Making an about-face in business
I’m CJ Jackson and this is the Business Review.
When entrepreneurs are faced with deciding when to stay the course or to pivot, Dr. Matthew Wood, Associate Professor of Entrepreneurship and Corporate Innovation, shares data-driven predictors to inform difficult business decisions.
How do we know when to pivot? Pivot is not just a small iteration or change to you're doing, but it's really coming up with a whole new business mode. It's a very consequential decision. You know, we want to put people in a position where they have to think intently about the magnitude of that kind of a shift.
Dr. Wood discovered three attributes that contribute to an entrepreneurs decision to pivot.
The first one was the magnitude of the miss. So when you're getting the negative feedback from the market, is that feedback suggesting that you missed your aspiration level by just a small amount, or by a very large amount. So the magnitude of the miss. And then the next one that we looked at was the length of the runway. So how much cash do you have versus how much cash are you burning? In other words, how much time do we have to make a change before we run out of money? The attribution of the miss is the degree to which you think that the miss is due to the anticipation. Did I miss the market, or did I just not convince the market that what I have is a good enough solution?
Individual differences like grit and impulsiveness were also factors that contributed to these difficult decisions.
These three attributes definitely do impact the decision, uh, the decision to pivot. And we're finding that all of these impact it, but the confluence of all of them together can be very, very powerful.
The Business Review is a production of KWBU, Livingston & McKay, and the Hankamer School of Business at Baylor University.
