That list I think is a good lesson/motivator that the "golden" product youre developing may not become the product defining your company but instead a side project.
Makes you wonder what you are actually building then, if it wasn't the product that ended up making you succesful.
I notice a few of these stories involve stumbling on an itch that badly needed scratching while doing something else with as much purpose. One of the big challenges of entrepreneurship in software is finding a problem worth working on when you're not actually experiencing any problems that aren't software related.
In that sense, perhaps you're building up experience in a new industry when building an idea, which introduces you to new problems, sometimes better problems.
The one I never really quite understood was Slack. Who builds an internal chat client, while building an online game, and then decides to build a b2b business around that chat client?
The rest at least have some logic to them. You build something, people use it for something else, so you generalize. Or you pursue a neighboring market or use-case. But the Slack one just seems so random.
I've heard similar stories many times, where someone discovers a gap in the market through an actual need that they have while trying to do something else.
Like the Kitopi Cloud Kitchen. The story I heard is that the guy already had a successful sweet business, and got the idea to have little mini distribution kitchens for it, instead of opening a new business everytime he wanted to extend his reach. Then decided to make that idea a whole business model.
Wow, I didn't know Kitopi Cloud Kitchen. This is truly a disruptive idea (I never use this word), as it breaks with the traditional idea that restaurant food cannot be industrialized and has a connection with the chef but also the place.
Even after reading this, it is hard for me to think "I could order food from this restaurant but the actual meal will come from a partner kitchen".
Brilliant from a business perspective, yet somewhat questionable culturally.
One cool part about it is that because the portions are so industrially controlled there a whole slew of reliably calorie counted restaurants available.
Early people at Slack were nerds and unhappy with the communication tools that were available at the time.
So they went the nerd way and hacked together something they would not spend most of the time complaining about. "Hacked together" is important. It was not dedication, it was "scratching your own itch ".
The hack was satisfactorily working. For them.
And when Glitch failed, they were left with (among other things) their communication tool. "Someone" thought it was worth trying to market it, following the proverbial dogfooding strategy, because there was nothing else left to do anyway with Glitch.
And boom. Slack.
Source: memories of an article read many years ago that I can't find traces of, but was quite fascinating.
Segment is similarly weird. They were building EdTech and then decided that this boilerplate file called analytics.js was the coolest thing they had built and they pivoted the company around that.
I don't know Segment, but EdTech is all about analytics. Everyone wants hyperspecific data, e.g. do students who attend the first three lectures do better than students who didn't do that, but were there the last lecture?
So not so surprising, "from a certain point of view" [0].
Ok, good point. I think their analytics.js was just tracking website usage, but you're probably right that they were planning on deep-inspecting that data in the way you suggest.
I believe the story is: their game failed, and they went back to Sequoia to return $5M in outstanding investment. Sequoia told them to 'keep it, and build something'. So they tried the Slack thing.
What's funny is that he's the same dude who founded Flickr, which also started out as some kind of game. Ha ha.
Also, $5M is a small amount for Sequoia - and it would have been a hassle to deal with, and frankly, probably already written off.
If you have a good founder and a team already moving ... $5M is actually enough to get a small team moving in a new direction so it's a smart choice.
It's a smart choice in modern Valley language though, instinctively, most other investors would have not done that.
While we can give credit to the investors, that only works in a system of plentiful bounty. You need to have large acquirers, tons of talent, etc. etc. in order for that investment logic to make sense.
A similar case for a company I previously worked for. They started out making high quality photo albums, I believe targeted primarily at pets. They built in the deep-linking experience, so that you could send links to friends, etc. They eventually realized that every app ends up building in their own linking, and in turn became branch.io
If I recall correctly, Slack was built utilizing IRC on the backend.
I remember that resonating with me as I was sole developer on an in-house invoicing system at a Fortune 500, and I added a whole corporate chat functionality using IRC libs. It only took a few days to implement. It made me aware how easy it can be to build a billion dollar business by mistake. Too bad not my billion dollar business!
It's not that surprising when you know the history. This is the founders' second or third try at live chat with media.
At Ludicorp, in the early oughts, they were building a game called Game Neverending. They built a chat feature into that game. Then they added the ability to drop photos into chat. Digital cameras and cameraphones had just become affordable, so suddenly that was the main feature of the game. Flickr had to drop the single live chat window when they became too popular, and then it became a web-based photo sharing community. But they always had plans to bring it back, they just never got around to it. Once Flickr was acquired by Yahoo those plans became even more difficult to realize.
Like many companies in the middle-oughts, Flickr did everything over IRC. When they were acquired by Yahoo, most of them moved to San Francisco, but some employees never left Canada. So it was a distributed, remote workplace the entire time. It was natural to do everything over IRC and add bots and such to help you do things.
When the Flickr founders left Yahoo, they founded Glitch, and it was also quite distributed, half in Vancouver, BC and half in the Bay Area. I'm not sure how they came to build their own sharing-media-in-IRC solution again, but they had the tools to hand.
A fun aside: as Glitch was failing, but before they pivoted to Slack, they downsized. And a lot of those downsized employees reformed as "Tomfoolery" and created a product called "Anchor", which was basically Slack! There aren't a lot of traces that this thing ever existed but here's an article from Fast Company:
I assume that those employees realized that their internal tools were actually the best thing that they had made. Anchor was led by a former Yahoo executive who had I think been COO at Glitch. Tomfoolery/Anchor didn't get much traction and was acquihired by Yahoo just a few months later - most of those employees were ex-Yahoo anyway.
A few months later Glitch pivoted to Slack and the rest is history.
It's unclear to me why Tomfoolery failed when they had all the knowledge about how Glitch's Slack worked and a head start of many months. I remember a period in 2013 when a group I was involved in was choosing between Flowdock (yet another thing that was basically Slack) and Anchor and the recently-launched Slack. Anchor didn't have the rich integrations of Flowdock. Slack was very new and immature and was worse than both of them. But Slack improved faster and people like Stewart Butterfield had way more goodwill.
The same people who pivot an MMORPG's screenshot-sharing feature into the top photo site of its era, I guess! Butterfield pulling that off twice just completely floors me.
There's a fantastic episode of Reid Hoffman's "Masters of Scale" podcast[1] that goes into great detail with one of the founders, Stewart Butterfield. He also did basically the same thing to form Flickr.
