How to pivot is an important question as the tempo of change accelerates. First, we should look at what causes a change on a macro level. Then, we’ll explore how startups and small businesses can be proactive in making adjustments. The three overarching themes that drive change around us are the advancement of technology, the flow of information, and the interconnected nature of the world.
The Advancement of Technology
We live in a world that changes faster than it ever has before. Technology and the demand for tech skills are also expanding. These days, by the time you open the box of your new computer or phone, it’s outdated. In fact, by the time, the latest Apple laptop has been designed, built, manufactured, shipped, sits in the box at the retail store, and sold — that computer is now significantly behind the new capabilities that are in the world. It’s seemingly impossible to keep up.
The cassette tape hit U.S. homes in 1964 and thrived in the 1970s and 1980s. It wasn’t until 1991 that CD’s became the better technology with higher fidelity audio and eclipsed sales of cassette tapes and vinyl. In 2001 CD’s really cemented their place as the default solution. Tapes died a quick death, with the last major album released on tape in 2009. This means audio cassettes had a nice 35 year run as a viable technology. But consider the replacement for the CD. In 2001 Apple released the iPod and by 2005 iTune sales eclipsed CD sales. That’s right, the change happened in just four years (not 35 years). Would the MP3 player be the future? Nope. Just ten years later music streaming services would eclipse MP3 sales as the new leader. Technology advanced quickly and rapidly. With this advancement comes a lot of change to markets and interactions.
The Flow of Information
Advancement in technology is not the only thing that is continually disrupting our world. The flow of information today and the amount of knowledge we have at our fingertips is exponential and ever-changing. Information moves at an almost instantaneous rate. People around the world can learn things as soon as it is released and respond accordingly, constantly keeping the competitive landscape on its toes. The need to respond and stay competitive in that type of environment is consequently difficult. The challenge today is more not so much knowledge, but understanding and execution.
Because we live in a global economy, the faster things change, the more we become dependent on one another. This is evident when an event occurs, whether it’s good or bad, in one part of the world it can clearly affect the rest of the world. Even if the event might have nothing to do with you, your company, your employees, or your business — it can greatly affect you because of the interconnected nature of our world. Many products today are sourced from one area of the world, assembled in another, and sold in yet another. Supply chains have become incredibly complex. Small business can sell services globally from anywhere.
How does a Business Plan in a World that Changes Rapidly?
Because of the advancement of technology, the flow of information, and the interconnected nature of our world, leaders, small businesses and entrepreneurs, must become more nimble.
The Two Types of Mistakes a Business Makes in Response to a Changing Economy
Ignore: The first type of response is to ignore. They look at something, like the novel Coronavirus, and think, “no one could have ever predicted that and planned for it and so we’re all just gonna move on with our lives.”
Over-plan: The second type of response is the opposite. A business can start to try to create contingency plans for every little thing, creating a diminishing rate of return where the business is spending way too much time, energy, and resources on ideas unlikely to happen. It can be crippling to the decision process, which ultimately affects the ability of the business to thrive. It’s paralysis by analysis.
The survival of the business depends on the ability to plan for 80% and then work hard on organization, leadership structures, and processes that are nimble. A surviving business is a learning organization that values an ability to pivot and learn. It’s about planning for the ability to change and adjust, not planning for every individual change.
How to Become a Learning Organization
How do you structure a team to be nimble? There are four fundamental keys to become a learning organization.
Leverage Technology: A surviving business needs to be at the forefront of technology.
Learn Quickly: Knowledge needs to pass quickly through the organization. Technology needs to be used to process that knowledge and make it meaningful.
Understand Interdependencies: A smart business will understand how they are connected and dependent across supply chains around the world. Once they understand this, plans need to be organized to have necessary adjustments in place if an event were to occur to affect the interdependent partnerships.
Prioritize Commitments: Looking at goals, deliverables, payments that might typically be longterm commitments, and finding ways to prioritize those into shorter-term, more nimble commitments. Real estate is one of those items that has been a longterm, inefficient commitment. Good questions to ask yourself and your company are: what are some current commitments that are unnecessary and that you can get rid of? Perhaps you need a coworking space?
Businesses That Are Pivoting Successfully
Some of the companies that have done well at this are retail stores, specifically big box stores. So let’s look at a company like Best Buy, Walmart, or Target. These companies have leveraged technology and pivoted in the ever-changing economy. For identified their local retail stores are just distributed warehouses. They have revamped their online platforms to leverage direct to consumer possibilities. Consumers can purchase online items that are available locally in-store and have options to pick up on-demand or have the item shipped to their house from a store that’s close. In doing so, these big box stores have shifted from retail stores around the country to distributed small warehouses where they can quickly get items to the consumer. It may sound like a small shift in thinking, but it’s a huge shift in execution and purpose.
Are You Ready for Change?
The world is changing at a rapid pace and we can no longer set 10-year plans without adjustments. Today businesses must constantly question their direction and reorient. The world will get upended on a more regular basis, whether it be from a global pandemic like the Coronavirus or the rapidly changing technology, the flow of information, and the interdependent nature of the world. Survival is based on moving and pivoting quickly. Think of it like an athlete who has trained their body to adjust, react, and respond quickly to their environment. Build your company to be nimble and ready for action. Set your goals and look to the horizon, but always be prepared to pivot.
