THE ART OF THE PIVOT

We've all seen that Friends episode - you know the one: "Pivot...PIVOT.....PIVOT!" as they try and manoeuvre the couch up the narrow stairs. In a single moment, "pivot" became a bad word!

But should we run our futures based on a Friends episode?

Why Changing Direction is a Strength, Not a Weakness

The ability to pivot—to change direction strategically—is becoming less of an exception and more of a rule. For senior leaders, embracing this concept can be the difference between thriving and merely surviving. Often, leaders can be hesitant to change direction, viewing it as an admission of failure or a sign of instability. However, when understood and executed correctly, pivoting is a powerful tool for growth and optimisation.

As rapid disruption becomes the norm and is no longer unexpected, being prepared to change your plans and adjust your approach is a vital part of your leadership stance.

Top 5 Reasons Why Pivoting Should Be Part of Your Strategic Thinking

1. Adapt to Market Changes: The business landscape is constantly evolving. Pivoting allows organisations to stay relevant and competitive in the face of new technologies, customer preferences, and economic conditions.

2. Unlock New Opportunities: Pivoting can open up new markets, products, or services that were previously unforeseen. It encourages exploration and innovation, leading to potential breakthroughs.

3. Mitigate Risks: By being willing to change course, organisations can avoid investing too heavily in failing ventures. Pivoting allows for course correction and minimises potential losses.

4. Enhance Innovation: A culture that embraces pivoting fosters creativity and experimentation. It encourages employees to think outside the box and challenge the status quo.

5. Build Resilience: Organisations that are adept at pivoting are better equipped to handle unexpected challenges and disruptions. This resilience is crucial for long-term success and sustainability.

Understanding the Neuroscience of Pivoting

Our brains are remarkably adaptable, a trait known as neuroplasticity. This is the brain’s ability to reorganise itself by forming new neural connections throughout life. It allows us to learn new skills, adapt to new environments, and recover from injury. For leaders, understanding neuroplasticity can demystify the fear of change.

When faced with the need to pivot, this neuroplasticity allows leaders and their teams to rewire their thinking, learn new strategies, and adopt new behaviours. Instead of being constrained by old habits or ways of thinking, leaders can actively cultivate a mindset of adaptability. This involves encouraging the development of new neural pathways that support flexibility and open-mindedness.

Moreover, neuroscience tells us that our brains respond positively to novelty and challenge. Pivoting, by its very nature, introduces both. This can lead to increased engagement, motivation, and cognitive function. By framing pivots as opportunities for growth and learning, leaders can tap into these neurological responses to drive their teams forward.

Key Concepts to Embrace Pivoting

Several key concepts can help leaders embrace pivoting as a strategic strength:

• Fail Fast: This principle encourages rapid experimentation and iteration. The idea is that it’s better to identify what’s not working early on, learn from it, and adjust course rather than investing heavily in a failing strategy.
• Sunk Cost Fallacy: This fallacy refers to our tendency to continue investing in something simply because of the resources we’ve already put into it, even if it’s not working. Leaders must be vigilant in recognising this fallacy and be willing to cut their losses to pursue more promising avenues.
• Strategic Abandonment involves the conscious decision to stop pursuing a product, market, or strategy. It's about proactively reallocating resources from less promising areas to those with higher potential rather than being held back by past investments.
• Sunset Clause: In project management or strategy, a sunset clause is a provision that sets a specific end date for a project or initiative. This helps prevent resources from being perpetually poured into something that may have outlived its usefulness.
• Innovation Culture: This organisational culture encourages employees to test new ideas and approaches, even if there's a risk of failure. It values learning from mistakes and sees failure as a stepping stone to success.
• Design Thinking: This human-centred approach to innovation emphasises empathy, experimentation, and iteration. It involves understanding user needs, generating ideas, prototyping solutions, and testing them in the real world.
• Kaizen: This Japanese philosophy of continuous improvement involves making small, incremental changes over time. It's about constantly seeking ways to optimise processes and products, and it aligns with the "fail fast" idea by encouraging frequent adjustments.
• Antifragility: Nassim Nicholas Taleb's concept of antifragility goes beyond resilience. Antifragile systems not only withstand shocks but actually improve and grow stronger as a result of them. This mindset seeks to identify opportunities for growth and enhancement within crises.
• Scenario Planning: This strategic planning technique involves creating multiple possible scenarios of the future and developing plans to respond to each one. It helps organisations be better prepared for unexpected events and allows them to react agilely.
• Organisational Learning: This is the process by which an organisation acquires new knowledge and adapts its behaviour in response to changing circumstances. A crisis can be a powerful catalyst for organisational learning, prompting reflection and change.

