The definition of “pivot” is “to turn.” I’ve been thinking about all the pivots that have occurred since March and all those that continue to be made as the novel coronavirus causes us to rethink how we operate personally and professionally. I was in the midst of a pivot from the full time practice of law after 20 years to venture capital when the pandemic halted my fundraising; I pivoted immediately to consulting.
This article suggests that the capabilities-driven strategy framework created by Paul Leinwand and Cesare Mainardi, and explained in their book The Essential Advantage, can be adapted to assess whether a pivot is viable and then used to execute it.
I begin with a short summary of my own decision to pivot earlier this year. I then summarize Leinwand and Mainardi’s “Coherence Test,” which provides questions that guide your investigation and decision-making about pivoting. I use a case study – my own pivot – as a means of applying the Coherence Test and The Essential Advantage analytical framework. At the end, I’ve summarized the “Essential Advantage Road Map,” which is a guide to executing organizational change in furtherance of a capabilities-driven strategy. Finally, I offer my key takeaways.
Why did I pivot?
I had no choice. The VC I founded was no longer viable in a pandemic-induced recession because I could not raise funds. I could go back to practicing law; or, I could pivot. I decided to pivot toward consulting and not go back to my comfort zone – litigation and trial work.
I made a fast but conscious, painstakingly researched, and intentional choice to build a consulting firm that focuses on early stage technology firms and small and medium enterprises (SMEs). These types of firms drive innovation and growth in our economy and deliver measurable and immeasurable value to their employees, stakeholders, and customers. I intended to support them with capital and advice as an investor; after the pivot, I would support them with advice, experience, and sound judgment.
A pivot that began out of necessity turned into an opportunity to realize my personal and professional objectives – helping others maximize their purpose by building sustainable, competitive, and investible companies that create value.
In pivoting, I used the capabilities-driven strategy framework as a guide. A full explanation of the framework can be found in The Essential Advantage by Leinwand and Mainardi (2011). As a starting point, take a moment to review the components of a capabilities-driven strategy, framed in the “Coherence Test” originally articulated by Leinwand and Mainardi in “The Coherence Premium,” Harvard Business Review, June 2010, 86-92, and adapted here.
“The Coherence Test”
Our Way to Play
Our way to play at Oak Moon Consulting mirrors the way we intended to operate at my VC firm. I was driven to create a VC that maximized the purpose of the entrepreneurs and firms in which we intended to invest. In doing that, I believed we could help them accelerate their growth, build competitive advantage, create value, and return outsized returns to investors. When I stripped away the investment component, the core – maximizing the purpose of entrepreneurs and their firms – remained. This is the genesis of the pivot to Oak Moon Consulting from VC.
We started with an understanding that our “way to play” did not have to change materially in pivoting from VC to consulting. We could still leverage our knowledge, experience, and research capabilities to help entrepreneurs, their firms, and other SMEs.
We experiment and analyze.
We collaborate and counsel.
We execute and check our work.
You can read more about our “way to play” here. Everything we do begins with understanding our clients. We then collaborate with them to create a tailored strategy that meets their specific needs. We don’t offer cookie cutter solutions. Once the strategy is set, we help our clients align firm resources in support of it and execute.
First and foremost, we are strategists. This aptly describes how we approach each of our practice areas. We have the education, skills, and experience to develop strategies that drive competitive advantage, and create, capture and deliver value. We do this for early stage and SME clients. We also design organizations, assist with capital acquisition, and provide branding and marketing strategy. Our technology and innovation strategy practice is our most niche service offering. Each of these practice areas is pegged to specific capabilities our people have.
Our Capabilities System and Organizational Structure
FIGURE 1. Our way to play; capabilities system; organizational structure.
Our practice areas work together in a system quite intuitively, with the common core being our focus on strategy. Each of the functional areas identified in Figure 1 is populated by a combination of our team members. We know we can add team members that allow us to offer a broader range of services that springboard from our strategy focus.
As we grow our team, we are adding people who complement our way to play and capabilities system. We want to be careful, however, not to build a homogeneous team. We intend to be diverse and inclusive demographically and intellectually. We also intend to treat all of our people equitably. We will recruit people who want to unite in furtherance of the same purpose – to help our clients maximize their purpose.
Product and Service Fit
We know that early stage companies, especially those that are not yet funded and pre-revenue, need to add capabilities they can’t always pay for immediately. We also know that SMEs often plateau and need an outside perspective about reinvigorating their firm, driving internal change, or pivoting.
To put a fine point on it: we provide capabilities early stage firms and SMEs often do not have. We do this in a way that recognizes their current state and their potential – by often deferring fees for 90-days. This lets our clients know that we are putting “skin in the game” and are investing our time, energy, and talent into our shared success. We believe this aligns with our way to play and capabilities systems at the same time it recognizes our clients’ needs, current state, and potential.
It’s my responsibility to maintain alignment among our way to play, capabilities systems, and product/service fit. It’s also my responsibility to set the tone, build community, and establish a culture that supports outstanding individual and collective performance.
