The Lean Startup - Eric Ries [70]
We ignored the signs because the company was still growing, delivering month after month of “up and to the right” results. But we were quickly exhausting our early adopter market. It was getting harder and harder to find customers we could acquire at the prices we were accustomed to paying. As we drove our marketing team to find more customers, they were forced to reach out more to mainstream customers, but mainstream customers are less forgiving of an early product. The activation and monetization rates of new customers started to go down, driving up the cost of acquiring new customers. Pretty soon, our growth was flatlining and our engine sputtered and stalled.
It took us far too long to make the changes necessary to fix this situation. As with all pivots, we had to get back to basics and start the innovation accounting cycle over. It felt like the company’s second founding. We had gotten really good at optimizing, tuning, and iterating, but in the process we had lost sight of the purpose of those activities: testing a clear hypothesis in the service of the company’s vision. Instead, we were chasing growth, revenue, and profits wherever we could find them.
We needed to reacquaint ourselves with our new mainstream customers. Our interaction designers led the way by developing a clear customer archetype that was based on extensive in-person conversations and observation. Next, we needed to invest heavily in a major product overhaul designed to make the product dramatically easier to use. Because of our overfocus on fine-tuning, we had stopped making large investments like these, preferring to invest in lower-risk and lower-yield testing experiments.
However, investing in quality, design, and larger projects did not require that we abandon our experimental roots. On the contrary, once we realized our mistake and executed the pivot, those skills served us well. We created a sandbox for experimentation like the one described in Chapter 12 and had a cross-functional team work exclusively on this major redesign. As they built, they continuously tested their new design head to head against the old one. Initially, the new design performed worse than the old one, as is usually the case. It lacked the features and functionality of the old design and had many new mistakes as well. But the team relentlessly improved the design until, months later, it performed better. This new design laid the foundation for our future growth.
This foundation has paid off handsomely. By 2009, revenue had more than doubled to over $25 million annually. But we might have enjoyed that success earlier if we had pivoted sooner.5
A CATALOG OF PIVOTS
Pivots come in different flavors. The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.
Zoom-in Pivot
In this case, what previously was considered a single feature in a product becomes the whole product. This is the type of pivot Votizen made when it pivoted away from a full social network and toward a simple voter contact product.
Zoom-out Pivot
In the reverse situation, sometimes a single feature is insufficient to support a whole product. In this type of pivot, what was considered the whole product becomes a single feature of a much larger product.
Customer Segment Pivot
In this pivot, the company realizes that the product it is building solves a real problem for real customers but that they