What to do when reality doesn't match the business plan?

By Renato Mendes, partner at Organica

Founded in 2001, Wappa was one of those startups born from an idea that seemed destined for success: offering companies a service for paying employee meal vouchers via SMS or WAP. It truly added value to the processes involved, and initially, customer reception was positive. However, it didn't take long for its founder, Armindo Mota Júnior, to realize that scaling the business would face a major unforeseen challenge. At that time, very few restaurants were able to adopt the technology necessary for it to function properly.

Seeing his startup at risk, Armindo had to make one of the hardest decisions of his life, and he didn't hesitate. He acknowledged that with that business model – at that time – Wappa wouldn't take off and aborted the mission. But that doesn't mean he gave up. Armindo believed in technology and decided to try applying it to solve a completely different problem in another sector of the economy. Thus, the new Wappa was born, a startup focused on the corporate taxi business. With Armindo's digital platform, companies could manage all aspects of taxi rides, eliminating paper and enabling total control over expenses for this type of service. The result? Today, Wappa is a relevant player in this competitive segment. And all this because, back then, Armindo adopted a procedure known as pivoting.

Behind this somewhat strange word lies the Portuguese adaptation of the English term "to pivot" (to change or rotate). In practice, pivoting is the ability of a startup to make a radical change in its business when it realizes that the expected results have not been achieved and there are no great prospects of this happening.

Looking back, it's easy to say that Wappa made the right decision in changing course. But when you're driving a Formula 1 car, narrowly avoiding the wall at 300 km/h and chasing lap after lap, things aren't so simple. Pivoting requires you to review a series of aspects of your business that may not have been considered when you launched it. And it's not always easy to admit you were wrong. After all, let's be honest, nobody changes the course of a business because they want to. The act of pivoting brings with it the undeniable truth that there was a mistake. A mistake in product conception, in market analysis, in understanding the target audience, in planning—it doesn't matter which one. That's why the first concept that needs to be clear in the mind of anyone who decides to pivot is a fundamental rule in the startup world: there is no absolute truth, but rather the one that works. Pivoting is nothing more than an adjustment to the market.

In a world where pragmatism reigns, pride and attachment must give way to learning and speed in implementing the new model. Accepting quickly that your great idea for a company may not be applicable, scalable, or simply may not have been born at the right time hurts less. In other words, perhaps it's time to stop adapting the world to your strategy and start doing the exact opposite. The most important thing for a successful pivot is to discover the cause of the failure and fight to find a new model that can generate revenue for your company. The first alternative won't always work, but the persistent search for an alternative is necessary as a matter of life or death. That's what usually motivates these entrepreneurs; they have no other choice.

One of the toughest parts of pivoting is undoubtedly the timing. Then comes the classic question: am I doing this at the right time? On one hand, there's always the belief that the current model will turn the tide. On the other, the natural anxiety of failing again on the new path. And the answer is that there's no perfect timing for this. There is, however, a new attempt, a "re-entrepreneurship" where risk is implicit. There will never be certainty. If you wait for the perfect moment to appear like an epiphany, it has probably already passed. The tip to minimize this feeling is to try using a strategy of having one foot in each boat, trying to make the transition to the new model as smooth as possible. Avoid making a change all at once, abruptly. Test your new hypotheses as much as possible with customers to discover what should be the flagship revenue generator for your startup going forward.

Understanding – and applying – the concept of pivoting is useful not only for startups but for companies of all sizes and sectors that face difficulties in getting off the ground. Admitting that something didn't work, raising and testing hypotheses for the new business, and acting quickly are essential points for success. And if you think pivoting is something for those who don't know how to manage a company properly, one last tip: do you know who carried out this type of process a long time ago? A certain YouTube, which used to be an online dating video service. Oh yes, and a certain Instagram too. Still ashamed to be part of that club?

About Renato Mendes
Renato Mendes is a partner in Organic[Company Name], a company focused on accelerating businesses and people within the logic of the New Economy, since 2016. He is a professor of Digital Marketing at Insper, a Scale Up mentor at Endeavor Brazil, and a columnist for Época Negócios. He has over 16 years of experience, almost five of which were as an executive at Netshoes, where he held, among other positions, the role of Head of Marketing & Communications for Latin America.