Why Market Research is Key in Business Pivoting
Even if you have a successful company, there’s no guarantee your business model will remain viable for long. So what happens when the market changes, and your business needs to adapt to stay relevant? This is where the concept of pivoting comes in.
“Pivoting” is common in basketball when the ball-handler keeps one foot grounded while using the other foot to step and rotate in a new direction. Pivoting is quick move a player takes while under pressure to avoid the defense.
There’s no doubt businesses often feel that same kind of pressure—the moment when a mammoth hard-charging opponent steps in your face, blocks your way, and grabs for the ball in your hands. If you freeze up, you lose. You need to stay collected. Step in a new direction. Look for an opening, and then seize an opportunity.
When faced with entrenched challenges, businesses must be willing to change strategy and direction too. Ultimately, the game is fluid. If something is not working, an alternate path must be found.
Pivoting can involve shifting a company's focus from one product or service to another, changing target markets, or even altering the entire business model.
Business Pivot Examples
People often point to tech startups as classic examples of businesses pivoting. Early on, Flickr reportedly changed from an online game company to a photo-sharing website, and Twitter switched from a podcast subscription network to a micro-blogging platform. These companies were willing to test out radically different ideas to find a winning concept and fill a gap in the market.
But tech firms aren’t the only companies that need to be agile. Organizations big and small received a crash course in pivoting during the COVID-19 pandemic. Many restaurants moved seating outside or focused on take-out and delivery during lockdown. Many schools, religious organizations, and yoga studios shifted online. Large firms also had to adjust. One example is Disney, which started releasing new films on its streaming service for an extra fee to circumvent the need for movie theatres. In these cases, people’s behavior had changed, and organizations had to meet their needs in a new way.
The Inherent Challenges of a Business Pivot
Of course, pivoting can be challenging, risky, and costly. Change may not work out the way you hope. You still have the potential to fail, and stakeholders may disagree about what needs to happen next.
One key point Wharton Management Professor Jacqueline Kirtley shared based on her research is that pivoting takes place over time, and you might not even realize you are pivoting until afterwards. Pivoting involves a significant degree of uncertainty, where you select certain options and keep many others the same. “The decisions are more steps, and they compile, they aggregate into this complete redirection of what we’re doing as a strategy and what we’re doing now,” she explained.
Pivoting can be a lot messier and more complex than a simple change in direction, but there’s one secret that can help ensure success: market research. Changes in strategic direction must be done with eyes wide open, with all the necessary information on hand. According to the Harvard Business Review, you must ensure that your pivot aligns with long-term market trends, serves as an extension of your company’s existing capabilities, and offers a sustainable path to profitability.
To determine if all those conditions are met, market research is an essential component of the decision-making process. With the right market research, you can more easily pinpoint market trends, identify opportunities for revenue growth, and understand how the competitive landscape is shifting. This data can help provide the clarity you need to move forward or make a change.
How to Change Your Business Strategy
Pivoting takes time, multiple decisions, and plenty of research. To start:
- Identify unmet needs: By analyzing consumer behavior and preferences, you can determine what your target audience is looking for that your company is not currently providing. This information can be used to guide product development or marketing initiatives to better meet the needs of consumers. For example, when Starbucks noticed that more customers were interested in sustainable, plant-based options, they expanded their menu to include a wide array of dairy alternatives such as soy, coconut, almond, and oat milk. Starbucks also added a breakfast sandwich made with Impossible plant-based sausage. Although these menu changes do not represent a complete transformation in strategy, these type of ongoing shifts can add up over time to help a business stay relevant in the eyes of consumers.
- Find ways to differentiate: Evaluate your competitors, so you can identify areas where your company can differentiate itself and provide more value to customers. For instance, when Airbnb realized that travelers were looking for more personalized, immersive travel experiences, they expanded their business to include Airbnb Experiences. This new offering allows travelers to book activities and tours led by local hosts, providing a unique and authentic travel experience that traditional hotels cannot match.
- Validate and test your ideas: Market research can help you to validate and test hypotheses regarding the potential of a new idea before you take action. Whether you are considering a big shift such as entering a new market, launching a new product, or acquiring a startup, stakeholders will want to know if your concept is validated by objective third-party research. Market data can help you build a persuasive business case for a new idea and mitigate the risk of failure. If the market demand is not sufficient to support a profitable venture, it’s better to know that ahead of time.
Pivoting your business can be a challenging but necessary step to stay ahead in today's ever-changing world. The good news is that market research can give you a disciplined approach that makes the entire process easier and more successful.
Author: Sarah Schmidt
Source: Market Research