Most entrepreneurs understand the meaning of a “Pivot”. A Pivot is a change of direction for the entire organization in order to take advantage (or find) an opportunity that expands the company’s business. A pivot can create an atmosphere of what appears to be total chaos and without proper management, can leave a business slogging along instead of soaring higher. However, by understanding the capabilities of your company, capability maps can make pivots more manageable. A pivot is one of the few times where capabilities may become fluid in order to adapt to the new direction. Business architecture usually assumes that capabilities are relatively stable – not so with a pivot.
Within my own company, I needed to pivot my product line from specialty retail to a new client base during the 2007-2010 recession as many of our specialty retailers shut their doors. Big box retailers were sourcing very low-cost products made offshore so we didn’t have a chance competing there. We made the decision to pivot into mass customization, an area where we already were having some success. But the transformation was anything but clean. I laid out a strategy, but there were a lot of loose ends that ultimately led to the effort being less than successful.
Fast-forward a couple of years and I discovered the tools of business architecture – in particular, capability maps. With just that one tool, I would have been able to map out a strategy that could put us quickly in the right direction by identifying current and needed capabilities. I understood that we had a core competency in creating low-volume customizable product. What I didn’t have was a way to see what else was involved in the pivot until the problems bumped into me – more like smacked me in the face.
Everything had to change and all at the same time. I had lists of lists, but a pivot is hugely disruptive. I focused on my manufacturing capability. We had the right equipment, but not the right people. Where previously I had people pulling and assembling runs of product, I needed a capability to customize images and produce them 1 or 2 at a time. That required a different skill-set which I hadn’t thought about. Retraining my production team was difficult especially as orders began to roll in.
What I completely missed were the changes to our shipping capability. I had designed the capability around shipping orders of a particular size and shape. Because of the size of a typical wholesale order, optimizing logistics was not the highest priority. For the pivot, we were now dealing with small orders. Our boxes were the wrong size. We kept running out of packing material. We had negotiated decent rates with UPS for the larger orders, but the smaller items were now throwing our numbers off. In the end, we found the US Post Office gave us better rates but a lot of profits went out the door before we caught that issue.
I have seen business architecture used to align an organization to its vision – defining and refining its capabilities. I have seen business architecture used to help align capabilities during a merger or acquisition where architects discover redundant or dissimilar capabilities. What I haven’t seen is how business architecture can support a pivot where capabilities need to be created or destroyed in a hurry.
Most people’s first thought of an entrepreneur is that of someone with a great idea trying to get it to market. In reality, an entrepreneur is in the business of building a new business. The entrepreneur’s main function is to concentrate on the organizational design which leads me back to business architecture. As an entrepreneur, yes I had to come up with great products, but the real strength of the business came from learning how to build a business that includes sales, marketing, manufacturing and distribution.
Granted, there is not the same complexity in the organizational structure as an established organization, but as a new entrepreneur, many have not had to think about what capabilities are needed to build a strong business a leading cause of failure.
Several of the business architects I’ve talked with found the concept of capabilities is very complex and nebulous when dealing with a large organization. If you want to learn the basics of what makes a capability, look at a young start-up and identify their capabilities. Yes, it’s barebones. Each capability will probably have very little resources and assets behind it, but it’s still a capability.
In fact, the same resource may be participating in many or even all of the capabilities. The importance though comes as the business takes off and starts to grow. What other capabilities do I need to add? Which should be split into sub-level capabilities? Which can or should I outsource? What else do I have to do to get to the next level? These questions should sound familiar within the realm of business architecture.
And with each stage of growth within a start-up, they cross certain thresholds where – guess what? They need to add new capabilities. That brings me back around to the pivot. At certain stages of growth, the organization needs to realign to continue to grow. They need to pivot. A solid understanding of the current capabilities and being able to design new capabilities is the key to survival. Those that do it best, live to see another day. I learned the hard way that a pivot could have been better planned had I known how to use capability maps. Next time I will already have my capabilities mapped out so if I need to pivot, I can – quickly.