Pivot is a bittersweet description, and ARM was a new spin-off founded in 1990 alongside Apple. Acorn renamed itself to Element 14 Ltd in 1998 and sold off the assets from their home computer business. They built DSL kit for a couple of years before ending up as part of Broadcom.
Not that it helped Acorn survive, of course! Right up until the end, RISC OS ran on interrupts, too much delicate kernel code, cooperative multitasking, and unprotected memory.
They weren't the only CPU pioneers; Argonaut didn't think it unreasonable to create a custom CPU to push polygons on a Nintendo cartridge - https://en.wikipedia.org/wiki/Super_FX
We can add this to the debate above about whether Netflix was really a pivot. Acorn made computers and eventually decided they needed their own processor. I'm sure one could debate whether that was evolution or revolution, but what we know for sure is that Acorn is not around today and ARM (the spin-off) is.
I also run a small business and I agree with this. I think it becomes more notable when you have to change the heading on a large company and all its bureaucracy.
It really begs the question "what is a company?" if one can shift between such disparate markets. Surely mission doesn't define a company then. Perhaps ability to accumulate capital for a means?
I don’t think Apple can count as a pivot because they never abandoned their core/existing business, and most of their activities are surrounded by and complimentary to their core business of general purpose computing devices.
A smartphone itself is just as general purpose as the Macintosh or Apple II.
I would classify Apple as “growing into a conglomerate,” not “pivoting.”
Apple right now has a movie screening in theaters, but I don’t even call that a pivot. It’s a complementary product to Apple’s main business, because TV+ subscriptions have been fueled by its built-in-to-the-OS nature. Buy an iPhone, get it free for a year, and now you’re hooked. Putting the content in theaters is just a cherry on top.
Maybe you could argue that offering the iPod and iTunes on Windows was a pivot. The iPod being wholly disconnected from the Mac was like a different business, and it dominated Apple’s revenue for a while.
If Apple had discontinued the Mac and focused on iPods, this would qualify as a pivot. But what ended up happening was that the iPod enhanced Mac sales and led to the Mac essentially being made into a portable device with the iPhone (“iPhone runs OS X” as Steve Jobs said in the keynote).
The Apple Watch could be a strong argument for a pivot product, as it’s essentially an entry into the jewelry market. The Apple Watch business is supercharged by selling interchangeable bands, which have nothing to do with computing. However, it’s still not a pivot: it requires an iPhone, which itself is basically a Mac, and the Watch itself is also still just another general purpose computing device based on macOS/OS X/NextSTEP.
There are a few of these that don’t really feel like pivots to me. For example Netflix changing from delivering things via DVD to doing it by streaming just feels like evolving to suit the market. Would we consider a publisher as pivoting because they now sell ebooks and run news websites instead of printing books and magazines?
Wasn't the streaming delivery piece intended from the start though, but they just had to wait for the infrastructure to support it so did DVD delivery as a stopgap? I had always assumed this was the case.
Yes, it hinges on the definition of pivot. From a customer point of view, this is a mere evolution. That this imposes vastly different requirements on the underlying business is not really the problem of the customer.
In a similar vein, how would you describe the move of just about every primary, secondary and tertiary educational institutions to online teaching?
I don't consider that a pivot. It was necessary to continue to deliver the basic added value of these institutions. However, that did require a whole slew of new skills from teachers. So sure, YMMV.
In one respect, this “pivot” is simply changing the medium for delivery of the service. On the other hand, this represents a major shift in the structure of the company, introducing change in basically every department. It seems very naive to presume this shift would be simply an adjustment of the business structure. I would guess the Netflix business as we know it now would have very little resemblance of what it was during those DVD days.
I actually think Netflix's move towards producing their own shows and movies was more of a "pivot" than going from DVD to online streaming (which I don't see as really any different than Blockbuster going from renting VHS to DVDs).
>There are a few of these that don’t really feel like pivots to me.
Because no authority dictates the meaning of "pivot", it looks like the concept diverged and became wider:
- "pivot" as switching from a unprofitable or failed business idea to a profitable one. A "phoenix rising from the ashes" type of pivot often associated with startups that finally figured out the elusive "Product Market Fit" instead of shutting down. This seems to be the original meaning popularized in 2011 by Eric Ries "Lean Startup" book : https://www.amazon.com/Lean-Startup-Entrepreneurs-Continuous...
- "pivot" as any change in business focus whether the previous one was profitable or not.
That's a good point. I thought pivot meant "switching from a unprofitable or failed business idea to a profitable one".
In that sense, IIRC Netflix's founder had the early vision to offer streaming services (one day in the future), so it wasn't a pivot. It was part of the plan.
I mean he named his company "Netflix". Does that sound like DVD delivery? No, it sounds like inter(net) + flicks.
Netflix went from legal access to any DVD produced, too needing content deals with the entertainment industry and making their own content. The technical difficulties are minor by comparison.
That’s generally what pivoting means, going from chemical to digital cameras for example is a similarly huge jump even if the customers largely stay the same you lost a huge revenue stream from selling and or processing film and now need to spend a lot more on R&D.
But it's obviously a lesser degree of pivot than a pivot that discards your current customer base. I also wouldn't be surprised if being a huge buyer of wholesale DVDs got them good contacts in the media/film industry.
Also, the transition from film to digital was more gradual than it appears, as many features now thought of as digital-only were actually available on late generation film cameras.
I'd agree that if you're 1) delivering the same promise to the 2) same customer base -- yes, it isn't as big of a pivot and some of the other companies on the list.
The content delivery aspect that Netflix coordinated with ISP's was a pretty phenomenal technical feat, and could be seen as a pivot into networking at scale.
Changing from film cameras to digital ones is exactly the sort of thing I wouldn’t call a pivot. Many of the components and skills are identical, but you are adding sensors and storage. That’s just the sort of adaption to an evolving market that any reasonable company should do.
A pivot suggests a sudden and radical change in course. Slack feels like one, companies that have switched from manufacturing to (apparently unrelated) software feel even more so.
I’d also say Nokia doesn’t feel like a pivot. They were a company that did anything internally for which they did not find adequate solutions on the market. They produced a lot of different things over the decades and the radio business is one that found external success and grew over time. Do we consider large conglomerates to have repeatedly pivoted as different portions of their business waxed and waned?
