Innovation Blog

How to Make Your Startup Ready for Future Pivoting


Pivoting is part of your business experience.

Startups, by design, must grow and evolve quickly. Operating in an uncertain environment, they must learn to rapidly change course – or pivot – If they want to win the game.

Pivoting – a shift in business strategy to address a new market, launch a new product, or start a new business model – is really an integral part of the startup business experience.  In fact, very few successful businesses are still doing what their founders originally envisioned.

Beyond anecdotal evidence, a study that was conducted at EPFL and Technion found that 73% of the sampled startups pivoted to another market during their first 3 years of existence, as their initial domain did not provide the fertile ground they were hoping for. In a more recent study from Station F, 80% of the polled startups made daring changes to their business strategy.

Many of the biggest global players- like YouTube, Instagram, Slack or PayPal- are famous for their pivoting story before dominating their respective spaces.  The COVID19 pandemic – driving global tectonic shifts – have also forced numerous startups to maneuver quickly and adapt their offering.

One such example is the MassChallenge IL alumni Sonovia. The company developed a disruptive sound wave technology that can embed long-lasting properties to fabrics via an eco-friendly process, aiming to evolve textile performance in fields such as UV-protection, water-repellency, and fire-retardancy.

As the pandemic hit, the team quickly realized that its technology could be applied to embed fabrics with built-in antiviral and antimicrobial properties that neutralize over 99% of COVID19 particles, and swiftly initiated the production of reusable facemasks. Since then, their SonoMask has earned the prestigious Genesis Award and the company completed its IPO on the Tel Aviv Stock Exchange – taking their mission to a whole new level.

Pulling off a pivot is hard

Yet for every successful pivoting story, there are countless cases of companies you’ve never heard of because they failed to recognize that survival depended on a pivot, or failed to execute it successfully.

“You have to be prepared to see the better idea when it arrives, and the hardest part of that is often discarding your old idea” says Paul Graham, Y Combinator co-founder. The shift is not only emotionally draining, but also often requires an immense effort to develop a completely new set of skills and capabilities.

Think about your IP and technology, your team and partners, and even your brand name and marketing efforts – they all need to be revised in an abrupt process, that can only succeed if you have the right mindset and the necessary agility.

Can you prepare your startup for pivoting well in advance? Can you develop its DNA to be agile, and nurture the cognitive flexibility of your team so that you are able to adapt once you hit the wall? Fortunately, the answer is YES.  Here is how.

The power of ‘real options’

Part of making an effective pivot is planning ahead for one. Understanding that pivots are part of the game and preparing your team in advance – both strategically and mentally – is critical for your success. Not only will it make the process less disruptive and painful, it will also help to maintain your team’s energy and trust.

Research on strategizing under uncertainty encourages managers to adopt ‘real options’ as a way to handle this complicated task. In finance, options relate to small investments that you currently make, to guaranty your future ability to capitalize – if desired. In strategy, real options mean small current investments in business opportunities, to guaranty your ability to further pursue them in the future should conditions turn favorable.

For entrepreneurs, this basically means that they should consciously keep open few selected opportunities – or build a portfolio of real options – to allow for greater flexibility down the road.

These relatively small investments will make their firm more robust to change – and hence more ready for pivoting – without compromising their focus. For instance, by creating a modularized technology that can be reconfigured more easily, by casting a wider IP net, or even by picking a brand name that would lend itself for redirection.

Here is how you can embrace real options into your strategy, in 3 clear steps.

3 steps you can do today to prepare your startup for future pivoting

Step 1: Know what else may be in store for you

Realizing the fungibility of your innovation and where else it may be applied is the first step in developing this all-important flexibility. To identify your broad landscape of opportunities, take a deliberate step back from your current strategy. Think about different applications stemming from your core innovative abilities, and different customers who might need them.

To illustrate this process, take a look at ShanenLi – a Masschallenge Israel 2021 finalist. Founded by Rabbi Elijah Dordek, educator of Judaic studies, the startup develops an interactive software tutor to achieve literacy, improve fluency and master memory by leveraging Automatic Speech Recognition and proprietary algorithms.

