How marketers identify the trends that inform company pivots
Mauro F. Guillén, a professor of management at the Wharton School of the University of Pennsylvania, wrote an article in the Harvard Business Review in which he advocates for the art of pivoting, rather than undertaking a complete transformation, as companies look to survive the pandemic. “Pivoting is a lateral move that creates enough value for the customer and the firm to share,” he writes.
Guillén is also releasing a book in August titled “2030,” which delves into the ways today’s trends will shape the future of business.
In his three-part formula outlined in the HBR article for a successful pivot, identifying trends is the guiding component that shapes a company’s strategy—and it’s also where marketers can take the lead.
You write in your HBR article and upcoming book about pivots being lateral changes—can you elaborate on what that means?
Mauro F. Guillén: [When a company is] pivoting, you’re moving one leg or one foot, but keeping the other one static. What that means is that you are not switching completely to a space where the company had no presence before. You’re not laying off all of your employees or hiring a new set of employees. It’s a lateral extension of whatever capabilities a firm has. In other words, this is who you are as a company. You have these employees, you have these assets, you have these customers, but the pandemic hit and your old way of doing business is not appropriate anymore or doesn’t result in the kinds of sales that you would want to have, or [you’re] just prevented from doing business because of lockdowns or other regulations. What you do is try to adjust to that by changing something, but not changing everything.
There are three requirements for a successful pivot, but one of them has to be that you are still making use of your bundle of capabilities as a company, but you’re redeploying those capabilities in a different way.
Could you dive into those three requirements a bit more?
MG: The first one is about … how you can realign your company with the trends that have emerged out of this pandemic, one of which is e-commerce. But we also have supply chain reconfiguration, remote work and remote learning. The first step should always be, “OK, so let me analyze the trend and let me see how I can catch that wave.” You have to be like a surfer. Where is the wind? Where is the wave that is being created by this pandemic?
You would want to focus on waves that are going to stay, not waves that are going to be temporary or are only going to last one month. … That’s the whole point of pursuing your pivot: to realign your organization with trends that are being created or intensified by the pandemic that are going to stay with us.
A good case in point would be remote work. I don’t think everyone is going to stay or keep working from home, but I think we’re going to have more people at least in part working from home. That essentially means a lot of companies will need to pivot in terms of the goods and services that they offer if people are spending more time at home, if they’re not commuting as much to the office, and so on.
When you start to see these oncoming waves, how can you identify which trends are going to stick so you can make that pivot stick as well?
MG: We’re lucky in this pandemic in that respect—lucky [is in] quotation marks—you can see that, for the most part, the pandemic doesn’t really create brand new trends.
What it’s doing is intensifying, accelerating the rate at which certain trends were progressing. E-commerce was on the increase before this pandemic, but the pandemic just resulted in an intensification of that trend. Most importantly, a lot of companies, very small ones in particular, that really weren’t thinking that seriously about e-commerce—now they are. And some consumer groups that were not that keen to buying things online, now, out of necessity, they are.
The reconfiguration of supply chain: That was going on before, primarily because of the trade war [that] started two years ago and forced a lot of companies to rethink their supply chains. And then the third one is remote work. In the United States, prior to this, only about 3% of people were working remotely. But we had another very important trend already indicating that remote work was going to be on the increase, which was [coworking spaces].
Because the trends are intensifications or accelerations, as opposed to new trends, then it’s easier to predict. If you take a look at the curve of adoption for these things, it was growing smoothly before the pandemic, let’s say they were growing from 10 to 11, 12, 13, 14, 15, 25, and then the pandemic arrives, and then it goes from 25 to 50. And then thereafter, it’ll go from 50, 51, 52, 53 …For supply chain, for e-commerce, for technology adoption … or for automation, the incentives for automation were there before this, especially in manufacturing but also in the service sector. Now, as a result of the pandemic, with social distancing, there’s going to be more automation. The other day I was talking to an executive from Asia who runs an entire chain of hotels and they’re investing in automation. They’re trying to reduce the interactions between the staff and guests of their hotels. I don’t think that’s going to go away. A lot of that will remain even after we have a vaccine and you no longer have to social distance.
Let’s talk about those other two conditions for successful pivoting.
MG: The second one is that you need to essentially think about your bundles of capabilities: What is it that, as a company, you can do well, whether you are a small restaurant or you are Unilever or Procter & Gamble. You make a pivot but using your capabilities and your employees, the kinds of things that you know how to do. You’re just retargeting your efforts in a way that you’re aligning with the trends out there, accelerated by the pandemic.
But the third point is, I wouldn’t pivot unless that creates a path toward sustainability, in terms of financial sustainability. Profitability at the end of the day is the goal. You’re not going to pivot unless you see a path toward profitability.