A pivot is mostly a question of abandoning the old model efficiently rather than simply starting to do something else. Kodak was mostly a chemical company, selling film every week and a new camera every decade.
Going from manufacturing pencils to building aircraft doesn’t make use of existing workforce, equipment, or customers so why not just expand into a new industry and keep the old one as long as it was possible? Netflix or digital cameras on the other hand eats into their customer base. Someone buying a digital cameras is no longer buying film from you, it’s a destructive transition.
If we take this approach EVERYBODY has pivoted. Walmart has online sales that are "eating into" their in store sales. CVS has home delivery, eating into their foot traffic...
I think Netflix is more of an argument than Kodak. Netflix kept selling access to movies, though the way they did so changed dramatically.
But while Kodak did sell cameras, Kodak sold cameras mostly to drive sales of their film. The film and chemicals were their high margin product ranges.
The pivot to try to drive their earnings mainly from their cameras was a fundamental change of business model in a way that Netflix shift to streaming (or Walmart or CVS online and delivery) wasn't. It turned a long term recurring high-margin revenue stream into a punctuated low-margin revenue stream. (not that they could have prevented the eventual collapse of their film business)
That doesn't matter, the organization is the people in it, if you have to make huge reorganizations in what the people at your company do then that is a huge pivot that is dangerous and likely to fail. Digital companies are not like other companies, you are thinking of companies where brands is the main thing and you can just slap together a new product in a year. It doesn't work like that in normal businesses, Kodak couldn't just say that all their factories specialized on making goods related to old cameras be repurposed to digital cameras.
Some of the expertise can transfer over, but if that is not your competitive advantage it doesn't matter. Kodaks competitive advantage was not camera lenses etc, so they had no way to pivot to digital cameras. Digital cameras destroyed the business they were good at.
> If we take this approach EVERYBODY has pivoted. Walmart has online sales that are "eating into" their in store sales. CVS has home delivery, eating into their foot traffic...
No, not everybody has pivoted. Lots of companies failed to pivot and died. Walmart is aware of this and has started to build expertise around digital sales already, because Walmart doesn't want to die in case digital sales overtakes physical sales.
The key pivot was not changing from film cameras to digital cameras, where indeed many components and skills are identical, but from film business (the majority of which is/was film and development process/chemistry/equipment/services, not cameras) to a camera-only business. Some companies did that pivot, some (like Kodak) did not.
Kodak was never known for good cameras. That was cannon and Nikon who both pivoted to digital. Kodak made great film and didn't have a simple pivot in pictures. Their simple pivot was pharmaceuticals which as others noted they did do.
Nokia climbed up the value chain in their vertical.
From telephone cable into PCM line concentrators.
From those into small exchanges.
Then to the DX-200 digital telephone exchange.
They merged/bought Televa (small exchanges and Gen0 Cellphones) and bought out Salora from Mobira (Gen0 cellphones and commercial radios). When Gen1 NMT became a thing they started making phones for it and later basestations.
With GSM (Gen2) they ware making basestations and handsets from day one.
And they still make basestations and exchanges to this day.
So they kainda are at their roots.
Nokia started as a paper mill taking advantage of hydropower, then after starting to generate electricity they combined with a rubber company and started working on cables. They seem like a pretty good example of pivoting even if they aren't as visible in consumer electronics as they used to be.
> “The technical difficulties are minor by comparison.”
You mean serving video to a pc? Because I also think about the infrastructure/last mile. And it’s one thing to have 10000 customers and quite another to have 10000000 (or whatever #)
Didn’t they still need to workout deals or licenses with the entertainment industry to rent out the DVDs? Didn’t Blockbuster have to do that to provide VHS and DVDs in the store?
I still think it was a pivot but not for that reason. Evolving can still be pivoting. Netflix shifted their business from providing physical media to streaming media.
No, definitely not, in the US anyone can rent out any physical media legally without any permission from the anyone due to the first sale doctrine. Same as me freely selling or loaning my DVDs and books without asking anyone first.
Before Blockbuster/Hollywood Video came to my town there were dozens of the video rental stores, all of which were mom-and-pop operations.
Nintendo tried to stop video game rentals during the NES era but failed - there was legislation banning video game rentals that was not passed and then they sued blockbuster for making photocopies of their manuals. I think I remember reading that rental stores having to send multiple employees into multiple stores to purchase Nintendo games because Nintendo had an agreement with retailers not to sell multiple copies of the same game to a single person to discourage rental and reseller purchases.
While legally you are correct, you want to make deals anyway, if you do you can get plenty of DVDs in on release day (they might sit in your backroom for a few days to ensure it was shipped fast enough). There are other things you can get in a deal if you make one.
See also: compulsory licensing for music. You don't need the permission of the copyright holder, but licensing deals are usually cheaper than the rate set by law.
Not quite accurate. If you become a distributor of content, then you fall under the rules for distributors.
That's (part of) why videos typically had that "not for rent" / "only for home viewing" stuff.
There's a difference between you lending or renting out a dvd once, versus this being a business model.
How this works out exactly in a US legal context, you ask?
Well: always follow legal advice from strangers on the Internet. Also IANAL.
Yeah, I would agree. Keeping up with the times and the market is different to pivoting, as is diversifying and monetising. Did Disney "pivot" from hand-made animations to theme parks and digital streaming? More of an evolution, I think.
Yeah... does every new technology change mean a pivot? Or evolution of business strategy?
If Netflix counts as a pivot, I feel like every company more than a few decades old should be on the list. IBM for sure, car companies because they now sell electric cars, banks because they now offer online services...
I agree that Netflix moving from dvds to streaming could be argued as an evolution instead of a pivot, but I would argue that moving from streaming and delivering others’ content to producing their own content was a very significant shift worthy of being called a pivot.
There is a great podcast called Land of the Giants and they have a "season" about Netflix (as well as Amazon, Google, Apple); based on the information I learned there I would certainly say it was a risky pivot.
Wow thanks for sharing this. I know I'm weird but I think I would still rather get DVDs because you have such a wider selection. And you can get very unique and hard to find movies. You're not locked into licensing deals between large movie studios.
