It was a Monday like any other Monday, but for one entrepreneur, it was different. It was a time for redemption. A chance to lay everything out on the table. An opportunity to take ownership of past mistakes, set things right and chart a new course. It was time to pivot.
In a highly anticipated event, Theranos founder Elizabeth Holmes faced a crowd of more than a thousand of the world’s foremost experts on laboratory testing and medicine. They were there to see the embattled CEO present, for the first time, credible data underlying her company’s controversial technology.
Instead, Holmes delivered a sales pitch. Even worse, she pitched yet another prototype that has never been vetted or peer reviewed. And she refused to answer questions about the remarkably flawed technology that led to federal sanctions, the voiding of tens of thousands of blood tests and a ban from the industry.
That is not how you pivot. It was actually just more of the same nonsense that got her and her company into this mess in the first place.
It’s said that doing the same thing over and over again and expecting different results is the definition of insanity. I’m not saying Holmes is crazy, but she did once tell a room full of Stanford grad students that “the minute you have a back-up plan, you’ve admitted you’re not going to succeed.” By that logic, nobody should have medical insurance, a spare tire in their car or a fire extinguisher at home. It’s spectacularly bad advice, especially if your product affects people’s lives, as Theranos’ does. It’s the stuff of grandiose zealotry that has thwarted business leaders with more hubris than common sense for ages.
There is a time to stay the course and a time to pivot. Knowing how and when to do one or the other can make or break your company and your career. Not that any of this is easy, mind you. It requires a certain sense of balance – a genuine understanding of your own capabilities and limitations that comes from experience and maturity.
When Carly Fiorina was running HP, she pitched investors on a plan to diversify into services by acquiring PricewaterhouseCoopers (PwC). Wall Street panned the deal and Fiorina got cold feet, leaving IBM free to scoop up the consulting firm and finalize its own successful transition to become the global leader in IT consulting services.
Had Fiorina trusted her gut and stuck to her guns, HP’s future and her legacy as a chief executive might have turned out much differently.
Then there’s Microsoft. While PCs were becoming less and less relevant in an increasingly mobile world, former CEO Steve Ballmer essentially stayed the course and the stock flatlined for more than a decade. But since Satya Nadella took the reins and decided to turn Windows and Office into cloud-based services, shares of Microsoft are trading near all-time highs.
Faced with declining global consumer demand for soda, PepsiCo CEO Indra Nooyi aggressively diversified, acquiring Tropicana, Quaker Oats and Gatorade along with it. Meanwhile, Coca-Cola doubled down on Coke and Diet Coke, which still make up the vast majority of revenues. As a result, shares of Pepsi are up 72% compared with Coke’s lackluster 30% gain over the past five years.
Twitter has been stuck at about 300,000 monthly active users (MAUs) for what seems an eternity while Facebook continues to grow, blowing past 1.7 billion MAUs and going strong. For years, former Twitter boss Dick Costolo tried to figure out how to make the site more engaging for users. Now it’s Jack Dorsey’s turn. As I said, none of this is easy.
Any smart venture capitalist will tell you that most successful companies don’t make it big on their first concept or product. Bill Gates was originally a contract developer of programming languages. Sony started out as a radio repair shop. Toyota made looms. Nokia was a paper mill. The McDonald’s brothers spent their first 20 years on hot dogs.
That’s why VCs are all about the quality of a startup’s team. They want to know how tenacious you’ll be in the face of adversity. They want to know how you’ll handle the pitfalls that every company encounters. They want to know what kind of decision-maker you’ll be when your plans crap out and there are no easy answers.
My advice is simple. You want to be confident, not over-confident. You want to trust your gut, not defy the laws of physics. You want to believe in yourself without being delusional. You want to reach for the stars, but stay grounded in reality. As with so many things in business as in life, knowing when and how to pivot is all about balance.