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Pivoting successfully

New ventures need to ‘pivot’ gracefully to avoid alienating their initial user community, says a new study co-authored by Professor Paul Tracey of Cambridge Judge Business School.

One player challenges another in a professional game of basketball.

Like athletes, companies “pivot” in adapting to changing circumstances. But while a bad pivot in football could result in losing the ball, in business the risks are even greater – alienating loyal customers and sparking a rebellion.

Pivoting is especially prevalent among startup ventures, which may have to radically transform themselves because their original approach has failed. Such pivoting risks disrupting relationships with “user communities” that engage intensively with a product and therefore form a strong identification with the new venture.

So what’s a startup to do when conditions require pivoting, but key stakeholders feel betrayed and pose resistance?

A new study co-authored by Paul Tracey, Professor of Innovation & Organisation at Cambridge Judge Business School, argues that there are techniques to defuse such an “existential threat” to new ventures – and the key is to create a “bond” focused around shared experience of the startup and the venture’s early customers.

“Ventures can remove the affective hostility of stakeholders and rebuild connections with many of them by exposing their struggles,” says the study just published in the Academy of Management Journal. In other words: user communities show a little tenderness if they better understand the venture’s difficult journey.

The study focuses on a dramatic pivot by the Berlin-based Impossible Project, an analog instant photography venture founded in 2008 to relaunch production of Polaroid film after the Polaroid Corp. went bankrupt.

Impossible initially focused on a small niche of dedicated customers known as Pioneers, but this analog community proved too small to sustain the venture. So Impossible in 2013 pivoted from being a pure analog instant film provider to a company that sought to redefine analog instant photography in a digital world for the mass market. This strained relations with the Pioneers, many of whom turned against the venture and stopped buying film.

So Impossible tackled this issue by engaging in what the study terms “identification reset work” – which involved “emotionally reconnecting with stakeholders to put their relationship on a new basis.” Impossible did this by generating empathy for the venture and its challenges, and by mythologising the technology of analog instant photography – even invoking the memory of legendary Polaroid founder Edwin Land. “By revering the technology,” the venture helped to “idealise its struggles.”

Many of Impossible’s initial user community then came around to resume support for the venture: they reconnected with Impossible’s mission out of “reverence” for its products and its efforts to improve them.

“The ideas in the paper could apply to any user community,” says co-author Paul Tracey of Cambridge Judge. “The most famous example is Reddit, the aggregation and discussion website, whose users revolt all the time. But you also see similar dynamics affecting any company whose customers identify strongly with a product – like the 2015 protests after Cadbury changed the recipe of its Crème Egg.

“Yet while Cadbury is part of a big multinational that can weather consumer protests, this kind of rebellion can be fatal to startups because they are usually resource constrained and very reliant on their users.

“So while entrepreneurs are advised to build user communities and forge close relationships with customers, they often forget the flip side – that building these kinds of relationship creates a sense of obligation. So if you do something users don’t like, they can treat it as an act of betrayal and turn on you – and such risks are greater in later stages of a venture.”

The study – entitled “The Art of the Pivot: How New Ventures Manage Identification Relationships with Stakeholders as they Change Direction” – is co-authored by Christian E. Hampel of Imperial College Business School, a PhD graduate of Cambridge Judge; Paul Tracey of Cambridge Judge; and Klaus Weber of Kellogg School of Management at Northwestern University in Illinois.