Pivot Like MJ
Most successful businesses have pivoted at least 4–5 times during their history. Even the largest companies—such as Apple, Amazon, Microsoft, and Google—need to keep changing and innovating, or they will drop off. As a smaller, nimbler business, it should be easier to pivot, but it takes guts, drive, and hard work. The COVID-19 pandemic has forced many companies to close and many others to find other business models. You might not want to stop making boards and start delivering for Amazon, but it is good to keep looking for new opportunities.
Why pivot? Usually, because you are stuck and/or you want to grow more. The business must have been doing something right in order to survive and grow, but all business strategies come to an end sometime. The first step in pivoting is to recognize the need to pivot. Sure, you might hit a contested 40-foot shot some of the time, but it is better to try to improve your position. Notable pivots during the COVID-19 crisis are breweries making hand sanitizer, GM making ventilators, commercial airlines switching to cargo flights, etc. These are temporary fixes that may or not work for long. Most likely, whatever your business is doing, there are at least 10 possible compatible products or services that your business could be producing.
How to pivot? Sorry, Alan Iverson, but it takes practice and preparation. As a leader, the owner has to organize the plan, get into meetings to discuss, brainstorm with the team, and practice making changes. The first ideas and attempts might not be good, but keep trying. Unless you want to turn your business into a dairy farm and milk it into the sunset, it will take hard work to find the right pivot and execute the play successfully. Remember how hard it was to get the business going? Pivoting should not be that hard, but it won’t be easy. If it’s easy, your competition probably already did it.
Game plan: Who is your Scottie, Rodman, or Luke Longley? Create a team that will execute the game plan and follow up with them constantly. As a leader, do not just bark orders like an old-school coach. Solicit input from the team. Most people respond positively to challenges if they feel like they are contributing to the team. If they are not open to change and want to follow the same old playbook, it might be time for a trade. How do you know the pivot is working? You’re getting buckets, and the team is winning.
Some examples of past pivots in the PCB and PCBA sectors are diversifying into related products. PCB shops have started board importing divisions and in-house or outsourced assembly services. PCBA shops have specialized in medical, mil/aero, or other niche sectors, as well as into other services. Each business needs to look at what they do well and expand on that. Also, look at what is not making money and cut your losses.
Buying or selling a business is one type of pivot, and it is important to prepare, work as a team, and keep at it in order to be successful. If the business is a one-trick pony, it is usually not that attractive to a buyer, who will discount their offer based on the risk in the business (unless it is a very successful one-trick pony, which is unusual). Showing that the business has adapted to change over the years will make it and the management more attractive in the eyes of the buyer.
For buyers, the temptation is to seek distressed businesses during times of crisis. Remember, the Chinese symbol for “danger” includes the character for opportunity, but it still means danger! Making the wrong type of acquisition can take management’s eye off the ball and put the whole company back a step. Be sure to double-down on due diligence and make sure the team has a good game plan before taking on an acquisition that is under-performing. In the past six months, there have been at least 12 deals completed in the North American EMS space, so deals are happening.
Typically, when a player pivots, they keep one foot planted. In business, don’t take it too far and travel: pass the ball if the pivot doesn’t seem like the right play. Call a timeout, gather around, and think of a new game plan. A bad pivot can be worse than standing still, but if you recognize it quickly, there may still be time to rebound and find a better play.
It would be great to have a crystal ball and see how business practices and the market are going to change after the pandemic. The only sure thing is that things are going to change. The businesses that pivot successfully will be a step ahead of the competition and will be more valuable. Swish!
Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.
