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The Art of Pivoting - How companies have radically reinvented themselves
Focus topic

Jan 20, 2020
Different sized arrows pointing in the opposite direction with the inscription "another way"

What to do when the business that made you big or should make you big in the first place stagnates and markets change? Cut the sails? No, either you gradually adapt to the new conditions - or you radically rethink your own business model and take countermeasures. In the latter case, one speaks of "pivoting", actually a movement that stems from the basketball rulebook. Here you can find out how to go from a rubber boot manufacturer to a mobile phone giant and which successful pivots the startup world has to offer.

Stuck

Very few companies are able to manufacture and sell the same products for years and decades. Technological progress changes markets, i.e. supply and demand. Therefore, companies are gradually changing their orientation in order to adapt to the times, because what TV office villain Bernd Stromberg already knew is true: "If you don't keep up with the times, you keep up with the times". But sometimes companies are forced to react radically and change lanes as quickly as possible. The younger the companies are, the more agile they are and the easier it is for them to change course. This moment is called "pivoting". Americans like to resort to sports metaphors, and pivoting also stems from this sphere.

The star step...

In basketball, the rules stipulate that as the player with the ball, you can only take two steps once you have stopped dribbling. Then you have to throw or pass. Sometimes, however, you can accidentally run into a defender and interrupt the dribbling. The ball is in danger of being lost, so what happens now? The rescue is the so-called “star step” (in English "pivot", which is taken from French where it means "key angle point"), which you can still perform In the star step, the supporting leg is not disintegrated, it serves as an anchor, while the so-called "play leg" may take steps in a star-shaped radius. So you turn on the spot, technically you have not taken a step because the supporting leg has not been disengaged, but the player can still pass the ball in all directions. This manoeuvre opens a way out in a muddled position and initiates the redirection of the attack. Transferred to the business world, this means that a company realigns its business model around its core value proposition. 

All companies necessarily change. The former computer manufacturer IBM has transformed itself into an IT service provider that relies on Software as a Service (SaaS). The former conglomerate Philips, on the other hand, is transforming itself into a healthcare company, while the former automotive supplier Bosch, which also sells vast quantities of wireless screwdrivers, is using its sensor technology to tap into the Internet of Things (IoT) in the field of automated driving and smart home. That is evolution. But here are some drastic examples of pivoting, because these companies no longer have anything to do with their original idea.

... and what companies have made of it

Fab.com

After the pivot:

Fab.com was still the fastest growing e-commerce company in the world in 2013. A so-called Unicorn, a startup that was able to record a billion-dollar valuation. Fab.com was a fashion and lifestyle shop that carried small contingents of carefully curated, reduced-price items that were sold in a flash sale. If one of the customers put something into his or her shopping cart, he or she basically had to buy it immediately, otherwise the item was gone. And that was well received: Fab.com passed the one million member mark in a shorter period than Facebook, Twitter and Groupon. By December 2012, there were already ten million members. The crème de la crème of venture capitalists such as Atomico or Silicon Valley high nobility like Andreessen Horowitz and Menlo Ventures queued up to finance Fab.com with a total of 336 million USD. But in the end, the Manhattan-based company ran out of steam in 2015 after growing too fast and disappeared from the scene. But after a second pivot the Fab.com domain was revived as a wellness and yoga website in 2015 after a fire sale and the acquisition of all assets by PCH International. Wow!

Before the (first) pivot: 

Before the business model was radically rethought, Fab.com was still Fabulis, a social network for homosexual men. However, as the network was unable to reach a critical mass of users and remained at 175,000 members, the founders began to revise the functionality of the site, while at the same time turning into cash what they knew most about: taste. Since 9 June 2011, “Taste-Makers” have been offering their members simply what they personally liked, be it clothes, accessories or furniture.

Mannesmann

After the pivot:

At the turn of the millennium, network operators Mannesmann and Deutsche Telekom were struggling for dominance in the German mobile phone market when Vodafone took over the Düsseldorf-based company in 2000 in a rather unfriendly takeover. In 1999, Mannesmann had recorded the most successful year in the company's history with annual sales of 23.27 billion euros. Mannesmann AG had also been a very successful company in the past, but a change of course nine years earlier opened a door to completely different dimensions. This pivoting culminated in the takeover, which cost Vodafone a staggering 190 billion euros, the most expensive ever. 

Before the pivot:

As a tube manufacturer and mechanical engineering company, DAX member Mannesmann is a heavyweight in the processing industry, employing tens of thousands of people worldwide. In 1990, however, 100 years after the company was founded, a strategic shift was decided upon and the first private mobile phone license was acquired, which entitles the company to set up and operate in the German D-network. Due to the margins within the company, this area becomes so important within a short time that the former core business is spun off. 

Nokia

After the pivot:

Nokia was virtually synonymous with the term "mobile phone" in the 1990s and early 2000s. The Finnish company supplied half of the world and contributed significantly to Finland's gross national product. Although Nokia launched a kind of smartphone with the Communicator back in 1998, at a time when UMTS was not even standard, Nokia literally lost touch and missed the opportunity to adapt to the new times. When Apple introduced its iPhone in 2007 and created a market for apps that had not existed before, managers smiled at the blatant outsider and career changer. 

