question

My Twin Cities-based start-up, Hoodstarter.com, helps commercial property owners and brokers fill their properties by asking the neighborhood around them to crowdsource ideas for what they'd like to see move in. We recently pivoted our start-up slightly to focus on a new customer segment. How do we know if it was the right change?

David Berglund

founder

answer

Let's start with a quick definition of a pivot. The "lean start-up" strategy depends on developing the product and service in parallel with gathering data on the potential market in order to shorten the cycle time, limit the risks of failure and pursue a market-driven product/service development strategy.

Under the lean start-up model, the goal is to get to market quickly and cheaply get feedback and shift the business model/product/service quickly, a pivot, based on the market feedback. It is a strategy that depends on gathering as much valid customer feedback as quickly as possible and iterating the product or service quickly and cheaply.

The strategy has risks and benefits. The risks are moving away from a market too quickly or on too little information and getting into a frenzy of constant pivots and never establishing a position in the market. The advantages of a lean start-up model are you get to market quickly, cheaply gain market intelligence, adapt and meet the market demand with the right product or ­service before large competitors can react.

So the challenge of a lean start-up strategy is making the right pivot. It's great if you're lucky enough to get it right the first time, but nobody does, so success relies on finding and solving your market's problem quickly and cheaply. The only people who can tell you whether you've made the right pivot are your current or potential customers.

While you're pivoting you need to be developing and executing a market research plan that is going to gather as much valid customer feedback as quickly as possible. Get rough prototypes up running and in front of customers as quickly as possible.

Bottom line: the only way to know if you made the right pivot is to ask the customers in your new segment.

About the author

David Deeds is a professor at the University of St. Thomas' Opus College of ­Business.