The problem is nobody likes risk. Psychologically we aren’t wired to take chances. We like things such as comfort and stability. Most of us are conditioned to gather resources, store them up, and preserve the status quo. We enjoy going from an air-conditioned house to an air-conditioned car to an air-conditioned office. Our society places a high priority on control and comfort. Those are the opposite of risk.
The Science of Risk
Science has only begun to understand the psychology and biology of risk-taking, but it’s quite a fascinating subject. A unique discovery is that our brains have both excitatory cells and inhibitor cells. Those inhibitor cells act like traffic cops and are less active in young brains. They become more active as we get older. This may be one reason why children learn so much faster than adults. Their brain is more open to explore, take risks, and try new things. It also may be why teens have been found more likely to take risks with unknown outcomes or ambiguity.
Kayt Sukel is a Carnegie Melon alumni and author of the book, “The Art of Taking Risks.” In a recent interview with Carnegie Melon she states:
“Risk-taking is part and parcel of everyday decision-making, and it’s a process not a trait, all of us have the power within us to use risk to our advantage. It’s not just the stuff of super heroes, legends and drug addicts: risk is the key to learning and growth for all of us.”
Science has also found our mood and environment affects risk-taking. “When we’re happy we take more risks,” writes University College London professor Noreena Hertz. “It’s why a country’s stock market tends to rise off the back of a national team’s win at football.” Sunny days can also change your outlook on life and interest in risk-taking some research has found. We tend to be more conservative in the cold winter months and more daring on those warm and sunny days.
Can You De-Risk Things?
The common issue is those that seek to be innovative or claim to invest in innovation end up caught in de-risking cycles. They attempt to hedge ideas or opportunities with processes, structure, or systems and essentially end up with something hardly innovative. Nothing new comes from old ways of thinking. Nothing truly innovative will come out of a calm structure and process. The old adage, “high risk, high reward”, is true. If you want big wins, you have to take big risks.
This is not to say planing, research, and process has no value. Business planning does have value. Imagine standing on a cliff, ready to make a cliff dive. You assess the direction of the wind. You take stock of the distance and the landing area. Perhaps you play out the jump in your mind a few times, thinking through the moves you’ll make and how you might adjust for the wind. Eventually, you have to jump. Once you jump, you’re on your way. Your instincts and training take over at this point, no matter what happens. Should a large gust of wind come about, your plan is junk. You have to adjust as you fall. You can’t start over – you just adjust.
When it comes to innovative ideas, it’s much like the cliff jump. There’s no amount of planning or process that could prepare you for the gust of wind on the way down. Ideas will hit all sorts of roadblocks and setbacks. This is why they are risky. Eventually, they must launch and learn to pivot and adjust on their fall. Some have described innovation as jumping out of an airplane and building your parachute on the way down. If that’s the case, perhaps you’d rather jump out of a plane with a seamstress than a skydiver. A standard skydiving plan doesn’t include “be good and sewing.”
Groupthink Can Kill Innovation
Recently there was a venture capital group, about 30 people or so, discussing their biggest wins-to-date. There were two companies in the portfolio that had far outperformed the others. Even though the group realized this and acknowledged these are their major wins, they still implemented process and structure that wouldn’t allow them to make a similar investment again. The group, in an effort to de-risk their investments and make ‘smart’ bets, implemented guidelines that would have labeled those two companies as too risky at the time they originally invested. They completely eliminated the ability to repeat their success. This is groupthink, and it will destroy innovation.
Groupthink is when patterns of thinking within a group merge to become more alike and aligned. Eventually, the group thought takes over, often eliminating descent or objection. This can become quite dangerous in homogeneous groups of people with very similar world views. A recent article in Applied Psychology stated, “It is concluded that minority dissent stimulates creativity and divergent thought, which, through participation, manifest as innovation.” Innovation requires that leaders seek out diversity of thought and opinion.
Too much process and structure will suck the life out of innovations. While every project needs some form of planning and structure, too often these are used as a way to de-risk ideas. Some may argue the implementing a certain type of business planning or following a certain structure will making the idea less risky. That’s simply not true and we don’t have to look far to find the anecdotal evidence. There is no single process, system, plan, or structure that every successful innovation or startup shares. Additionally, many startups and innovative ideas have tried using different plans and processes only to fail.
In the Army, they have a concept called Commanders Intent on a battle plan. Military commanders have long known that battle plans rarely survive contact with the enemy. Despite the great discipline of many troops and advanced training, once an engagement with the enemy happens things can go sideways. The Commanders Intent helps field leadership know what the intention is so they can make informed decisions in the field. For example, there may be a detailed plan to advance on an enemy position but the Commanders Intent might simply be to take the hill.
The point is that process or planning is important, but we must give risky innovations the freedom to adjust and pivot. That means you can’t completely plan for how an innovative idea will come together.
