In February 2018, the Nigerian tech world was shocked on waking up to news of Konga’s acquisition by Zinox Technologies.
Just a year before, Kinnevik AB’s latest report stated that Konga was on its way to profitability, and a few months before its release, Konga made some big changes like: stopping the pay-on-delivery option, and shutting down its warehouse service. However, a few months after being acquired by Zinox, its re-launched Pay-on-Delivery and began expanding its retail network with a target of 100 stores before the end of 2019 and a long-term ambition of having 774 stores by 2022. It pivoted.
Pivot, according to Eric Ries (author of “The Lean Startup”), is “making a change in strategy without a change in vision”. So, basically, it entails achieving the exact same company goals through a different method. Like Konga, before and after acquisition, its goal has been to break even and become profitable, but it tweaked its business model (or pivoted) from a pay-before-delivery and no-warehouse service to a pay-on-delivery and multiple on-ground facilities service. So far so good, it’s been paying off.
Many entrepreneurs are so fixed on a particular modus operandi that they do not know when it is time to change their model or focus on a new vertical and product. Here are the top 4 ways to know when it is time to pivot:
- When only one facet of the company is getting attention
If your startup is like 70% of other startups out there, it does not do or sell one exact thing, and if it does, that service or product may have multiple features. Now, there is a possibility that in the course of operations you notice that only a singular feature is gaining traction, whilst other features or services have remained stagnant. At that point, the best option may be to focus on that singular feature or service, thus creating a simpler offering instead of spreading resources thin. Instagram, the Facebook-owned picture-sharing app, started off as Burbn, a mobile social check-in app with game features. Before its launch, it noticed that most of its beta users were utilizing its photo-sharing feature, and it pivoted. Now, it is valued over $100 billion.
- When there are too many competitors
Sometimes, you can begin a business and have a few competitors, maybe, 5 within your geographical target market; and in the next few years, 20 more spring up to compete for market share. If your business is in this position and doubling down on the same system of doing things is not bearing fruits, it may just be time to change your business model. To survive in this overcrowded market or “red ocean”, you would need to pivot.
Globacom, Nigeria’s second largest telecommunications operator, came into the market in 2003 with MTN Nigeria, MTEL and Econet Wireless (or Airtel) as its competitors. Now it has 7 major competitors jostling for market share and others springing up daily. For the firm to stay competitive, it had to change its business strategy and rebrand itself into a telco with the lowest data prices, or as its slogan says, “The grandmasters of data”.
- When your customers begin leaving
During the course of operations, you may notice complaints and criticisms from your customers. It could be about the quality of your service, the cost, the delivery time, etc. Whatever the reason might be, feedback from customers is very important. However, at the point more and more customers start leaving your platform to use competitors’ and no matter the money pumped into the business, no (or little) positive changes take place, that might be the signal to pivot.
A month ago, the CEO of Nigerian online grocery startup, Gloo.ng, Olumide Olusanya announced that the ecommerce business was shutting down. This was another loss in the ecommerce subset of the Nigerian tech ecosystem, after the likes of DealDey and Efritin waved their flags. It took the company 7 years to decide to close up shop. However, if they had seen and acknowledged the red flags over the years, they might have decided much earlier to tow the path of Supermart.ng or Foodlocker, with a hyperlocal delivery model, and still be in business.
- When you are no longer serving your target market
At the point every business begins, it has a market it wants to serve, be it, geographically, demographically, or otherwise, and a way to do so. Once you realize that your target audience wants to be served a different way or strangely, you are getting more traction from another niche within your market or even an entirely different vertical, then it may be time to move. Pivot and focus on serving the market the way it wants to be served. The customer is king, anyway.
Kenya’s largest fintech company, M-Pesa, was initially created for microfinance borrowers to receive and pay loans. However, during the course of its 2 years pilot, it noticed that customers adopted its service for alternative uses, and at that point it knew it had to reposition itself and change its business model to suit these customers. Now, M-Pesa has pivoted to focus on the payments and the remittance spaces. It realized customers wanted its service for a completely different reason than initially planned and swam the tide of the market to success.
There is no magic formula to entrepreneurship. Good market research may increase your chances of business success, but there is no certainty that the market will respond positively to your business. As such, it is necessary for you, as an entrepreneur, to always listen to the market. Know when you should continue doing what you’re doing, and also recognize when it is time to move away from your current business model. Being able to recognize when it is time to pivot may just save your business. It has worked for the likes of Wrigleys, Avon, Konga, Foodlocker and M-Pesa, and it may also work for you.