What’s Up Wednesday 2/27/19

At Times, Startups Must Pivot

You may go into an endeavor with a clear vision of what you want the product or service to look like.  You have a theory regarding potential customers and ultimately how you want the business to develop and grow.  However, there are no sure things when dealing with a startup and the inflexibility of founders in their approach to the envisioned product or service can sometimes lead to the demise of a company.

Let’s look at a couple of recent examples of businesses that were forced to pivot from their original models into something quite different.

The first example is a startup called Adero.  This company, backed by Amazon, came out of the gate as a maker of Bluetooth-enabled smart tags for tracking individual items.  But as that market became commoditized, it switched focus to the software side of the same business, specializing instead in the (software-based) group-tracking of items (rather than on hardware to track each item individually).

As Adero shifted its focus from the hardware side and individual tracking tags to a broader software-centric approach, a substantial company reorganization became necessary.  To this end, major layoffs have occurred.

The major problem that Adero faced with its original product – physical smart tags hardware for tracking individual items – was intense competition in that space.  There’s very little differentiation between its product and the products of would-be competitors.  All of these marketplace offerings provided similar functionality at a similar price point.  With no clear way to distinguish itself, achieving a competitive advantage and adequately growing revenues were difficult (the startup was left in a position of having to rely on its affiliation with Amazon as a way to try wooing customers).  The company smartly chose to shift focus and try a less-traveled route.

The second example, a company that everyone knows, is Blackberry (previously known as RIM – Research In Motion).  Blackberry is most known for its early dominance in the smartphone market.  Blackberry offered what could be considered the general public’s original smartphone.  Those early phones obviously didn’t boast all the functionality of today’s Apple and Android units, however they did have Blackberry’s own set of applications and very good call and email functionality.  Unlike modern do-everything smartphones (and their endless array of available downloadable apps), the early Blackberry devices were mostly limited to making calls and sending or receiving email.

Once the iPhone hit the market, Blackberry’s market share and popularity began to slip.  Then with the introduction of Google’s Android OS, Blackberry sales dipped to a point where the company either needed to make a change or die.  Two factors that worked in Blackberry’s favor were its ownership of significant intellectual property (IP) and its sterling reputation as a provider of highly-secure communications devices.  Those things allowed it to ultimately completely shift strategies from a company that specialized in handheld hardware to a company focused on software and services.  The Blackberry software is used extensively in IoT (Internet of Things), automobiles, and many other areas.  The company recently acquired the AI (artificial intelligence)-based security startup Cylance in a $1.4 billion transaction to help further its reputation as a security company.

Although Blackberry ultimately decided to pivot away from handheld smartphone hardware, the Blackberry smartphone devices continue to live on.  Blackberry licensed the Blackberry brand name and smartphone technology to TCL, the Chinese electronics manufacturer that is popular here in the United States for its low-cost televisions.  By so doing, Blackberry continues to draw revenue from that branch of the business, but is no longer dependent on it for company growth or profitability.

Both these examples demonstrate the way that savvy companies can effectively change their product strategies and how management must at times completely pivot directions to ensure survival in the marketplace.  If you or your startup is stuck in a market segment that is stagnant or has been developing a product that simply (for whatever reason) turns out to be a bad idea, you must be flexible enough to recognize the need to revamp strategies.  Everyone knows that there are no certainties in business and that changing focus doesn’t automatically result in success.  But it’s certainly better than continuing on a pathway that leads to a known dead end.

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