Find Your Constant and Pivot with Purpose
By Hannah Landers
The scene is familiar in any popular bar on a weekend night: the crowd is four-or-five people deep, and there’s a single bartender trying to keep up with the patrons. It’s frustrating enough to order a cocktail in this situation, but even more so when the night is winding down. Departing drinkers elbow their way past the rowdy throngs to settle their tab — and wait…and wait…for that sole bartender at the opposite end of the bar, deep in conversation with a customer.
Even after a customer waves their hand and captures her attention, it’s just to receive the check — which inevitably is dropped right into the fresh ring of condensation left by someone’s glass, leaving it an unreadable, inky blob. Actually completing the transaction demands repeating this process again, leaving patrons less than eager to return.
It’s an obvious opportunity for disruption, and Flowtab (originally christened Apptini) sought to totally transform that process for the better by taking it digital. Downloading their app allowed patrons to send their order to an iPad synced with the bar’s point of sale terminal, thereby paying their check without ever handing over their cash or card. The app then automatically directed the funds straight into the bar’s bank account.
Smartphone users seamlessly sending and receiving emoji-emblazoned funds on apps like Venmo, as well as the increasing ubiquity of digital wallet services like Apple Pay, would think Flowtab’s 2011 launch was a cornerstone in the world of convenient, digital payments.
Yet, anyone who’s been in a bar recently knows Flowtab never joined the likes of Venmo and Apply Pay. The company was shuttered in 2013. In its two years of existence, Flowtab fought fearlessly to stay afloat. Like many fledgling companies, they executed a series of pivots in an attempt to gain traction.
What separates companies like Flowtab or Fab.com, who pivoted their way into oblivion, from those like Kabam, whose significant pivots resulted in an $800 million exit, or Printfection, who have turned theirs into almost $10 million a year in revenue?
Flowtab failed to pivot with purpose. The brand’s vision, simply serving as a “mobile ordering, payments, and loyalty platform for bars and nightclubs,” was so product-focused it left the organization rudderless when the product itself had to change. In lacking a core, purpose-driven brand story, Flowtab was unable to understand the ways in which they alone could empower their customers to mend their broken world.
After the initial version of their platform struggled to profit from charging bars and customers to place and receive orders on the app, Flowtab pivoted their target market away from bars and toward funding the company by selling advertising space within the app to alcohol companies — though that quickly proved to be pointless, as the app didn’t have enough users to monetize. Flowtab then tried for another pivot, this time shifting their focus to stadiums as their primary customer. Numerous regulatory issues, combined with established players like Bypass already zeroed in the market, made this effort too little, too late.
Flowtab was right to pivot. Almost every young company endures a pivot — a shift in business strategy as a reaction to a number of different factors — at some point. In fact, the entire “lean” methodology put forth by entrepreneur Eric Ries in his book, The Lean Startup, makes the pivot a right of passage for organizations that are encouraged to be agile in an ever-changing marketplace.
All pivots occur around a fixed point on which everything turns. Understanding what this point is, the constant in a business that cannot change, is the difference between success and failure.
Flowtab lacked this clear direction, and their pivot left them scrambling for a viable business strategy. It had less to do with shifting the tactics of the organization around the core “why” that drives everyone in the organization forward, and instead was a desperate attempt to remain viable in their final hour.
Kabam began as a social network, and after several pivots, emerged as a successful gaming company before their exit. Through the process of evolving his company, CEO Kevin Chou identified four key pillars of his organization:
- Go-to-Market Strategy
- Business Model
Significant changes to any one of these four qualifies as a pivot. Strong or weak, pillars require a foundation — something more elemental even than the four items above. The brand’s story forms that foundation. Understanding why the company exists in the first place clarifies what can change and what must remain immutable.
Design-focused ecommerce website Fab.com also emerged from a pivot. The company was originally called Fabulis, and had iterations as a social networking platform and a Yelp- or Groupon-type site, all geared toward the gay community. When those approaches failed to take off, founders Jason Goldberg and Bradford Shellhammer reconfigured the site, shortening the name to “Fab” and focusing on the flash sale model: selling a limited number of items at a discounted price for a short amount of time.
The decision to switch to an ecommerce platform specifically focused on unique and finely designed housewares, jewelry, and other accessories was more than just a blind experiment. In a 2012 Inc. interview shortly after launching Fab, Shellhammer and Goldberg talked about the rationale behind the pivot. “[W]e asked three questions,” Goldberg said. “What are we most passionate about? What are we good at? Where is there an underserved market? The answer was design, design, design.”
Shellhammer and Goldberg recognized that there wasn’t a marketplace to find striking yet affordable products for the design community and, combined with their own deep passion for design, defined the mission behind Fab’s existence. Less than a year after the pivot, the site had more than two million users and $50 million in funding.
Fab faced entirely normal challenges scaling, such as customer complaints about long shipping times. In response, Fab decided to bulk up their overall inventory rather than relying on designers to fulfill orders of their limited product mix. The company inventory quickly ballooned from 1,000 to 11,000 products available per day.
Having a larger selection of products meant that Fab was stocking more ubiquitous inventory. Those that once flocked to the site to find eccentricities like a chandelier made out of martini glasses, a motorcycle helmet studded with rhinestones, or other products curated with a distinct eye by the Fab team were now met with items they could just as easily find on Amazon. By making a move contrary to Fab’s core “why,” they undid what fueled their initial, successful pivot.
Within two years of that fateful change, the brand had become a shell of what it once was, and was sold for much less than its former near-billion-dollar valuation.
Contrast this with Printfection, which began as an ecommerce platform for artists and designers to sell T-shirt designs directly to consumers. Although founder Casey Shorr told Startups.co that he felt enthusiasm for the idea and was energized by a “passion for technology,” this initial iteration of Printfection was conceived “without a lot of discipline or though for what we really wanted in life — what we were really passionate about.”
Shorr convened his team to talk about what kind of purpose would inspire them to come to work every day, excited and motivated to do what needed to be done. Ultimately, they settled on the core story of their brand: “We realized we were passionate about helping other businesses grow,” he said. Printfection defined itself as a place for individuals and organizations alike to create branded merchandise for marketing purposes.
This decision wasn’t driven by a lack of revenue: Printfection had surpassed $1 million in sales in their original business model. Printfection took the time to evaluate not just their product-market fit, target audience, or other pillar, but instead truly considered the core “why” that defined the organization’s mission. This shared purpose has led Printfection to post-pivot success: the company’s revenue clocks in at $9 million annually and they hold an average 4.4-star rating on business software and services review site G2 Crowd.
It’s rare for a company to nail a perfect business model and plan their first iteration. Even the most transformational and high-growth organizations require tinkering, and leaders need to be agile, adjusting different elements of their business as markets, people, cultures, and technology shift. The key to ensuring any of these pivots are successful is an understanding of the core “why” that brought their organization into existence and the story that communicates the purpose that team members can charge toward. A business is like any equation full of significant variables — solving for them requires a single constant: purpose.
Hannah Landers is an associate at Woden. Whatever your storytelling needs may be, Woden can help. Read our extensive guide on how to craft your organization’s narrative, or send us an email at firstname.lastname@example.org to discuss how we can help tell your story.