Does the Pivot Strategy Apply to All?

Does the Pivot Strategy Apply to All?

Is the ‘pivot’ strategy the prerogative of the new-age technology companies? Or are there examples of non-technology companies achieving stupendous success upon pivoting?

Starbucks opened for business in 1971, retailing coffee beans. In 1982 Howard Schultz joined the company and on a buying trip to Milan experienced the way coffee was consumed in Italy: coffee bars acted as a public meeting place.13 He got the company to ‘pivot’ from a retail store selling coffee beans to selling it as an experience; the rest, as they say, is history.

Is the ‘pivot’ strategy of recent vintage? It has been in existence, it seems, from time immemorial, Tiffany and Co. opened for business in 1837 in New York as a stationery and fancy goods store with a $1000 advance from Tiffany’s father. In 1867 Tiffany first achieved international recognition for silver craftsmanship. Over time it gained a reputation as ‘the world’s diamond authority. It was pivoting from selling stationery and fancy goods to jewelry that won Tiffany worldwide recognition as a trusted maker of gifts that will be treasured for a lifetime.

Avon is yet another example of a company that achieved success upon ‘pivoting’. In the nineteenth century, its founder David H. McConnell was a traveling book-salesperson who offered beauty products as a gift to facilitate the sale of books. Much to his consternation, he observed that the customers were more interested in the free perfume sample than the books those perfumes were supposed to sell. This insight made him pivot. McConnell formulated the company’s first perfume himself and recruited a team comprising only women to sell it door to door, as he believed that they had an innate passion for the products and also loved to network with other women. This business model—direct sales, or selling directly to end customers, offered women the opportunity to be the CEO of their own businesses—continues till date.

You may surmise that Avon stumbling upon a successful formula may be a flash in the pan. Take William Wrigley Jr to take for instance. Mr. Wrigley took up a job as a salesman selling soap and baking powder. To increase sales, he offered chewing gum free with the product. Lo and behold, gum proved to be more popular than soap. Wrigley jettisoned his selling career and pivoted towards manufacturing chewing gum brands.16 Today, Wrigley is among the most recognized brands.

Even Marlboro had to pivot before it achieved its current cult status as one of the world’s most famous men’s cigarette brands. When launched in 1924, it was targeted at women and positioned as ‘Mild as May’ 17 The brand sales remained in the doldrums.

With little to show for itself even after two decades of existence, Philip Morris, the brand owner, decided to ‘pivot’ and relaunch the brand, this time ‘for men’ personified by rugged cowboys. This pivot in strategy gave Marlboro the winning edge and catapulted it among the leading brands of the world, a position it continues to enjoy even today. Marlboro, the brand, is now ranked no. 23 in the Forbes list of the world’s most valuable brands (2019) an&its brand value stood at $ 28.5 billion.

Philip Morris has once again sensed the urgency to pivot. It knows that the cigarette industry is facing a hostile environment: governments are relentlessly increasing taxes on it to bring down the menace of smoking. Offices and many public places are declaring themselves smoke-free.19 The woes of the cigarette industry seem unending.

Before water rises above its head, Philip Morris has decided to pivot towards a smoke-free future by replacing cigarettes with smoke-free products. Why are they proactively pivoting? Because if they don’t, they might be the next Nokia.

Pivoting to revitalize a business is not the prerogative of companies dealing in consumer products. Even engineering and heavy equipment companies pivot to stay relevant. Let us look at John Deere, a ninety-year-old heavy equipment MNC that enjoys worldwide reputation and goodwill. It sells its products mostly to farmers and construction companies.

John Deere realized that merely selling tractors and farm equipment would make it an easy target for disruption. Therefore, it decided to pivot. From the 2000s, it started embedding sensors and software to its equipment to collect data. Since then it has collected a treasure trove of data which it has analyzed to gain insights into various issues relating to farmers.

It is now providing customized information on weather, and seed and fertilizer usage to farmers. In addition, it has built capabilities to proactively predict when maintenance is required, so that equipment downtime can be reduced, if not eliminated. By providing these additional services, John Deere pivoted from a farm equipment company to a farm management company. By proactively pivoting, it has secured its future. 

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