I don’t make decisions in a vacuum. I do the research and analysis required to make certain that we are internally aligned to offer exceptional services that meet unmet needs for early stage firms and SMEs. I talk to industry leaders, founders, entrepreneurs, investors, and others about the trends they are seeing and anticipate in the short and long term. I also spend a lot of time with our clients talking about their needs, how we add value, and how we can continuously improve what we do and how we do it so that we are better able to help them. Finally, I lean heavily on the team we’ve assembled for input and feedback on my leadership of the firm, client service, and adherence to a coherent strategy.
I do all of these things so that our way to play, capabilities systems, and product/service fit remain aligned and also in sync with our people and our values.
The Essential Advantage Road Map
The Essential Advantage Road Map is a highly effective analytical framework that can guide you once you decide to pivot. You can find it in Chapter 10 of The Essential Advantage.
The Road Map has five distinct elements: (1) Discover; (2) Assess; (3) Choose; (4) Transform; and, (5) Evolve. I have summarized them here, and then offer my own takeaways at the end of the post.
Discovery. In the discovery phase, you should identify a reasonable number of hypotheses concerning your way to play options. They should be distinct from one another, but they don’t necessarily have to be in silos. They can be entirely compatible, incompatible, or a hybrid. When I did the exercise, my hypotheses tended to be compatible and complementary. My best advice is to really stretch yourself here to identify ways to play that will allow you to achieve your objectives. This may even mean considering an alternative that doesn’t align with your firm’s industry, market, or segment, but that allows you to leverage your ways to play and capabilities to create a product or service that meets an unmet need or satisfies outsized market demand.
Assessment. The assessment phase is where you’ll do the diligence to determine the risks, rewards, and opportunity costs of each hypothetical way to play. This needs to be an evidence-based analysis in the broader context of the industry, market, and segment in which your firm operates. You’ll then need to determine how attractive each alternative way to play is and whether you can build and sustain competitive advantage using one or more of them. This phase requires rational, complete, and thorough analysis of the facts and data that potentially support each way to play. A robust analysis at this phase of the Road Map will lead to better decision-making.
Choice. In phase three, you have to choose the capabilities driven strategy you intend to pursue. This largely falls on senior management, supported by a core team within your firm. Once you choose, you need to support that choice with people, processes, resources, and time. Pivots don’t happen overnight. They require patience. And, they require consistency. Firm leaders must demonstrate that they actually support the pivot, that its mission critical, and that those involved (whether it’s a specific team or the entire firm) will receive the investment required to succeed.
Transformation. Phase four, transformation, will be different for every firm that undergoes a pivot. In small firms, pivots may happen very quickly and without a lot of process involved. In larger organizations, transformation tends to occur more methodically and according to established (or new) processes designed to effectuate it.
My view is that smaller organizations have an advantage when they pivot. Small teams can coalesce more quickly and collaborate more directly to effectuate the required change. Before the pandemic, they often were co-located in one place. Even after the pandemic, the communication tools available facilitate collaboration even if it isn’t taking place face-to-face in the same physical space.
The point here is that once you decide to pivot, you need to drive alignment among the firm’s ways to play, capabilities systems, and product/service fit. The firm’s values – a topic for a future blog post – also have to be aligned. This is a process that requires ongoing investment at all organizational levels. Once aligned, a firm can relentlessly pursue its strategy.
Evolution. Phase five consists of ongoing activity and support for the pivot until it becomes a coherent and sustainable strategy. Firm leaders must remain engaged and committed in both words and deed. The firm’s capabilities must remain aligned and drive its work. They also must be continually improved and adapted to meet industry and market dynamics.
Leinwand and Mainardi describe the outcome of the evolution phase as follows:
“The evolution stage is nonprogrammatic: it never ends. But in its own way, it is as dramatic and significant as any of the previous stages. It involves continually adapting, improving, and extending the innovations; movements toward growth; and other practices that allow you to apply the capabilities you need. From here on, you write your own rulebook, and it should be coauthored by everyone who is committed to being a part of your company’s success.”
Let’s get straight to it:
1. Assess your current circumstances and context realistically and objectively; view volatile, uncertain, complex, and ambiguous circumstances as an opportunity; but, be wary of the threats they present and account for those threats in your decision to pivot and in executing your strategy;
2. Identify your competitive advantages and how you use them to create and deliver value;
3. Align your systems to drive competitive advantage and to create and deliver value; create new systems if necessary;
4. Lead the pivot in word and deed; behave consistently with your announced objective to pivot; invest in your firm and its people; sync your firm’s values with the objectives you set for the pivot;
5. Inspire your people to invest their time, energy, and talent in furtherance of the pivot; support and reward them;
6. Focus on hitting your chosen competitive “sweet spot; create and deliver value consistently and exceptionally;
7. Don’t pivot half-heartedly; commit to it and execute;
8. Check your work – plan, do, check, adapt; do this iteratively to continuously improve your ability to pivot successfully;
9. Persevere – despite the challenges, believe in yourself and your team; know that if you don’t succeed, you’ll gain additional skills and build resilience that will set you up for future success;
10. Pay it forward – if you succeed, help others who can benefit from your experience.
We would love to help you and your firm determine whether and how to execute a pivot. Feel free to reach out and start a conversation. No strings attached.