2 Risky Pivots You Probably Haven't Heard About
Steve Jobs once famously said, “people don’t know what they want until you show it to them.” But if recent tech history is any indication, the very opposite may be true. Pivoting based on what your customers want can often drive explosive growth.
For some companies, pivoting is a very natural process. Groupon is a great example. When Andrew Mason launched The Point as a nonprofit Kickstarter, he had to think of a way to monetize. Crowdsourcing was the natural solution, and Groupon quickly emerged as The Point’s very profitable successor. How did Mason come up with this game plan? He paid attention to what his customers wanted.
But for many companies, pivoting is not so natural. Many startups have gone bust rather than wade into the murky waters of unknown markets. Many are unable to adapt quickly enough to customer demands. Many fail.
That’s why the few companies that have taken the plunge and pulled off risky pivots are the ones we really need to learn from. Their success stories teach us that, even in worst-case scenarios (when most entrepreneurs would give up), there is always an alternative way of doing things around the corner that your customers might already be asking for.
While many of these risky pivots are now almost legendary in the tech world (i.e., Odeo → Twitter), others are much less talked about.
1. Planet Source Code → Rent a Coder → vWorker. Ian Ippolito lost 4 million visitors overnight during the dot com burst. But he stuck with his vision and turned Planet Source Code into vWorker, which was acquired by Freelancer.com.
Frustrated with the barriers to innovation at the large software companies he was working for, Ippolito dabbled in startups before starting Planet Source Code, a site where coders could share their source code. The company earned upwards of 3 to 4 million page views a month when the dot com bubble burst in 2001. All of his advertisers went out of business and couldn’t pay their bills. Which meant Ippolito couldn’t pay his bills, either.
Instead of giving up, he realized that he had a valuable resource in Planet Source Code (i.e., freelance coders) and cobbled together Rent a Coder, which connected those coders to businesses. Within a few years Rent a Coder became vWorkers, and was pulling in $11 million a year. The rest is history - Ippolito sold vWorker to Freelancer.com for an undisclosed amount (that we can safely assume was seven digits).
Takeaway: Ippolito was able to take a calculated risk and pivot towards a profitable business model by leveraging an existing resource and identifying a potential “blue ocean” market.
2. Eloqua. While you may have heard of Eloqua, the software-as-a-service marketing-automation and lead-generation software company that was bought for almost $1 billion by Oracle in 2012, you may not know that Eloqua was once four days away from bankruptcy.
During his Growth Everywhere interview, co-founder Mark Organ explained how the company was started in 1999 on little more than an idea by a bunch of 20-somethings who had no idea what they were doing and who spent years chasing after clients on razor-thin margins.
“We were all twenty-something, real green folks that nobody really believed in,” Organ said.
Eloqua’s first product was a “shot on steroids,” and had morphed from a lead-generation software concept into an integrated email and website-tracking tool. But pivoting away from Eloqua’s original business model turned out to be profitable enough for the company to grow 60 percent a year, until Eloqua finally caught the attention of venture capitalists in 2005.
At one point during those five years of desperate client chasing and product development, Organ had four days of cash left, and was practically living “hand to mouth.” But before the four days were up, Eloqua won General Electric as a client on the budget they had once reserved for paperclips and other office stationery.
Takeaway: Organ and his team succeeded by “naively” (his own words) believing in themselves despite dire situations and investing early in customer success and satisfaction.Their clients were the ones who really informed their pivots during those first five years, and their input ultimately contributed to Eloqua’s success.
Be water, my friend. Jobs was an amazing entrepreneur and legendary tech mastermind, but that doesn’t mean he was right about everything. Startups around the world are innovating by pivoting toward customer demands instead of sticking with their original game plan.
Sometimes it really pays to listen, learn and stay open-minded. By pivoting, startups can discover new markets and satisfy demand in a way that their original forecast could not have foreseen.
Pretending to know everything gets you nowhere. Seek criticism. That’s how you learn what you need to know. That’s how you grow. -- Tannerc