Pivoting a Mature Startup

Problem

I had joined a somewhat mature (200 employees, $30MM ARR, 5+ yrs old) midsize startup where growth was beginning to plateau. We faced the "Innovator's Dilemma" - the company's growth model no longer scaled well, leading to a natural asymptote in growth. While our legacy product accounted for the majority of our revenue and usage, the CEO expected a product strategy that supported a more ambitious mission and growth expectations. The organization leadership disagreed on the path forward. We had the choice to continue incremental improvements in the existing product and product strategy or to use the company's assets to invest in a riskier, but more ambitious product strategy that might yield sustainable growth for the company. While creating the new product strategy we struggled to determine how transparent to be with the team about the limitations of the current strategy (before we were aligned on the new direction). We erred on the side of transparency, knowing it would create thrash in the team. The transition created significant internal tension in the earliest phases of the pivot. Our new plan was fuzzy with significant assumptions we hadn't tested. Customer-facing orgs had a hard time understanding why weren't doubling down on the legacy product (which accounted for all of our revenue).

Actions taken

• We worked to understand why the current model was failing and spent a year experimenting with new product experiences that would address those challenges and develop a cohesive strategy.
• Given the risks, we continued to use "lean hypothesis testing" to validate the significant questions in the new product strategy before executing against it.
• We worked to align the different functions (sales, support, along with eng/design/product) on the new strategy - going as far as to present a class on strategy & the innovator's dilemma.

Lessons learned

• Developing a new product strategy takes time - often on the order of years.
• Building a new product strategy requires a period of organizational learning (e.g., lean hypothesis testing). Without validating key questions, it's difficult to defend a product strategy with confidence.
• The innovator's dilemma is experienced more acutely by certain parts of the organization. A customer-facing support team may have a difficult time understanding the logic behind building a new product instead of just fixing the customer complaints about the existing one.
• Without alignment of the CEO, it will be challenging to align other parts of the organization against execution. This alignment is necessary to overcome the negative inertia from the innovator's dilemma.