More than at any time in the past 20 years, being an entrepreneur is cool. Hip. Trendy.
It used to be that if you announced yourself as an “entrepreneur” you were either laughed at or simply labelled as someone who “doesn’t know what to do” or, worse, was just “unemployed”.
But no more. Now, everyone aspires to the have their own business, to get featured on TechCrunch and raise an investment round from a top-tier VC.
However, many people severely underestimate what it takes to be successful. The journey is never simple, the path is never linear, and success has to be fought for as the obstacles will be manifold and unexpected.
The only certainty with regards to early-stage company business plans and ideas is that they will be very different to inception and the initial investment. How founders and investors approach this is the key to whether such a venture can be successful.
Talk to any successful businessperson or entrepreneur and they will tell you about their failures, about what didn’t work and what they learnt from it. This happens inside current ventures too. There will be mistakes and missteps leading to setbacks and disappointments.
It is how you – as a management team – and your board and investors respond (or even pre-empt) these realities that will determine the quality of the outcome. That may well necessitate a pivot or a change in direction.
But what determines this and what considerations are important? In my opinion, the following issues are key.
1. No data, no pivot
The decision to pivot should be data driven. Too often entrepreneurs change course without the necessary data to make an informed choice. There are many reasons why a particular product or application might not be gaining traction.
That being the case, it doesn’t always follow that the product is wrong. Know your customers, get their feedback, track the funnel and conversion cycles and procure data. That data will reveal plenty about what is working or not and whether a change is required.
2. Communication
Internal and external communication is key in all aspects of every company. On a fundamental strategic matter such as a pivot, the communication lines preceding such a consideration should be flawless. Are the product and tech teams properly interwoven? Is the vice-president of sales giving real-time feedback from customers? Is this data, collectively, being seen and assimilated by the chief executive and/or founders?
The second important step in this regard is for the picture to be succinctly conveyed to the board and investors. A pivot requires buy-in from every stakeholder. This is only possible with accurate information which does not suffer leakage through poor communication.
3. Execution trumps ideation
On a panel at the FUTURE:Proptech event a few weeks ago, we discussed the importance of execution. Many prospective entrepreneurs believe being successful comes down to the nature of the idea.
The idea is important, but what determines the outcome is the execution capability. Founders, therefore, need to have a razor-sharp insight into their team, their performance levels and whether they are delivering.
A strong concept and product can be lost or sunk by poor execution at any level. It follows that the board and investors need to apply such an assessment to the founders or management team as well.
4. Nimbleness v stubbornness
For most founders, their product and company are part of a vision that they feel passionately about. Rightly so. However, founders need just the right balance between having the strength of their convictions in terms of their mission and being receptive to what the data is telling them.
A major advantage of an early stage company is its nimbleness and ability to adapt to new environments and realities quickly. So, embrace the change if that’s what all the signals are pointing to.
5. Bench strength
A pivot normally requires different perspectives and skillsets. For example, if a strategy is going to change from a B2B to a B2C focus, this needs a completely revised go to market approach.
Having built a team with a particular goal and segment in mind, this now needs to be ripped up and started over. In terms of the strengths of the team, what does the bench look like? How are these new challenges going to be faced and gaps plugged? These are tough calls to make – hires who were the A team yesterday are literally redundant for the path of tomorrow.
Despite all of these measures, there are times when enough is enough and the sun needs to set. This is never easy, but its worth remembering that this is statistically the most likely outcome and as such there is no shame in such an outcome.
What sets entrepreneurs apart is their willingness to take on enormous personal risk in the pursuit of their own vision. But this should never come at any and every cost. For every stakeholder – founder, employer, partner, investor – life is too short and it there comes a time when moving on is the best choice.
Dom Wilson is co-founder and managing partner, PiLabs