After the company no longer played a role as a clock generator in the industry, it sold the mobile phone division to Microsoft in 2015. Another pivot and merger later (Alcatel-Lucent), Nokia earns a lot of money as the world's largest network equipment supplier in the telecommunications sector.

Before the pivot:

The company was founded in 1865 and shed its skin several times. For decades, paper was produced in densely wooded Finland by the Nokianvirta River, the river that gave the company its name, before the sexiness factor was taken up with a shovel and the topic of rubber boots. In fact, from the mid-1960s, Nokia was a general store consisting of several business units. It produced and sold cables, rubber boots, but also mobile radios and telephone switches. After a few acquisitions in the 1980s - for example, a computer department of Ericsson's Information Systems or Schaub-Lorenz - technology became increasingly important. In 1987 Nokia bought Mobira, a manufacturer that also developed mobile phones. Gradually, Nokia divested other business units and concentrated on mobile telephony. From 1998 Nokia was the world's largest producer of mobile phones.

Preussag/TUI

After the pivot: 

As a company you never really know where the journey will take you. Since 1997 and the takeover of the logistics company Hapag-Lloyd, however, Preussag already had a certain idea of this, as Hapag-Lloyd was in turn intertwined with TUI (Touristik Union International). In 1999 Preussag acquired the remaining shares in TUI, only to buy the British Thomson Travel Group a year later and become Europe's largest tourism group. The core business was divested and the company now officially operates as TUI. 

Before the pivot:

Preussag is a former state-owned company, which is already manifested in the name of the company founded on 9 October 1923 as Preußische Bergwerks- und Hütten-Aktiengesellschaft. Initially the focus was on coal mining, ore mining and smelting, but from the 1960s onwards the company, which was officially called Preussag from 1971, developed the business fields of chemicals, electricity, logistics and steel. 

Starbucks

After the pivot:

The globally active coffee house chain (which now has a branch even in the coffee country par excellence - Italy), whose name is derived from Starbuck, the helmsman from "Moby Dick", has become an indispensable part of the inner cities nowadays and many a business idea has its origins here thanks to deep armchairs, an inexhaustible supply of caffeine and free Wi-Fi. 

Before the pivot:

When the company was founded, however, it did not sell any coffee at all - only the appropriate machines for it and roasted beans. The first branch in Seattle opened in 1971, and it was not until Howard Schultz, who later became CEO of the company, went on a trip to Italy to familiarise himself with coffee house culture that he realised that it would be much better to sell a feeling, namely ambience, a little time out, accompanied by coffee that you brew yourself. 30,000 branches later, it must be said that the pivot turned out to be an excellent idea.

Suzuki

After the pivot:

Another company that has moved a long way from its origins is the two and four wheeler manufacturer Suzuki Motor Corporation. The world's second largest motorcycle exporter, which was intertwined at times with General Motors and then with VW, set the standard in non-fossil fuel propulsion systems in the 1970s. In 1970 Suzuki presented the first electric car, nine years later even the world's first hydrogen vehicle. Running!

Before the pivot:

When company patriarch Michio Suzuki founded his company on February 10, 1909, the automotive age had just begun and had hardly reached Imperial Japan, so the company initially produced looms. In 1937 - the company had long been listed in the Nikkei index - Suzuki then presented its first car. It was not until after the Second World War that business really took off, partly because Suzuki now offered motorised two-wheelers. All these years the company was on two tracks, but from 1954 the loom business was over. Now also small cars were produced and the international expansion began. Also officially the company is now called Suzuki Motor Co, Ltd.

Twitter

After the pivot:

The San Francisco-based company, which to date has not developed a lucrative business model, but (also thanks to the US president, who is very active in Twitterverse) has 300 million active users and hundreds of millions of dollars in venture capital, has not always been a social network or information network. 

Before the pivot:

In 2006, when the young company was still called Odeo, it was still a kind of search engine for podcasts. Within two weeks, external pressure from Cupertino's neighbor, whose service iTunes had now added podcasts, turned a caterpillar called Odeo into the twittering butterfly called Twitter. The Odeo team came up with this feature for internal use only. Team members could now send SMS-like text messages to each other. The micro-blogging service forced its users to be brief, so (initially) only 140 characters were available. Initially, the company still operated under the name "twttr", which was exactly the content of the first tweet sent by the later CEO Jack Dorsey ("just setting up my twttr"). Dorsey's team bought the assets of Dorsey and Twitter, and buried Odeo in 2007, bringing millions of new users and founders like Jack Dorsey and Biz Stone to Twitter after its IPO on November 7, 2013.

Surely there are also enough examples of pivots that have failed spectacularly. In the cases described, timing played an important role. However, every pivot is preceded by a radical, self-critical analysis of the status quo. Whoever then finds the courage to draw conclusions from this will - with a little luck - be rewarded. By the way, you can also subject your whole life to a pivoting and apply lessons from basketball, as former basketball professional Philipp Pausder,  opened up the heating market with Thermondo after his career, proves.

Did you like this article?

Then you might also be interested in our article "How more values create added value".

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