Does anyone else think a new blu/dvd shipping company could work well again with same day shipping assuming the continued fragmentation gets worse and worse?
They pivoted from having a bunch of people managing mailing DVD's to people to having a bunch of people managing computer servers. It is really different and there is no reason to assume they would succeed at that, if they built a subpar service they would have lost.
The real pivot was going from DVD distribution to movie and tv show production. This, of course, only happened because the switch to streaming made it so that Netflix were dependent on content producers. Netflix knew content producers would just create their own streaming service in time and they'd lose all their leverage.
Ted Sarandos, chief content officer for Netflix, once said, "The goal is to become HBO faster than HBO can become us" I worked for HBO when he said that, and took it very seriously.
> There are a few of these that don’t really feel like pivots to me. For example Netflix changing from delivering things via DVD to doing it by streaming just feels like evolving to suit the market.
Reed Hastings allegedly barred the delivery team executives from his leadership meetings when they were responsible for 100% of the companies revenue. It was a massive, legendary pivot.
Pivots are nothing else but evolving to suit the market, at the cost of an established existing business or use case.
> Would we consider a publisher as pivoting because they now sell ebooks and run news websites instead of printing books and magazines?
I don't see why not, except that their legacy/core businesses are still or until recently responsible for the majority of their revenue [1]. I think there is a difference between adding a new distribution channel and altering the fundamentals of the business. The pivot for publishers has been more from ads -> subs.
To be fair, Netflix's DVD via email business model was very successful before they pivoted to streaming while many of the others initial idea was ... <hrm>
In the case of Netflix, here goes a company that smartly and efficiently adapted to changing market conditions rather than "pivoting".
Nokia is incorrect (afiu the tire/rubber business was span-off some years ago Nokian), even the source cites it better "The company has operated in various industries over the past 150 years. It was founded as a pulp mill and had long been associated with rubber and cables, but since the 1990s has focused on large-scale telecommunications infrastructure, technology development, and licensing."
Yeah the source sentence is awfully vague to the point of confusing. Nokia was a paper mill, and their own website says as much in less ambiguous terms - https://www.nokia.com/about-us/company/our-history/
Not sure if the original business needs to be dead for it to be considered a successful pivot. You could include amazon with aws. Or Dassault (planes) with Dassault system (CAD). And all the big asian conglomerates. You could even include the east india company which started as a trading company before becoming a colonial administration! My point is that these pivots are quite common.
Nintendo existed for nearly one hundred years before they started making video games. Saying that all they did up until then was not successful is ridiculous - you do not run a company for an entire century by not being successful.
That's not what the article says. It says that Nintendo tried to pivot away from the playing card business into several other businesses, each of which ended up failing except for electronic toys/video games.
Given that Nintendo no longer operates a taxi service, love hotels, or sell instant rice, I would say the article is correct about that statement.
I'm thinking of Epic Games and their game Fortnite. The game was some kind of tower defence at the begining. They swithed to battle royal and made one of the most played video game of all time.
Ok, it's a small pivot, but it changed the company and gave them so much money that they were able to create their own game store (and fight Apple in court).
I mean if we're doing this, you can probably go back to the 1999 Japanese book "Battle Royale", which lent its style to the popular UHC Minecraft mod well before "The Hunger Games" mods came out.
Mentions Western Union but no mention of American Express (express mail -> financial services)? Western Union hardly even counts as a pivot because their original money wiring service operated entirely through their telegraph network, which is where the term "wiring" came from.
Here is more background about the nature of the pivots at WU.
WU had already pivoted once in the 1970s to become a satellite communication company being one of the first companies to have five birds in orbit. (Westar series)
Sometime around 1980(?) things were so bad they went into chapter 11, bankruptcy protection. At a senior executive meeting the reports were all bad. A guy named Art Tarini spoke up and said "What about money transfer? Can't we do something with that?" The reply was something like "Art if you think you can help give it a try"
Art setup a call centre and had a small sales force to sign up agents in small stores in the north east side of the USA as money transfer locations and created paper forms to record the transaction details. All agent transactions were sent over the telephone.
They were scheduled to be in bankruptcy court at the end of the year, but the new money transfer business was making so much money they cancelled it.
Told to me by Art Tarini in 2001. (Paraphrased from memory)
Later on (1990?) a computer terminal was created with Turbo C, communicating over modems to a back office system.
In 1989 when US law changed to allowed transfers to other countries somebody asked
"I wonder if Mexicans in the USA would want to send money home?" A new platform was created to handle foreign exchange and the rest is history.
Telegraph service was shutdown in 2006.
It was still doing ~$10M per year in revenue then. Money transfers were about $4B.
> Netflix had considered offering movies online, but there were speeds and bandwidth problem in mid-2000.
One of the more interesting things I learned from the (outstanding) documentary "Enron - The Smartest Guys in The Room" [0] was that Enron planned an online movie streaming service together with Blockbuster in the late 90ies (to start in 2000), but failed for the same reasons.
> Enron would store the entertainment and encode and stream the entertainment
over its global broadband network. Pilot projects in Portland, Seattle and Salt Lake
City were created to stream movies to a few dozen apartments from servers set up
in the basement. Based on these pilot projects, Enron went ahead and recognized
estimated profits of more than $110 million from the Blockbuster deal, even
though there were serious questions about technical viability and market demand [1]
But of course Enron "pivoted" to outright fraud some years before that.
Enron planned an online movie streaming service together with Blockbuster in the late 90ies (to start in 2000), but failed for the same reasons.
I lived in Houston during that era, and for some reason a bunch of the local energy companies dabbled in internet video and infrastructure at the time.
As you mentioned, Enron. But there's also Williams (https://en.wikipedia.org/wiki/Williams_Companies). It built one of the first live business news channels. I knew a few people who worked there, but I can't remember the name of it. Naturally, it was focused on energy. The idea was that people in the energy industry would have it on a screen next to their computers in their offices.
It worked, a bit. I saw the channel in the break rooms and lobbies of several oil and gas companies I visited at the time. But, like the Enron/Blockbuster thing, I think it was a little ahead of its time. While today a big oil company would think nothing of deploying thousands of screens to its cubicles around the world, back in those days, it was considered a crazy extravagance. Plus, everyone was still using tubes, not flat screens, so a big chunk of desk real estate would be lost at a time when offices were far more paper-reliant than they are now.
