Robert Chess: When A Plan Doesn’t Work, Managing Through The Pivot

Robert Chess: When A Plan Doesn’t Work, Managing Through The Pivot


[MUSIC] For first time entrepreneurs,
it’s the toughest. Because first time entrepreneurs
oftentimes don’t recognize the signs that a pivot needs to be made, and
will stick with things too long. Or alternatively,
which is the art of this, they think that they need
to respond too quickly. I think the key thing is setting
up a lot of experiments. Setting hypothesis up. Finding ways to testing them. If you have an internet business, you can sometimes actually test them
to make changes on your website. If you don’t have an internet-type
business and you have something that has a longer development cycle,
do a lot of market research. Set up experiments AB,
experiments where you can get real data. So the key, really, I think there,
is setting a hypothesis, creating a set of experiments, going forward with
the experiments, analyzing the data in an objective manner, and doing it in a way
that is based on real customer feedback, either through product or
through really good market research. [MUSIC] It’s both,
because you have to look at the analytics. If you can have objective data,
that helps a lot. But a lot of times,
if you think about Steve Jobs. Steve Jobs did not make his decisions
based on a lot of analytics. He was making it based on gut and based on a true understanding of what the
customer would want if it only existed. And so in those situations, sometimes you
just have to stick with it for a while. But even so, there, they’re still
ways of testing to make sure that your product concept and
your market is correct. And I think particularly on the market
side, that’s the easiest to test. [MUSIC] When you’re pivoting,
there’s really three ways you can pivot. You can pivot on the product, say gee,
we don’t have the right product here, we have the right market,
we have the right team. You can pivot on the market, and
say, gee, we have a good product, we have a good team, but
we just didn’t pick the right market, we didn’t pick the right customer base, or
maybe we’re just early into an area, and the area hasn’t developed and is mature
enough for our particular product. Or you can say I’ve got the product right,
I’ve got the the customer right, but my team isn’t correct. Usually in startups, more often than not,
it’s the customer and the market where you need to pivot on. Because if you pivot on the product,
that’s a huge restart for a company. That’s almost like let’s
just throw this out and we’re going to try a whole
nother technology. That can take years. Usually the founding team, the investors,
it’s very hard to change out. It’s sounds like an easy thing,
but it’s not. The easiest thing usually to pivot on
is to try to find another application. And if you look at most of the companies
that have been successful in pivoting, they usually pivot along the axis of
the market and the customer, not so much on the axis of the technology and
the team. [MUSIC] There’s a lot of aspects to that, because there’s a lot of people you have
to bring along to make a pivot successful. You have to bring your investors along. You need to bring your board along. You need to bring your employees along. And companies that have
done very good at it. First of all, they prepare ahead of time. Is they think about, gee we’re in a start up, we’re not
going to get everything right initially. We’re going to have a lot
of bumps on the road. They plan in terms of telling their
investors, is we need to raise enough so we have time for experimentation. That if our first customer base doesn’t
work out, we have time to do the success. People tell their boards about that. They also tell the employees as you
need into the mission of the company, you need to buy into the overall vision. The specific implementation
in terms of the customer, in terms of even the product,
may change overtime. So I think the most important thing
is to prepare people ahead of time. And then, when you make the change,
I think the hardest part isn’t so much changing directions strategically,
it’s really the people issues. And particularly, what do you do with people who may
no longer fit with your business? As if you’ve hired somebody who may be
an expert in consumer packaged goods, and now, our company is going to go
focus on financial services. You need to find a way of re-purposing
those people, or to, basically, if you need to let them go, is to do it
in a way that doesn’t send the signal to the rest of the organization
that may happen to them as well. It’s a very difficult
issue to work through. [MUSIC] The ones that people are familiar with
now is Twitter’s a very good example. Netflix’s a very good example,
very different model than what they have. You could even say Apple has been. Actually a GSB professor here performed
a very successful Andy Rachleff, with Wealth Front,
which started off as Ka-Ching. You know which, and they’ve now basically
morphed that business into something doing personal wealth management. Very different than the initial topic. The industry that I’m in
is the biotech industry. And you don’t think of the biotech
industry as one of pivot. Very long science,
very long development time. But, the most,
eighty percent of the companies that have been successful in our industry,
major successes, are successful in something very
different than their original idea. Which is probably you know one of
the largest biotech companies out there, originally did chicken growth hormone. Genentech, which has been
the pioneer in the industry, started off doing industrial chemicals. And they recognized early on they
had fabulous technology bases, but they were doing the wrong
market application and pivoted. It’s much harder in
a technology company than it is necessarily an Internet software company. Just as important. [MUSIC] Really at the early stage, it’s how
do I learn what my best market is, what my best application is, and
really achieving product market fit. So if you set your objective, in
the first year or first year and half, as I want to learn where my best application
is, how to tailor my product to that. All these things that you might call
failure, are really just learnings and actually are contributing to
the intellectual success, intellectual based and
the eventual success of the company, and that’s not failure at all that’s success. [MUSIC]

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