Originally launched to help kids memorize Judaic text, Elijah planned his innovation so it can be used for two broader applications: learning to read, and practicing giving speeches. Each of these applications can address the needs of different target groups. For example, achieving fluent reading can be interesting for elementary schools, kids with learning disabilities, foreigners and immigrants learning a second language. Perfecting your pitch is needed for sales teams, entrepreneurs and business managers, politicians or public speakers.

EyeKnow – founded by Tomer Sagi– is another Masschallenge Israel 2021 finalist. Using a unique blend of computer vision, AI and CCTV footage, EyeKnow is able to detect and monitor aggressive and violent acts at home, at institutions and on streets in real time and notify relevant stakeholders.

Taking a step back from their original market – childcare – they realized they could address additional verticals such as elderly care or homeland security. Analyzing their core abilities, detached from this specific usage, helped them understand that their know-how can also be applied in other niche markets such as fall detection and fall prevention, addressing nursing homes or hospitals, to name a few.

Step 2: Assess relatedness with existing products and customers

Once you have a clearer picture on your landscape of opportunities, try to evaluate the relatedness of these possible future directions to your current domain. Relatedness means that developing and delivering the product- for both options- require relatively similar resources and capabilities.

If ShanenLi decides to focus on achieving literacy in elementary schools, then a reading app for adults’ education would be relatively related – in terms of the product as well as the market. On the other hand, a less related option, Pitchloop – his sales enablement app, requires a completely different language, style, and sales channel.

Synergetic or related opportunities are easier to keep open, because you can leverage existing competencies, networks, and reputation to succeed in both. If you find related opportunities that do not share the same major risks or show stoppers with your primary market – they have the ideal traits to become your fallback options.

Step 3: Keep your backup and growth options open

Some of these related opportunities could offer an attractive future direction- either for backup or for growth. A backup option is one that you will want to pursue if you are not successful with your current strategy. A growth option is an opportunity that you will want to pursue once you are successful with your current idea.

Select at least one backup and one growth option to keep open. Keeping an option open means that you invest very little resources and management attention in it, just to make sure not to lock yourself out of it. So, when you develop your technology, write your patents, gather your stakeholders or set your branding strategy, you keep these options in mind.

While both ShanenLi and EyeKnow are still searching for their most fertile ground, they already learned the importance of building flexible competencies to avoid locking-in. ShanenLi, for example, develops its underlying code to be suitable for both applications, and would change their brand name (ShanenLi means ‘help me repeat’ in Hebrew) to Pitchloop, signaling a focus on a broader sector. EyeKnow is broadening their search spectrum, and building their advisory board with experts from different industries.

This is exactly what real options mean! You invest this little effort now, to make pivoting possible in the future.

The power of an Agile Focus Strategy

The strategy that clearly defines future opportunities to keep open and help bake agility into the DNA of your venture is called the Agile Focus Strategy.

To help founders unleash the power of focus and foresight and define their Agile Focus Strategy, we developed the Market Opportunity Navigator – with 3 dedicated worksheets that walk you through the systematic process described above. It’s clearly not an easy job, but structured processes can turn it into a more manageable task. The result is more than a strategy – it’s a mindset!

Having such an early understanding of the markets that can (potentially) be entered helps you in taking key decisions regarding your resources and capabilities and how you want to develop them over time – in a way that will enable greater flexibility and agility.

But maybe even more importantly, it nurtures your openness and receptiveness to alternative opportunities and to change and adaptation. This is very important, as cognitive rigidity may lead you very quickly to the graveyard of companies that failed to listen to the market to adapt promptly.

Keeping selected backup and growth options open actually helps you to build and maintain the cognitive flexibility of you and your team, regardless of whether you will actually pursue these options in the future.

So when the time for pivot arrives- and most likely it will – your venture will be better equipped to handle the challenge!

Dr Sharon Tal is author of the book Where to Play and creator of the Market Opportunity Navigator- a tool to help entrepreneurs identify, evaluate and prioritize market opportunities for their business.


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