Many businesses are experiencing serious revenue loss due to the corona virus crisis. Instead of just waiting it out, however, some may look for ways to pivot into areas that might bring new revenue to replace what has been lost.
For example, restaurants and bars have seen huge revenue declines due to the mandated dine-in shut down. Some, however, have responded by offering more than just carry out and delivery versions of their previously available menu items. In addition, they are also selling ingredients (e.g., fresh produce, bread) directly to their customers as groceries, rather than using those items to prepare restaurant meals. This restaurant to grocery seller pivot appears to be working,
But, not all pivots into new lines of business go well. Many pivots intended to bring new revenue merely end up producing devastating losses. And, during today’s trying times, businesses need to make sure such ill-fated pivoting doesn’t happen to them.
As discussed in my last newsletter, some changes are required due to the virus, regardless of whether or not the new mandates are in keeping with business strengths. For example, many businesses that weren’t very digitally oriented now have to operate more virtually than they previously did.
Nonetheless, when considering pivots into new areas, businesses should pay attention to their strengths. Doing so helps avoid common traps that it is easy to fall into during revenue declines. One of the most common traps during tough times is businesses pivoting into new areas too far afield from their strengths. This trap engulfs struggling businesses regardless of whether revenue declines are due to technological disruption, to a severe economic downturn, to regulatory changes, or are merely due to a lengthy period of weak management. This is the trap of ill-fated pivoting. And, ill-fated pivoting can bring disastrous harm to already struggling businesses.
Just like with threats of disruption, companies should not panic during times of revenue declines. That may be easier said than done during this severe corona virus downturn. Yet, companies trying to identify new revenue streams should remember that pivoting into a new area is essentially like doing a new business start-up. And, start-ups often lose money in the early stages. If the new business is a poor fit which the company doesn’t really understand, those losses can be huge. So, this is not the solution to corona virus related business woes.
That’s why, when considering new revenue streams, companies should think about their strengths and about how well proposed new revenue streams fit with those strengths and, thus, are likely to help or hurt. The last thing a business wants to do is to pursue a hoped for solution that ends up doing more harm than good.
Although there have been some recent steps toward reopening the economy, the corona virus has brought some really tough times. So, before investing heavily in new areas, it is essential to give some thought to whether the new pursuit can really help, or can harm, the business. And, avoid the temptation of ill-fated pivoting.