filtration systems.
This pivot to a prioritized health and safety strategy prepared Chipotle to thrive in the madness that was 2020. When the Covid-19 pandemic shut down the world as we knew it and the hospitality industry was left scrambling, Chipotle was already set up for these circumstances.
Brian Niccol, Chairman & CEO of Chipotle said that “the only two things we had to implement during Covid-19 was the idea of social distancing and wearing masks”.
Chipotle was able to adapt to the new reality quickly implementing strategies such as contactless delivery, drive-thru for mobile orders, and a digital-only menu.
These small adaptations to their strategy enhanced Chipotle’s value and allowed them to continue pursuing sustainable growth and profitability.
Which they did successfully, as Chipotle increased total revenue by 7.1% to $6USD Billion from 2019 to 2020.
A large portion of this increase can be attributed to the 174.1% increase in digital sales to $2.8USD Billion, which totaled 46.2% of sales in 2020. Visualize your own strategy in our Free Health & Safety Strategy Template!
Unilever
As we all well know (and are sick of being reminded about!) Covid-19 temporarily changed the entire fabric of our existences.
Whilst things are starting to return to some form of normality for the majority of the world, the impact that Covid-19 has had on some businesses will remain.
The multinational consumer goods company Unilever is an example of a Covid related pivot. With over 400 brands Unilever’s products span across the foods & refreshments, home care, and beauty & personal care industries.
Unilever’s product demand was impacted by Covid as demand for products like hand sanitizer skyrocketed whilst demand for things like beauty products decreased.
Unilever reallocated resources to enable increased manufacturing of hand sanitizer and other in-demand products. Unilever was able to successfully pivot in this manner, as they aligned to the new consumer demands through a lateral extension of existing capabilities.
This contributed to Unilever only posting 2.4% less global revenue than in 2019. Unilever also donated over €100m of soap, hand sanitizer, bleach, and food during 2020 to aid the global response to Covid-19.
Unilever Global Revenue 2007-2020 in Million Euros
To conclude, it is understood that strategically pivoting a business is a hard decision to make and act upon. The aim of this article was to provide the what, when, and how of pivoting.
Along with giving 5 excellent examples of great business strategy pivots, and an example of what happens when a business fails to pivot. Designed to visualize your own business's strategy and potential to pivot.
Now, if only there was a platform to align, act, and adapt your own strategic pivot...