Business Models That Support Pivoting

Certain business models are inherently more adaptable and lend themselves to pivoting. They can be adopted by any organisation and applied in almost every domain.

• Lean Startup: This approach, popularised by Eric Ries, focuses on minimising waste and maximising learning. It involves building a minimum viable product (MVP), testing it with customers, and iterating based on feedback.

• Agile Methodologies: Originally developed in software development, Agile principles emphasise flexibility, collaboration, and iterative progress. These methodologies can be applied to various business contexts, enabling teams to respond quickly to changing circumstances and customer feedback.

• Blue Ocean Strategy: This strategy, outlined by W. Chan Kim and Renée Mauborgne, encourages businesses to create new markets rather than competing in existing ones. This often requires a willingness to pivot away from traditional industry norms.

Numerous organisations have demonstrated the power of pivoting. Pivoting can take many forms, from diversifying into new markets to refining a product based on user feedback. The common thread is a willingness to adapt, learn, and embrace change as an opportunity for growth. Notable examples are:

• Netflix: Originally a DVD rental service, Netflix pivoted to streaming video and then to producing original content. This series of pivots has made it a dominant force in the entertainment industry.

• Amazon: Starting as an online bookstore, Amazon has pivoted into e-commerce, cloud computing, digital streaming, and artificial intelligence. Each pivot has opened up new avenues for growth and innovation.

• Starbucks: Initially a seller of coffee beans, Starbucks pivoted to become a café experience. This pivot transformed the way people consume coffee and created a global brand.

• Nintendo: Starting as a playing card company in the late 1800s, Nintendo has successfully pivoted multiple times. They moved into toys, then arcade games, and finally into the home video game console market, where they've seen enormous success. Their ability to reinvent themselves has been key to their longevity.
• Samsung: Initially a trading company that dealt in groceries, Samsung pivoted into textiles, then electronics, and eventually became a global leader in smartphones, televisions, and semiconductors. Their diversification and willingness to enter new industries have fuelled their growth.
• IBM: Once known primarily for hardware, IBM made a significant pivot towards software, services, and cloud computing. This strategic shift allowed them to stay relevant in the evolving tech landscape and maintain their position as a major player.
• Instagram: Originally a location-based photo-sharing app called Burbn, the founders realised that users were primarily interested in the photo-sharing aspect. They pivoted to focus solely on photos, leading to the creation of the hugely popular Instagram platform.
• Slack: Initially a gaming company, the team developed an internal communication tool to facilitate their work. Recognising its potential, they pivoted to focus on this tool, which became Slack, a widely used collaboration platform.

Conversely, many organisations have suffered the consequences of failing to pivot. Getting stuck in the mud is not a good strategic place to be.

These organisations did not address risks of complacency and the importance of continuous adaptation:

• Fairfax Media: A once-dominant Australian media company, Fairfax struggled to adapt to the digital disruption of the news industry. Their slow transition to online platforms and challenges in finding a sustainable digital business model led to significant restructuring and decline.
• Retravision: An Australian electronics retailer, Retravision faced increasing competition from larger retailers and online sellers. Their inability to adapt their business model and compete on price and convenience led to their collapse.
• Dick Smith: Another Australian electronics retailer, Dick Smith, expanded rapidly but struggled with inventory management and changing consumer preferences. Their failure to adapt to the evolving retail landscape and compete with online retailers contributed to their demise.
• Blockbuster: This once-dominant video rental company failed to adapt to the rise of streaming services and ultimately went bankrupt.
• Kodak: Despite inventing the digital camera, Kodak was slow to embrace digital photography, clinging to its traditional film business. This reluctance to pivot led to a significant decline.
• Nokia: Once a leader in mobile phones, Nokia failed to keep pace with the smartphone revolution. Its inability to pivot quickly enough resulted in a loss of market share.

Pivoting is not a sign of weakness but a strategic imperative for leaders. By understanding the neuroscience of adaptability, embracing key concepts like "Fail Fast" and avoiding the Sunk Cost Fallacy, and studying successful and unsuccessful examples, you can cultivate a mindset and organisational culture that thrives on change and moves beyond mere survival!