Some of the big oil and gas companies saw how the railroads were getting into telecom, and follow that, as well. (The "SP" in "Sprint" is Southern Pacific Railroad.) They figured if the railroads can run phone calls over microwave relays along their rights-of-way, the oil companies could run fiber through their pipelines. And they did.
Again, I'm most familiar with Williams. It built a huge fiber-optic network across the country by running cables through its pipelines. One of its services was called VYVX (pronounced "viv-ex"). For years and years, it was the primary way to move video between television stations at a time when satellite hookups were a lot more expensive than they are today.
I know at least part of the Williams network became what we know today as Level3. I wonder if the original network is still in use. Kind of ironic to think about all those environmentalist web sites flowing through fiber running through oil pipelines.
Even after doing multiple assignments on Enron and going through multiple lectures about it, I am still not hundred percent sure what Enron's business was. The most easy to grasp description of their main activity was they were into energy based commodities trading. Yet they had their sticky finger in every industry.
It was such a massive complicatedly diversified company, I think it is reasonable to say if it wasn't whistleblowers we wouldn't have never realized what went wrong.
The natural gas pipeline industry had it's regulations changed around '85 that made it so pipeline operators had to let anyone use their pipes. This meant Enron didn't have to actually own pipes. They could just buy and sell natural gas from the wellhead to the refinery. They made a lot of money doing this. They then tried to copy that to anything else that can conceivably move over a fixed, expensive infrastructure like electrical power lines, broadband lines, water pipes etc. They wanted to be in heavy industry with an "asset lite" model.
The Enron physical pipeline business still exists as Kinder Morgan as Enron sold it off because they didn't want to deal with the physical infrastructure anymore.
Enron, Lehman Brothers and similar companies would have easily thrived in the 2020s.
Up until 2015, there was really a true cost of capital. Investors wanted to see real products, real cashflow, else you head straight to bankruptcy.
2015+ changed a lot of things. You can fraud / lie / deceive your way to success if you form a cult around it. Trump, Nikola, NFTs, Crypto, Hertz, Gamestop, AMC, Blackberry, Tilray, Sundial have all shown you can astroturf, gaslight, propagandize a subset of population to fund your fantasies in a world awash with capital and very few assets to invest.
Hertz feels weird to me as an example for two reasons:
1. The company wasn’t really leaning into the thing where they became a meme stock when they filed for bankruptcy for some reason. They did start an at-the-market offering but that was stopped pretty quickly by the courts.
2. It did actually go up for non-meme reasons so the crazy people buying stock of a bankrupt company, or rather, the people who believed what they read on Reddit and bought the stock and didn’t sell it, we’re vindicated as the company did somewhat recover.
I was there when Hertz became memefied. Memefication always starts with atleast some good research.
There was three schools of thoughts with the Hertz saga-
1. Bankrupt companies are required to buyback their shares from the market. If they force the share price to go up the company is required to buyback the stock from the market regardless of the price.
2. People expected that Hertz would get a lifeline from a hedge fund.
3. Hertz car inventory still had value. If you look at used car prices you can see this sentiment was true. They thought Hertz had plenty of good assets that was just affected by the pandemic but after the pandemic prices would go up.
So essentially, it was backed by some logic but when it comes to finance logic validity of that is subjective.
It all started with Tesla. Everyone thought Tesla was a load of BS. But post 2018 the sentiment became Tesla will keep growing until the last short investor held their breath.
Tesla showed that classical economic value means squat when ultimately market sentiment determines the price of an asset. I with hundred of people created bots to track the CEO twitter feed to determine a stock price. And it worked to some extent. Head down to dogecoin subreddit, and you will see everyone there is praying and hoping a car manufacturing company CEO shitpost about their coin which might trigger another spike. And this time they will sell for sure. If you are in your 30s you would remember Facebook games like Barn Buddy or Farmvile. The fucked up thing is that now you have similar games where you harvest NFT game characters which are supposedly worth thousands and millions of dollar equivalent money.
I sat through the GME senate hearing and politician interviews. Even a US senate member acknowledged that what makes Tesla's valuation fair but Gamestop's valuation unfair? Based on the accounting numbers they are exactly the same thing. GME has its own meme leader a, a guy who sold his dog toys business to amazon for a billion dollar. I remember people talking up patent, innovation and charismatic leadership of Tesla. I see the same passion in GME people when they talk about GME and some they were NFT deals.
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[ 9.5 ms ] story [ 631 ms ] threadI notice a few of these stories involve stumbling on an itch that badly needed scratching while doing something else with as much purpose. One of the big challenges of entrepreneurship in software is finding a problem worth working on when you're not actually experiencing any problems that aren't software related.
In that sense, perhaps you're building up experience in a new industry when building an idea, which introduces you to new problems, sometimes better problems.
The rest at least have some logic to them. You build something, people use it for something else, so you generalize. Or you pursue a neighboring market or use-case. But the Slack one just seems so random.
Like the Kitopi Cloud Kitchen. The story I heard is that the guy already had a successful sweet business, and got the idea to have little mini distribution kitchens for it, instead of opening a new business everytime he wanted to extend his reach. Then decided to make that idea a whole business model.
Wow, I didn't know Kitopi Cloud Kitchen. This is truly a disruptive idea (I never use this word), as it breaks with the traditional idea that restaurant food cannot be industrialized and has a connection with the chef but also the place.
Even after reading this, it is hard for me to think "I could order food from this restaurant but the actual meal will come from a partner kitchen".
Brilliant from a business perspective, yet somewhat questionable culturally.
So they went the nerd way and hacked together something they would not spend most of the time complaining about. "Hacked together" is important. It was not dedication, it was "scratching your own itch ".
The hack was satisfactorily working. For them.
And when Glitch failed, they were left with (among other things) their communication tool. "Someone" thought it was worth trying to market it, following the proverbial dogfooding strategy, because there was nothing else left to do anyway with Glitch.
And boom. Slack.
Source: memories of an article read many years ago that I can't find traces of, but was quite fascinating.
So not so surprising, "from a certain point of view" [0].
[0] Sir Guinness.
What's funny is that he's the same dude who founded Flickr, which also started out as some kind of game. Ha ha.
