Business pivoting occurs when a company, usually a start-up venture, realizes that its current approach is not working and makes a sweeping change in its business strategy. Lean Startup author Steve Blank defines a pivot as “a substantive change” to one or more of these business model components: product, customer segment, marketing channel, revenue model and pricing, resources, activities, costs, partners, and customer acquisition (https://steveblank.com/2014/01/14/whats-a-pivot/).
There’s lots of talk — and many examples and anecdotes — about business pivoting in the business start-up world. But few scholarly studies try to objectively assess the results. Well, by mining website data, we have had a go in a new paper on measuring dynamic capabilities for, and outcomes from, market sensing and seizing by start-ups. That’s academic speak for pivoting!
For a sample of US green goods ventures, we find that strategic change (or seizing) has a curvilinear, inverse U-shaped relationship with sales growth. In other words, there is an optimal level of strategic pivoting; too much or too little leads to relatively lower sales growth. There are controls and limitations to this finding — read the paper for details.
The paper is: “Measuring dynamic capabilities in new ventures: exploring strategic change in US green goods manufacturing using website data,” by Sanjay Arora, Yin Li, Jan Youtie, and Philip Shapira, published in the Journal of Technology Transfer, 2019 (August). The paper is full open access (free download) at rdcu.be/bPk98
Here’s the abstract of the paper:
Entrepreneurial scholarship suggests that a small firm’s ability to grow is a function of its capacity to sense and respond to changes in the market as well as the broader environment for the firm’s goods and services. Developing detailed measures of internal capabilities at a large scale, however, is often hampered by limitations in the availability of data from conventional sources, low survey response rates and panel attrition. The emergence of new information sources, including big data sets derived from the online activities of firms, coupled with advanced computational approaches, raises fresh analytical possibilities. In this exploratory study, we turn to freely accessible website data to gauge internal capabilities, specifically for market sensing and responding. To operationalize the construct of seizing, the paper uses an application of topic modeling, a text mining approach commonly used in computer science, on archived website data from the Wayback Machine for two time periods, 2008–2009 and 2010–2011, to explain sales growth for green goods enterprises in two later time periods, from 2010 to 2012. We find an endogenous inverse U-shaped relation-ship exists between market seizing and sales growth. Increasing levels of focus on a firm’s local geographic area also predict sales growth. We consider these findings in light of the practitioner literature on firm agility and pivoting and discuss opportunities for future work using website data to study entrepreneurship and the strategic management of innovation.
A dataset for the analysis underlying the paper is available at 10.17632/v8br9dgvsw.1
This paper is one of the outcomes from a project on Sustaining Growth for Innovative New Enterprises, where we probed how different combinations of business, technology and relationship strategies influence the growth of small and medium-size enterprises. Our research case study focus was on green goods ventures in the UK, the US, and China. In this project, we pioneered using websites as novel data sources for understanding business strategies. For more details, see:
- Using the Wayback machine to mine websites in the social sciences: A methodological resource. (2015)
- Using web mining to explore Triple Helix influences on growth in small and mid-size firms. (2018)
- Use of web mining in studying innovation. (2015)