Transformation and disruption are two of the most used business buzzwords of the past five years. And for good reason: only 12 per cent of companies in the original listing of the Fortune 500 some 60 years ago are still on that list.
And mid-last year at a packed conference, Cisco’s outgoing CEO John Chambers, after 20 years at the helm, said that “40 per cent of businesses in this room, unfortunately, will not exist in a meaningful way in 10 years. Either we disrupt or we get disrupted.”
The examples of new companies, brands such as Uber, Airbnb and Skype, disrupting entire industries are well known.
Just as well known are those previously successful companies that didn’t transform, and subsequently failed – companies such as Kodak, Blockbuster and Borders Books. But what is less well known are the examples of companies having the courage and vision to transform and disrupt themselves to their own benefit. Some, such as Apple, Adobe and IBM, were successful companies already. And some cleverly changed their business model while still in the start-up phase to become household names: Facebook, Twitter, Instagram, Paypal and Android.
The favoured Silicon Valley phrase to describe these successes is “the pivot”. It was only coined in 2011 by Eric Ries in his popular book, The Lean Startup. It gained further notoriety via Silicon Valley heavyweight Marc Andreessen a year later when he commented: “The pivot. It used to be called the f . . k-up.” Even so, it’s good for Australian CEOs and CMOs, to acknowledge when the current business strategy has run its course, and that they have to reset the company in a new way.
For marketers, the obvious pivot tactic is to change the product. When the bosses at start-up Odeo realised that its podcast subscription and search network was doomed with the rise of iTunes, they gave staff two weeks to come up with a new product. Twitter was conceived, and the rest is pivot history.
In 2005, Hamdi Ulukaya quickly realised his dream of mirroring his father’s successful cheese company in Turkey was ill-fated, and instead decided to focus on creating the best natural yoghurt in the US market. Chobani was created and was a billion-dollar company within five years.
Similarly, IBM decided to exit personal computing to focus on technology consulting, buying PwC’s consulting arm in this space to fast-track their plans.
Others have minimised their product offering. Apple was losing $US4bn a year when Steve Jobs returned to the company in the late 1990s. The pivot was to reduce its offering to just four products and innovate from there.
Likewise, when start-up Burbn realised that the majority of usage on its app was for photography, it rebuilt itself, and Instagram was born. And when Game Neverending saw that the most popular part of its online role-playing game was the photo sharing, it minimised its offering to what is Flickr today.
But changing the product is only one way to pivot. Some have expanded into additional or different customer segments, others have successfully partnered with analogous companies, and some have found other channels to market to.
Others, such as Adobe, completely overhauled their revenue and pricing model. Only 10 years ago Adobe would send out its latest imaging and design software upgrades on CD-ROMs and charge a licence fee upward of $600 for use on just one computer. Fast-forward to today, and many Adobe products are free, while the equivalent imaging software upgrades are downloaded from the cloud on a subscription model at a smidgin of the price, but by a far wider user base.
For many the challenge beyond how to pivot is when to pivot. Joe Schoendorf, the former CMO of Apple and HP, and now a major tech start-up investor, has a great answer to that: “Every year I get my best people to hack my business.”
That sort of philosophy has seen Paypal pivot five times since the company formed as Confinity in 1999. It makes you wonder whether other previously successful pivoting companies such as Nokia and Nintendo need to go again. And it’s a great reminder for companies from start-ups to bluechips to be always open to pivoting, to transforming themselves and disrupting their categories, to ensure future success.