Also, $5M is a small amount for Sequoia - and it would have been a hassle to deal with, and frankly, probably already written off.
If you have a good founder and a team already moving ... $5M is actually enough to get a small team moving in a new direction so it's a smart choice.
It's a smart choice in modern Valley language though, instinctively, most other investors would have not done that.
While we can give credit to the investors, that only works in a system of plentiful bounty. You need to have large acquirers, tons of talent, etc. etc. in order for that investment logic to make sense.
I remember that resonating with me as I was sole developer on an in-house invoicing system at a Fortune 500, and I added a whole corporate chat functionality using IRC libs. It only took a few days to implement. It made me aware how easy it can be to build a billion dollar business by mistake. Too bad not my billion dollar business!
> Who builds an internal chat client, while building an online game, and then decides to build a b2b business around that chat client?
Someone who's done something similar — successfully — once before, that's who. The experience gained from Flickr certainly helped with Slack.
At Ludicorp, in the early oughts, they were building a game called Game Neverending. They built a chat feature into that game. Then they added the ability to drop photos into chat. Digital cameras and cameraphones had just become affordable, so suddenly that was the main feature of the game. Flickr had to drop the single live chat window when they became too popular, and then it became a web-based photo sharing community. But they always had plans to bring it back, they just never got around to it. Once Flickr was acquired by Yahoo those plans became even more difficult to realize.
Like many companies in the middle-oughts, Flickr did everything over IRC. When they were acquired by Yahoo, most of them moved to San Francisco, but some employees never left Canada. So it was a distributed, remote workplace the entire time. It was natural to do everything over IRC and add bots and such to help you do things.
When the Flickr founders left Yahoo, they founded Glitch, and it was also quite distributed, half in Vancouver, BC and half in the Bay Area. I'm not sure how they came to build their own sharing-media-in-IRC solution again, but they had the tools to hand.
A fun aside: as Glitch was failing, but before they pivoted to Slack, they downsized. And a lot of those downsized employees reformed as "Tomfoolery" and created a product called "Anchor", which was basically Slack! There aren't a lot of traces that this thing ever existed but here's an article from Fast Company:
https://www.fastcompany.com/3013553/meet-tomfoolery-the-comp...
I assume that those employees realized that their internal tools were actually the best thing that they had made. Anchor was led by a former Yahoo executive who had I think been COO at Glitch. Tomfoolery/Anchor didn't get much traction and was acquihired by Yahoo just a few months later - most of those employees were ex-Yahoo anyway.
A few months later Glitch pivoted to Slack and the rest is history.
It's unclear to me why Tomfoolery failed when they had all the knowledge about how Glitch's Slack worked and a head start of many months. I remember a period in 2013 when a group I was involved in was choosing between Flowdock (yet another thing that was basically Slack) and Anchor and the recently-launched Slack. Anchor didn't have the rich integrations of Flowdock. Slack was very new and immature and was worse than both of them. But Slack improved faster and people like Stewart Butterfield had way more goodwill.
[1] https://pca.st/episode/2bbb5eea-de22-4825-8854-014ee29f33a1
https://en.wikipedia.org/wiki/Arm_Ltd. https://en.wikipedia.org/wiki/Element_14_(company)
We have IBM + the rest of the mainframe guys and Sun.
They weren't the only CPU pioneers; Argonaut didn't think it unreasonable to create a custom CPU to push polygons on a Nintendo cartridge - https://en.wikipedia.org/wiki/Super_FX
Many of the people I know started in a similar place, but their businesses evolved into all kinds of weird and wacky enterprises.
I had a client who once sold anti-virus software and even ZetaOS.
Somehow they pivoted to selling mobile speakers and toys.
APPLE!!! Which started as a company that made computers, then became a company that made mobile music players, and now is a company that makes phones.
Or every other company, which now essentially makes computers.
So conversely, you could say that when Apple rolled out the iPad, that was a pivot to electric cars without wheels.
https://twitter.com/hartsman/status/555953649004716034
https://twitter.com/charlesvonbrown/status/14578242568012636...
https://network1consulting.com/tuesday-tip-tesla-motors-cont...
https://www.reddit.com/r/TeslaModel3/comments/8qvxwq/finally...
https://www.macfilos.com/2021/03/17/first-impressions-of-the...
https://www.itbusinessedge.com/business-intelligence/how-tes...
A smartphone itself is just as general purpose as the Macintosh or Apple II.
I would classify Apple as “growing into a conglomerate,” not “pivoting.”
Apple right now has a movie screening in theaters, but I don’t even call that a pivot. It’s a complementary product to Apple’s main business, because TV+ subscriptions have been fueled by its built-in-to-the-OS nature. Buy an iPhone, get it free for a year, and now you’re hooked. Putting the content in theaters is just a cherry on top.
Maybe you could argue that offering the iPod and iTunes on Windows was a pivot. The iPod being wholly disconnected from the Mac was like a different business, and it dominated Apple’s revenue for a while.
If Apple had discontinued the Mac and focused on iPods, this would qualify as a pivot. But what ended up happening was that the iPod enhanced Mac sales and led to the Mac essentially being made into a portable device with the iPhone (“iPhone runs OS X” as Steve Jobs said in the keynote).
The Apple Watch could be a strong argument for a pivot product, as it’s essentially an entry into the jewelry market. The Apple Watch business is supercharged by selling interchangeable bands, which have nothing to do with computing. However, it’s still not a pivot: it requires an iPhone, which itself is basically a Mac, and the Watch itself is also still just another general purpose computing device based on macOS/OS X/NextSTEP.
In a similar vein, how would you describe the move of just about every primary, secondary and tertiary educational institutions to online teaching?
I don't consider that a pivot. It was necessary to continue to deliver the basic added value of these institutions. However, that did require a whole slew of new skills from teachers. So sure, YMMV.
Because no authority dictates the meaning of "pivot", it looks like the concept diverged and became wider:
- "pivot" as switching from a unprofitable or failed business idea to a profitable one. A "phoenix rising from the ashes" type of pivot often associated with startups that finally figured out the elusive "Product Market Fit" instead of shutting down. This seems to be the original meaning popularized in 2011 by Eric Ries "Lean Startup" book : https://www.amazon.com/Lean-Startup-Entrepreneurs-Continuous...