The way that you’re describing this, as keeping one foot in place and then moving the other foot, that takes a little bit of fear out of the idea of a pivot, to overcoming the fear of the unknown. Is there a way to look at pivots as a positive?
MG: It has two characteristics. The optimistic part of it is, “I can do something with my existing employees, with my existing assets, whether they are tangible assets or intangible.” And the second aspect is equally important, which is that you don’t want to make a change that is so big that then maybe you overreact.
Pivots are a nice compromise between the two extremes of underreacting and overreacting to what is a huge event that we’re going through and a huge transformation that is being triggered by this. Pivoting helps you find the balance between underreacting and overreacting, knowing also that circumstances are shifting very quickly.
There’s a lot of uncertainty as to how long the more severe part of the pandemic will last. I don’t think there’s any vaccine that would take us back to where we were December of 2019. We’re going toward a new normal or a new, pseudo-normal reality. But we’re not going back to where we were, for starters because of what we’ve been discussing, which is that the proportion of e-commerce as a percentage of all sales is going to be much higher. Supply chains are going to be very different in terms of the origins of the sourcing and diversification and so on. We’re going to have more remote work than we had before the pandemic, even if a lot of people go back to the office.
What role do you think marketers play in a company’s pivots?
MG: An enormous role. Let’s think about the three steps that I mentioned: aligning with trends, lateral extension of capabilities and a sustainable path to profitability.
Marketers should play the predominant role in the first step, because [they] are the ones who have the data and can anticipate or have some understanding as to how consumers might shift as a result of this pandemic, even as we go back to more normal times.
It’s essentially the role of marketers to tell other parts of the company, “This is the direction in which we should pivot.” If you think about pivoting using the analogy that you’re standing and there’s 360 degrees [in which you can pivot], you can direct your efforts in any direction. Marketers should play the predominant role in terms of informing the decision as to which direction you should be aiming.
The second [step], lateral extension of capabilities, [marketers] should play a very important role because marketers know you’re making a pivot, you’re emphasizing certain goods over others, or services, you’re shifting your business model—how is that going to be received by customers? Is that going to increase the brand equity? Or is it going to affect it negatively? Some companies, for example, are doing crazy things like discounting and all of that. Marketers are saying, “Well, maybe this is temporary relief, but we may be distorting our positioning and the customer may be confused in the future.”
Then the third one, finding a sustainable profitability: Let’s think about this in terms of margins. Obviously, margins are coming under stress because of the pandemic for all sorts of reasons—one of them is declines in volume. Let’s imagine a company that offers different kinds of products: Some of them may be increasing, others are decreasing. My favorite example is cosmetics. They sell lipstick, but you can’t really sell lipstick right now. People are wearing a mask [and] people are staying at home, working from home, so therefore they don’t wear lipstick. However, because many firms also sell skin care or hair care, they’re seeing more demand for those, which is partly compensating for the enormous decline in the demand for lipstick and for makeup. There are considerations there about margins and about profitability of those different things. Also, as you’re shifting away from the cosmetics from stores to e-commerce, there’s more price competition in e-commerce channels. In general, marketers should also have a strong presence in those decisions that have to do with whether the pivot makes sense in terms of profitability.
It sounds like the marketer, or the marketing department, is a compass for the company to point them in the direction of the trend to follow. But considering how quickly things are changing right now, and how people are learning in real time, is there a way that marketing departments can overcome the fear of a misstep?
MG: That’s precisely why a pivot makes sense. In the midst of uncertainty, you’re more likely to make a big mistake if you try to reinvent everything all at once. Why do I say that? You’re really in the dark saying, “OK, yes, I see this thing going on, maybe we should put all of our eggs in one basket and entirely shift what we’re doing.”
Pivoting has two characteristics that help you cope with that uncertainty and therefore resist this fear that you’re going to make a mistake. The first thing is that pivots, as I mentioned earlier, you can tailor them more to what it is that you’re perceiving that may be the new situation in the market in terms of consumer preferences. The other one is that it’s easier to take a pivot back, to undo a pivot, than it is to undo a wholesale transformation of the company.
Think about basketball players: They pivot in one direction and see there are too many players there, they pivot in another direction until they see an opportunity. Pivoting, by definition, is something that can be at least partially undone, and that should give marketers more confidence in terms of not fearing making mistakes. Because, OK, you make a mistake, you pivot again.
Is there anything else marketers should keep in mind when it comes to pivots during the pandemic?
MG: It’s important to emphasize that pivots are not huge steps that you take—a pivot is not a leap. A pivot has a direction about it, and depending on your leg span—that has to do with a firm’s capabilities—you can do a very long pivot or you can do a shorter pivot. There is a flexibility that is built into a pivot that I think should be attractive to marketers at a time when there is so much uncertainty.