Ways to cross the rubicon: Pivoting in software startups

Abstract

Startup, or a potential company looking for form and repeatable, scalable business model, has become an advocated mechanism for embracing high ambition, innovativeness, and growth. The success of a startup is often related to the time it takes the startup to develop their business model. When the entire business is based on extreme uncertainty the main business hypothesis of the business model must be continuously tested and improved. This main business hypothesis can be split into smaller business hypotheses and when one of these business hypotheses proves to be false, a change in the direction of the company –so-called pivot –must be considered. Readily made approaches exist to accomplish this, including in particular the Lean Startup framework, that aims at iteratively developing, experimenting, and validating business hypotheses. In this paper study how pivots can change business hypotheses shown as a segments in Lean Model Canvas, a strategic management tool for developing nbusiness models. As an empirical contribution, we describe this definition of pivots with three case companies –all small software startups from Tampere region, Finland –and map the pivot effects on the business hypotheses. We found out that the pivots can be identified by changes in the Lean Model Canvas, that pivots typically take place in groups, and that comprehensive pivots happen early in the startup’s life, whereas once the business model is clarified, fine-tuning is more likely to take place.