- "pivot" as any change in business focus whether the previous one was profitable or not.
In that sense, IIRC Netflix's founder had the early vision to offer streaming services (one day in the future), so it wasn't a pivot. It was part of the plan.
I mean he named his company "Netflix". Does that sound like DVD delivery? No, it sounds like inter(net) + flicks.
That’s generally what pivoting means, going from chemical to digital cameras for example is a similarly huge jump even if the customers largely stay the same you lost a huge revenue stream from selling and or processing film and now need to spend a lot more on R&D.
Also, the transition from film to digital was more gradual than it appears, as many features now thought of as digital-only were actually available on late generation film cameras.
A pivot suggests a sudden and radical change in course. Slack feels like one, companies that have switched from manufacturing to (apparently unrelated) software feel even more so.
I’d also say Nokia doesn’t feel like a pivot. They were a company that did anything internally for which they did not find adequate solutions on the market. They produced a lot of different things over the decades and the radio business is one that found external success and grew over time. Do we consider large conglomerates to have repeatedly pivoted as different portions of their business waxed and waned?
Going from manufacturing pencils to building aircraft doesn’t make use of existing workforce, equipment, or customers so why not just expand into a new industry and keep the old one as long as it was possible? Netflix or digital cameras on the other hand eats into their customer base. Someone buying a digital cameras is no longer buying film from you, it’s a destructive transition.
If we take this approach EVERYBODY has pivoted. Walmart has online sales that are "eating into" their in store sales. CVS has home delivery, eating into their foot traffic...
Survivorship bias means you see a lot of company’s that have successfully pivoted, and the brands that failed often get bought up after the fact.
But while Kodak did sell cameras, Kodak sold cameras mostly to drive sales of their film. The film and chemicals were their high margin product ranges.
The pivot to try to drive their earnings mainly from their cameras was a fundamental change of business model in a way that Netflix shift to streaming (or Walmart or CVS online and delivery) wasn't. It turned a long term recurring high-margin revenue stream into a punctuated low-margin revenue stream. (not that they could have prevented the eventual collapse of their film business)
That doesn't matter, the organization is the people in it, if you have to make huge reorganizations in what the people at your company do then that is a huge pivot that is dangerous and likely to fail. Digital companies are not like other companies, you are thinking of companies where brands is the main thing and you can just slap together a new product in a year. It doesn't work like that in normal businesses, Kodak couldn't just say that all their factories specialized on making goods related to old cameras be repurposed to digital cameras.
Some of the expertise can transfer over, but if that is not your competitive advantage it doesn't matter. Kodaks competitive advantage was not camera lenses etc, so they had no way to pivot to digital cameras. Digital cameras destroyed the business they were good at.
> If we take this approach EVERYBODY has pivoted. Walmart has online sales that are "eating into" their in store sales. CVS has home delivery, eating into their foot traffic...
No, not everybody has pivoted. Lots of companies failed to pivot and died. Walmart is aware of this and has started to build expertise around digital sales already, because Walmart doesn't want to die in case digital sales overtakes physical sales.
And they still make basestations and exchanges to this day. So they kainda are at their roots.
You mean serving video to a pc? Because I also think about the infrastructure/last mile. And it’s one thing to have 10000 customers and quite another to have 10000000 (or whatever #)
I still think it was a pivot but not for that reason. Evolving can still be pivoting. Netflix shifted their business from providing physical media to streaming media.
Before Blockbuster/Hollywood Video came to my town there were dozens of the video rental stores, all of which were mom-and-pop operations.
Nintendo tried to stop video game rentals during the NES era but failed - there was legislation banning video game rentals that was not passed and then they sued blockbuster for making photocopies of their manuals. I think I remember reading that rental stores having to send multiple employees into multiple stores to purchase Nintendo games because Nintendo had an agreement with retailers not to sell multiple copies of the same game to a single person to discourage rental and reseller purchases.
https://en.wikipedia.org/wiki/Compulsory_license#United_Stat...
That's (part of) why videos typically had that "not for rent" / "only for home viewing" stuff. There's a difference between you lending or renting out a dvd once, versus this being a business model.
How this works out exactly in a US legal context, you ask? Well: always follow legal advice from strangers on the Internet. Also IANAL.
If Netflix counts as a pivot, I feel like every company more than a few decades old should be on the list. IBM for sure, car companies because they now sell electric cars, banks because they now offer online services...
It'll happen as soon as the fragmentation is worse enough for people to loose interest and willingness to pay for them separately.
Reed Hastings allegedly barred the delivery team executives from his leadership meetings when they were responsible for 100% of the companies revenue. It was a massive, legendary pivot.
Pivots are nothing else but evolving to suit the market, at the cost of an established existing business or use case.
> Would we consider a publisher as pivoting because they now sell ebooks and run news websites instead of printing books and magazines?
I don't see why not, except that their legacy/core businesses are still or until recently responsible for the majority of their revenue [1]. I think there is a difference between adding a new distribution channel and altering the fundamentals of the business. The pivot for publishers has been more from ads -> subs.
[1] https://www.nytimes.com/2020/08/05/business/media/nyt-earnin...
In the case of Netflix, here goes a company that smartly and efficiently adapted to changing market conditions rather than "pivoting".
It dawned to me a few years ago that this service was Netflix, before they went streaming.
Such a Cave Johnson move.
Unsplash was originally a marketing attempt by a company named Crew, a marketplace startup trying to connect businesses with freelance designers.
After Unsplash took off and the talent marketplace didn’t, the company became Unsplash.
p.s. you could also add FanDuel to the list https://en.wikipedia.org/wiki/FanDuel#History
lol, interesting.
Given that Nintendo no longer operates a taxi service, love hotels, or sell instant rice, I would say the article is correct about that statement.
https://www.nintendo.co.jp/others/playing_cards/index.html
Ok, it's a small pivot, but it changed the company and gave them so much money that they were able to create their own game store (and fight Apple in court).
More specifically, they saw the success of PUBG and decided to copy it immediately. I suppose that still counts as a successful pivot!
(Rather I suppose the popular 2008 book The Hunger Games.)
