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When to pivot from your original plan?

Plans do not often work as devised. 

We are not always smart about the market or the product.  We may miss the context of the times and come to market too soon or too late. We might not have researched the market diligently or used a focus group or other market research.  Well, the good news is that great teams are not bound by their original product or marketing plan.  Greatness finds one definition in management’s ability to “pivot,” or change the plan in reaction to its early response from the marketplace.

How do investors usually react to a pivot?

Investors most often celebrate teams that quickly find flaws in the original plan and reallocate resources in another direction before more wasted resources.  Even the term, pivot, seems to call up images of a light-footed dancer able to move so very quickly in any direction.

My story of a great pivot

My favorite example of a world class pivot comes from the CEO and board of one of my most successful investments.  Green Dot Corporation was formed by an entrepreneur in the year 2001 to create a product to permit those without credit cards to purchase items on the Internet.  Think of it:  to shop on the web, you must have a card, not a nine- digit routing and bank account number.  The young, inexperienced entrepreneur had two assets that attracted me – rights to use the MasterCard name on this new product, and a laser focus to make this work in any form possible.

Early market experience can cause a need to pivot

[Email readers, continue here…]   Over the years, the original vision changed dramatically several times as the world’s first debit cards were invented by the firm, positioning the card to be used by the un-bankable, those unable to obtain credit cards or in some cases even checking accounts.  The firm grew to dominate its new field, create an infrastructure to allow any of its current 100,000 retail stores to simple activate or load the card with money from any cash register.  It replaced Western Union as the preferred way to send money across great distances.  And it built a billion-dollar market and then some – where the original vision and plan might have restricted the then-small company to a tiny percentage of that.

And we who held early stock celebrated together the ringing of the NYSE opening bell the day that often-pivoting company went public.

  • Christopher Mirabile

    I thought this piece was great and it reminded me of material I have been teaching for a while. My material starts with a riddle:

    Q: “What is the difference between a good CEO and a great CEO?”

    A: “A good CEO will pivot. A great CEO will pivot in a capital-efficient way.”

    That gives me a jumping off point to talk about temperament and EQ and point out that any CEO will pivot when they are out of money and their back is to the wall and the only alternative is failure.

    But a great CEO has the EQ and the humility to listen to what the market is telling him/her and make the pivot before the company is in a deep cap table hole. In other words, make the pivot when requiring them to do so requires them to admit they were wrong before they absolutely have to. It is far easier to “keep experimenting” until the money is gone. But being a great CEO is having the courage to admit it is not working, cut your losses relatively quickly and fund a different experiment before the runway is gone and the company is underwater relative to their post money valuation.

    This insight has served me very well and informed a lot of the due diligence we do into CEO temperaments and coachability.

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