Assess the Benefits and Risks to Pivot Your Small Business
Whatever the reasons behind your decision to steer your business on a new course, or pivot your company, make sure you carefully assess the benefits you hope to gain by making a big change. Then weigh them against the risks by following these steps:
Begin by stating clearly, in a sentence or two, the problem you face.
Outline your basic strategy for addressing the problem.
Be as specific as possible about the strategic steps you intend to take.
For each of the strategic changes you list, write down the benefits you hope to gain.
Again, zero in on specifics here, such as “increased online sales” or “greater customer loyalty.”
For each of the strategic changes you propose, list the potential risks.
Be as specific as possible.
After you’ve considered both the hoped-for benefits and the potential risks, strategize ways to maximize the benefits and minimize the risks. Put your strategies in writing in your plan.
Toyota made its name in the 1970s with reliable, low-cost automobiles. In the late 1980s, the Japanese car giant decided to enter the luxury car market with a new brand, Lexus (the name itself a melding of luxury and excellence). The pivot offered the obvious benefit of an expanded market. But the move had risks.
The most serious: Car buyers might view the new Lexus as nothing more than a gussied-up Toyota with a few fancy extras thrown in. To keep Toyota’s image as a reliable economy car maker from diluting the luxury appeal of the new line, the company decided to sell the new cars in independent Lexus dealerships. They advertised the Lexus brand entirely differently from Toyotas.
Lexus owners were offered perks that mere Toyota owners didn’t get. The strategy succeeded. Lexus soon became one of the world’s most successful luxury automobiles. Many people weren’t even aware that the two very different lines were manufactured by the same automaker. In 2005, Lexus separated from the parent company Toyota. It now has its own dedicated design, engineering, training, and manufacturing centers.