WU had already pivoted once in the 1970s to become a satellite communication company being one of the first companies to have five birds in orbit. (Westar series)
Sometime around 1980(?) things were so bad they went into chapter 11, bankruptcy protection. At a senior executive meeting the reports were all bad. A guy named Art Tarini spoke up and said "What about money transfer? Can't we do something with that?" The reply was something like "Art if you think you can help give it a try"
Art setup a call centre and had a small sales force to sign up agents in small stores in the north east side of the USA as money transfer locations and created paper forms to record the transaction details. All agent transactions were sent over the telephone.
They were scheduled to be in bankruptcy court at the end of the year, but the new money transfer business was making so much money they cancelled it.
Told to me by Art Tarini in 2001. (Paraphrased from memory)
Later on (1990?) a computer terminal was created with Turbo C, communicating over modems to a back office system. In 1989 when US law changed to allowed transfers to other countries somebody asked "I wonder if Mexicans in the USA would want to send money home?" A new platform was created to handle foreign exchange and the rest is history.
Telegraph service was shutdown in 2006. It was still doing ~$10M per year in revenue then. Money transfers were about $4B.
One of the more interesting things I learned from the (outstanding) documentary "Enron - The Smartest Guys in The Room" [0] was that Enron planned an online movie streaming service together with Blockbuster in the late 90ies (to start in 2000), but failed for the same reasons.
> Enron would store the entertainment and encode and stream the entertainment over its global broadband network. Pilot projects in Portland, Seattle and Salt Lake City were created to stream movies to a few dozen apartments from servers set up in the basement. Based on these pilot projects, Enron went ahead and recognized estimated profits of more than $110 million from the Blockbuster deal, even though there were serious questions about technical viability and market demand [1]
But of course Enron "pivoted" to outright fraud some years before that.
[0] https://www.youtube.com/watch?v=rDyMz1V-GSg
[1] https://pubs.aeaweb.org/doi/pdfplus/10.1257/0895330037658884...
I lived in Houston during that era, and for some reason a bunch of the local energy companies dabbled in internet video and infrastructure at the time.
As you mentioned, Enron. But there's also Williams (https://en.wikipedia.org/wiki/Williams_Companies). It built one of the first live business news channels. I knew a few people who worked there, but I can't remember the name of it. Naturally, it was focused on energy. The idea was that people in the energy industry would have it on a screen next to their computers in their offices.
It worked, a bit. I saw the channel in the break rooms and lobbies of several oil and gas companies I visited at the time. But, like the Enron/Blockbuster thing, I think it was a little ahead of its time. While today a big oil company would think nothing of deploying thousands of screens to its cubicles around the world, back in those days, it was considered a crazy extravagance. Plus, everyone was still using tubes, not flat screens, so a big chunk of desk real estate would be lost at a time when offices were far more paper-reliant than they are now.
Some of the big oil and gas companies saw how the railroads were getting into telecom, and follow that, as well. (The "SP" in "Sprint" is Southern Pacific Railroad.) They figured if the railroads can run phone calls over microwave relays along their rights-of-way, the oil companies could run fiber through their pipelines. And they did.
Again, I'm most familiar with Williams. It built a huge fiber-optic network across the country by running cables through its pipelines. One of its services was called VYVX (pronounced "viv-ex"). For years and years, it was the primary way to move video between television stations at a time when satellite hookups were a lot more expensive than they are today.
I know at least part of the Williams network became what we know today as Level3. I wonder if the original network is still in use. Kind of ironic to think about all those environmentalist web sites flowing through fiber running through oil pipelines.
It was such a massive complicatedly diversified company, I think it is reasonable to say if it wasn't whistleblowers we wouldn't have never realized what went wrong.
The Enron physical pipeline business still exists as Kinder Morgan as Enron sold it off because they didn't want to deal with the physical infrastructure anymore.
Everything else was just financial engineering.
Up until 2015, there was really a true cost of capital. Investors wanted to see real products, real cashflow, else you head straight to bankruptcy.
2015+ changed a lot of things. You can fraud / lie / deceive your way to success if you form a cult around it. Trump, Nikola, NFTs, Crypto, Hertz, Gamestop, AMC, Blackberry, Tilray, Sundial have all shown you can astroturf, gaslight, propagandize a subset of population to fund your fantasies in a world awash with capital and very few assets to invest.
1. The company wasn’t really leaning into the thing where they became a meme stock when they filed for bankruptcy for some reason. They did start an at-the-market offering but that was stopped pretty quickly by the courts.
2. It did actually go up for non-meme reasons so the crazy people buying stock of a bankrupt company, or rather, the people who believed what they read on Reddit and bought the stock and didn’t sell it, we’re vindicated as the company did somewhat recover.
There was three schools of thoughts with the Hertz saga-
1. Bankrupt companies are required to buyback their shares from the market. If they force the share price to go up the company is required to buyback the stock from the market regardless of the price.
2. People expected that Hertz would get a lifeline from a hedge fund.
3. Hertz car inventory still had value. If you look at used car prices you can see this sentiment was true. They thought Hertz had plenty of good assets that was just affected by the pandemic but after the pandemic prices would go up.
So essentially, it was backed by some logic but when it comes to finance logic validity of that is subjective.
It all started with Tesla. Everyone thought Tesla was a load of BS. But post 2018 the sentiment became Tesla will keep growing until the last short investor held their breath.
Tesla showed that classical economic value means squat when ultimately market sentiment determines the price of an asset. I with hundred of people created bots to track the CEO twitter feed to determine a stock price. And it worked to some extent. Head down to dogecoin subreddit, and you will see everyone there is praying and hoping a car manufacturing company CEO shitpost about their coin which might trigger another spike. And this time they will sell for sure. If you are in your 30s you would remember Facebook games like Barn Buddy or Farmvile. The fucked up thing is that now you have similar games where you harvest NFT game characters which are supposedly worth thousands and millions of dollar equivalent money.
I sat through the GME senate hearing and politician interviews. Even a US senate member acknowledged that what makes Tesla's valuation fair but Gamestop's valuation unfair? Based on the accounting numbers they are exactly the same thing. GME has its own meme leader a, a guy who sold his dog toys business to amazon for a billion dollar. I remember people talking up patent, innovation and charismatic leadership of Tesla. I see the same passion in GME people when they talk about GME and some they were NFT deals.
Rant over.
Ran into one once, very high quality plastic cards.