From local restaurants to major corporations, companies that are successfully navigating the Covid-19 pandemic and ensuing recession have often pivoted to a business model that’s conducive to short-term survival, and long-term resilience and growth. Not all pivots, however, result in good business performance.
What does pivoting mean?
Prior to the pandemic, “Pivoting” was a familiar word in the startup world. When a company’s first business model wasn’t working, a wise CEO and team might pivot to plan B. But pivoting didn’t always mean desperation, it was often a tool to discover additional growth — growth a company might otherwise have overlooked.
But pivoting isn’t always good. According to an article from Harvard Business Review, three conditions are necessary for a successful pivot during the pandemic.
First, pivots must align the firm with one or more of the long-term trends intensified by the pandemic. For instance, if social distancing remains the rule for the near future, the casual dating platform Tinder will need to follow competitors Bumble and Facebook Dating in offering video dating.
Second, a pivot must be a lateral extension of the firm’s existing capabilities, cementing — not undermining — its strategic intent. If you’re a manufacturing company, pivoting to manufacturing a pandemic-needed supply would make sense, but moving into manufacturing and you’re a service related business isn’t lateral extension of your firm’s existing capabilities.
Christina Long, president and CEO of Create Campaign, a nonprofit organization in Wichita that works to support minority entrepreneurs, says there are dangers to chasing some of the hottest new market opportunities being created by the pandemic, especially if it’s a new area for the business owner.
“PPE is a hot item that people are trying to score” funding to produce, Long says. “And while it’s great to be in a position to service those immediate needs, reaching out into areas that you have no past performance, and you have no understanding of the business model, just because you see the opportunity” is risky at best.
And just because something is a good idea during a pandemic doesn’t mean its success will last once the emergency is over. Simply surviving the pandemic will be a success story for many entrepreneurs, she says.
Third, pivots must offer a sustainable path to profitability, one that preserves and enhances brand value in the mind of the consumer.