In this guest post, Caroline McDonald, the Head of Content at SME-focused bank Aldermore, explains how making a big change to your company’s strategy can be the making of your business.
When the market shifts beneath their feet, should entrepreneurs stay on course or change direction? For many business owners, it could be a make or break point in their business and also their careers.
The business world is moving at an ever-increasing speed, thanks in part to the digital age, and SMEs need to be agile and flexible in order to stay successful.
Businesses will often attempt to ‘pivot’ in these periods of change, which refers to switching strategies when an original business model is no longer working. While at first glance, you might assume this move is done out of desperation, but for many businesses it can be a positive move that drives success and facilitates growth.
Pivoting or switching strategies is not a decision to be taken lightly, and business owners need to consider the pros and cons of such a move before taking any action.
Making the change
It is vital that businesses are adaptable, even when everything seems to be going well. If business owners put too many restrictions on their plans and activities, they run the risk of becoming outdated. This is especially true if their existing plans are based on old data or a market that has changed or no longer exists.
Switching strategies is not without its risks and business owners need to consider a number of factors before making any major changes.
Prioritise your customers
Your customers should be at the heart of everything your business does. It doesn’t matter if you’re switching strategy in order to keep your existing customers or attract new ones; you need to ensure you continue to meet the needs of your target market.
Assess your finances
Whilst it’s not entirely essential, if a business does want to pivot and switch its strategy, it would benefit from being in a strong financial position. Having a backup of strong finances will enable you to recruit knowledge and experience from new employees, perhaps invest in updating equipment, or enable you to completely change your offering. Before starting the pivot process an ideal route would be to ensure there is a pot of savings available to undertake the planned changes – whilst many businesses ensure they have a contingency fund, others could use additional cash savings to help smooth any transitional change.
It may be that your firm has surplus cash in its current account that isn’t earning you interest. Those funds could be transferred to a business savings account and earn interest whilst you plan changes for your business. There are some banks who offer business savings accounts that allow you to choose the exact maturity date for your funds, meaning you can plan effectively whilst maximising your returns. Using the business’s savings and reinvesting is an ideal scenario but it may be that other lines of external finance could be available, should the business need it.
Don’t underestimate the power of small changes
When an existing strategy isn’t working, it’s easy to think that the only answer is a major pivot, but this isn’t always true. Sometimes, smaller adjustments can still provide big results – a change in product processes or altering your distribution channels could create the results you need rather than trying to implement an entirely new strategy.
It may come as a surprise to some, but many great businesses were born out of a pivoted strategy. Multinational cosmetics company Avon was founded by travelling book salesman David H McConnell. When he noticed that his female customers were much more interested in the free perfume samples he offered than his books, his switched strategies and began providing his customers with the products they wanted.
As technology continues to evolve at an increasing rate, more businesses are feeling the need to pivot in order to remain successful. Take micro-blogging platform Twitter for example; the social network started life as a podcasting website called Odeo. After the launch of iTunes, the company found itself struggling to remain relevant, and its employees started to build Twitter as a side project. Over time, the new concept progressed and grew to become one of the world’s most popular social networks.
Twitter’s co-founder Evan Williams shared one of the lessons he learnt through his successful pivot, stating that Odeo’s demise was in part due to an inability to adjust fast enough, saying: “It turns out long term is not soon enough for a start-up.”
Whilst pivoting is seen as a common trend amongst digital companies, who often switch strategies to gain advantage on the competition and provide additional benefits to their users; the need to be flexible and adapt to changing market conditions is not an entirely new business phenomenon. Regardless of what industry a business operates in, flexibility, adaptability and agility are key to achieving business success.
Founded in 2009, Aldermore is a modern, SME-focused bank which challenges the established view of what banking should be. They deliver award-winning business finance, mortgages and savings to Britain’s SMEs, homeowners and savers.