Innovation is a Little Crazy
People aren’t as innovative as they like to think. Venture capital investors often follow each other, pumping money in companies with everyone else. Peloton, for example, is a fine company but it’s an exercise bike. There’s nothing that innovative about Peloton. At the time of this article, though, it’s valuation has skyrocketed.
If a business wants to truly innovate and be creative, they have to take a risk. They have to do things other people aren’t doing. Risk is scary; it involves failure, crashing, and embarrassment. But no risk, no reward. The more you try to de-risk an idea, if that’s even possible, the more you’re throwing innovation out the window. Truly unique and world-changing concepts will be crazy risky because they’re crazy new.
Six months ago, I was an exhausted startup employee and became friends with an overworked journalist. Over a pitcher of beer, we discussed creating a podcast on innovation called The Commonwealth. I would host the show and land the biggest guests possible. My friend, Alec McChesney, would produce the content and manage distribution.
Since first putting our podcast idea on a napkin, this passion project has taken us on a wild ride. After building up some episodes, Alec left journalism to take a job as a Marketing Strategist at Firespring. My startup went through a restructuring and laid me off. This gave me the opportunity to focus on the show full-time.
The amount I’ve learned from each guest is tremendous; I can’t even appreciate it all just yet. However, these are currently my top takeaways since we started this show.
Use Disposable Resources | Amanda Valentine
Amanda Valentine moved to Los Angeles to follow her brother who was forming a new band. The brother would play lead guitar. Adam Levine would sing. They named the band Maroon 5.
Amanda started getting involved in wardrobe design for the band. She moved to Nashville to start her own boutique shop when she auditioned for Project Runway. She was voted off the show after a poor performance on Season 11. When season 13 rolled around, the producers asked if they could include her on a list of previous contestants for fans to vote back onto the show. She said yes.
Her friend, Adam Levine, Tweeted the link. All the Maroon 5 fans voted. She made that season and placed runner up.
“Most really successful fashion designers come from really wealthy families,” Amanda told me on the episode, “Zac Posen is funded by his family’s trust fund. Same with Tory Burch.”
She didn’t have a family trust. But, she did have a famous brother and leveraged that resource to help her succeed. Most people don’t have trust funds or famous siblings. However, many people have resources available to them that they don’t use because they are too afraid to ask.
Know Your Core Offering | Runza
Donald Everett is the President of Runza. His grandmother opened their first fast-food restaurant in 1949. The chain today is run by the third generation of Everetts, has 85 locations in the Midwest and is beloved by most that call themselves Nebraskans.
Runza has experimented with multiple menu items throughout the years, most recently a vegetarian Runza. Some have been incredible successes, while others have dramatically flopped.
When asked the approach Runza takes to these new menu items, Donald said, “At the end of the day, Runza sandwiches, fries, hamburgers account for 80% of our sales. The other things are noise. You have to make sure whatever thing you add to that menu isn’t a flippant decision. You have to make sure you know how it’ll impact the execution of your other products.”
Being the best at everything is impossible. Pick one to focus on. When adding something to that core competency, make sure it doesn’t distract from the rest.
It’ll Go Unexpected Places | Nelnet
Jeff Noordhoek is the CEO of Nelnet, one of the biggest student loan businesses in the world. I asked Jeff if he ever thought the company would grow to this size when he joined the team as the third employee.
“The short answer is I had no idea it would get to this level. This idea for this business came about when Mike (Dunlap), who’s speaking later on the episode, and a friend Steve Butterfield came together and said we’re going to start a company. They approached two friends—I was one of them—with the idea that we’d finance student loans.
“At the time I remember thinking: ‘This is a big risk, it’s a startup company. If we made it to 10 people, in my mind, we’d be highly successful.’ Here we are, 23 years later, with 6,800 employees. We have 560 open positions today.”
Jeff continues: “At the time, I had no idea what it would get to. But that’s the beauty of life.”
Value Diverse Experiences | Buildertrend
Buildertrend is a construction management SaaS company in Omaha, Nebraska. After emailing firstname.lastname@example.org, I was able to get time with its three founders.
Buildertrend started with Jeff and Steve Dugger building websites and software in their parents basement. The freelance work allowed them to create products that solved problems across a variety of industries. After making a website for a construction company, word got around with local home builders wanting a website. Jeff and Steve saw the pain point and brought on their high school buddy with sales experience, Dan Houghton. Thirteen years later, the company has 500 employees with software that’s used around the world. Without dabbling in multiple industries and projects, Jeff and Steve wouldn’t have been able to discover the construction pain point.
It Takes Times | The Commonwealth
Creating this show has given me the ability to speak with some remarkable and renowned individuals. We built up some episodes before launching the show. When we released the first episode, we didn’t get thousands of hits overnight. Podcasts grow primarily through word of mouth, which takes time to develop. This project has been consuming, frustrating, exciting and overwhelming… depending on the time of the day.
We have a specific vision where we want this show to take us. If achieving it were easy, everyone would have a well-known podcast. It doesn’t happen overnight. But the first step in building anything is laying the first brick.
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