With the “lean startup,” a generation of entrepreneurs have become enamored with “the pivot.” For those unfamiliar with these terms, the lean startup is an approach to launching a startup by creating a product as quickly as possible and putting it in customers’ hands to get feedback. Once customers have the product, the focus moves to experimentation to get the product right over time. This approach is contrasted to incessant planning and completing a giant business plan before launch - or even talking to a customer. Pivoting is how startups redirect their product and/or target customer through experimentation.
There is much to like about the lean startup approach. It gets founders out of the library, garage, or dorm room, and away from developing an extensive business plan before interacting with customers. It focuses on real-world and real-time interaction, making sure founders understand the problem they are addressing and incorporating customer feedback into ideation to achieve product/market fit. Rather than projecting 5 years of financials based on a hunch and an Excel spreadsheet, founders craft hypotheses about the market and test these hypotheses through experiments. Getting feedback from real customers early can save a lot of time and money. Ultimately, it leads to a much more informed approach to the market.
The challenge of the lean startup is that founders can rush to market and keep pivoting without paying ANY attention to the hidden debts they are accumulating. In our Titanic framework, hidden debts are the unintended consequences of making decisions due under uncertainty. When startups craft a message and build one set of functions as part of an MVP (Minimally Viable Product), they are setting expectations and building a frame of reference for the customer. When the startup changes direction, it is not just fighting lack of awareness—it is actually having to change perceptions. This is actually much more difficult. Each change of direction in product functionality, value proposition, and market messaging can build costly debtbergs with customers. And create significant technical debtbergs as well.
This challenge is also true of investor relationships. When founders in fundraising mode undergo a significant pivot, they must be able to explain why they changed direction, what they learned, and how the new direction will allow for faster market traction. Many founders simply rebuild/revise their pitch decks without sharing the strategy behind the redirection with investors. Appearing to change direction repeatedly, based on any negative feedback without any apparent strategy, results in what we call the “pinball entrepreneur”—one who is constantly in motion and bouncing in new directions in reaction to a barrier. Pinball entrepreneurs can be mildly entertaining, but they are rarely investable.
So what is the right balance? By all means, founders should use the lean startup approach to ideation and early market interaction. Develop a Business Model Canvas initially that allows your startup to understand the major components of the business without overinvesting time and money based on flawed assumptions. Build an MVP that allows your startup to get reaction from customers on more than vaporware (an offering that has been announced but cannot actually be purchased). But do this with intent and thoughtful experimentation—not using random energy throwing ideas against the wall to see what sticks. And be aware that each pivot must be accompanied by a new messaging strategy that re-educates both customers and investors. Some hidden debt is inevitable—but using the Titanic Effect framework allows your startup to anticipate and navigate around these debtbergs so you don’t sink. Download one of our Titanic Effect tools to anticipate icebergs on your horizon.