How to know when to pivot and when to hold

As a business, you must be constantly setting new goals and working towards accomplishing your current goals. The goals you aim for need to be big enough to ensure consistent growth while remaining tangible, realistic, and achievable. 

But goals also need to be flexible. Managing how your team goes about accomplishing those goals requires you to be open to suggestions and improvements or else risk falling behind the pack.

Oftentimes, there will be an aspirational quantifiable goal that your team is working towards accomplishing. For example, reaching $1 million in annual revenue. While there are many different ways you can accomplish this goal, the conventional wisdom is usually to follow the same methods that lead you here and keep progressing along the same path towards that goal.

Sometimes, the plans that got you here are not the plans that will lead you to your ultimate goal. Let’s continue with the quantity goal of achieving $1 million in revenue. Now let’s say you are collecting monthly payments on your product or service, and your sales team is growing sales at 10% month-over-month: it looks like you are well on your way! But you might be missing crucial factors. You might not notice until it’s too late that your product isn’t high enough quality to retain those clients and now you are losing 20% of clients after three months. Now you are stuck in a situation that is essentially just pouring water to a leaky bucket.

The cost to make the quality adjustments might be really expensive…but the cost of consistently losing business is usually going to be worse. If there aren’t quality controls in place, it’s going to make achieving your $1 million in revenue goal harder and make the next important milestone even more difficult to achieve if you don’t change your things up.

Word spreads quickly and first impressions are incredibly important! If word spreads that your quality is inconsistent, you will saturate the market with a negative reputation and eventually find it very difficult to garner new customers.

Essentially, the cost of consistently putting out a bad product becomes more and more expensive as word spreads. This cost to reputation quickly grows to be significantly greater than the cost of doing nothing.

A story that does a great job of conveying this is the story of Pixar Animation Studios and the story of Toy Story 2. In the 1980’s, Steve Jobs (after getting let go by the board of Apple) bought Pixar from Lucas Film, and in the early 1990’s the Walt Disney Company hired Pixar to make 1 full-length, completely computer-animated movie.

At the time, there had never been a full-length completely computer animated movie. It had never been done. Pixar had done shorts before (and actually won an Oscar in 1988 for Tin Toy), but they had never made a full-length movie before. The agreement was that the Walt Disney Company would pay for the entire cost of producing the film but would receive 100% of the royalties.

Steve Jobs and the Pixar management team knew that this was not necessarily the greatest deal for them. They knew that if the movie was a hit and Disney kept all of the royalties, they would have Pixar hamstrung and forced into this type of deal for the future because their profit on this deal was minimal.

Therefore, right before Pixar’s first movie with Disney went live to theaters, they made a bold move. They decided to have an Initial Public Offering (IPO). This was risky because if their first movie flopped, the company would be out of business. But, if it was a success, they knew Disney would come back to them to make more films and the additional funds from IPO would allow them to cover their half of the production cost and take a half of the royalties.

Their first movie: Toy Story.

What else needs to be said? But just in case you need a refresher: Toy Story was a smash success and won an Oscar in 1995.

The Walt Disney Company agreed to a deal to cover half of the production cost for two more movies and split the royalties with Pixar. This was still a relatively risky spot for Pixar because if any of these movies flopped, they would be on the hook for it.

Pixar’s next movie was A Bug’s Life. Not only was it another great box office success and instant classic, but the production of the film went off without a hitch.

Their second movie was Toy Story 2, and the production of the much-anticipated sequel was not nearly as smooth as A Bug’s Life or even the original Toy Story. In fact, Toy Story 2 almost ended up never being released…twice!

Because Pixar was a young and quickly growing company, they hadn’t really established the type of quality protocol and procedures necessary when making films. Like most startups, they were flying by the seat of their pants.

Since they were making A Bug’s Life and Toy Story 2 at the same time, they had to split their teams to focus on each respective movie and hired an outside film director to direct Toy Story 2.

The Pixar team was so focused on releasing A Bug’s Life that they gave essentially free reign to this new director to direct Toy Story 2. By the time Toy Story 2 was “ready” for a final review, Pixar encountered a huge problem: the movie just wasn’t very good. It simply wasn’t emotionally gripping or well-put together.

The Pixar team had to make a choice: keep this sub-par film that they invested millions of dollars into, or scrap the entire film and start over (and risk upsetting everyone that worked on the original Toy Story 2).

The short-term risk was losing the millions of dollars they spent producing the film. The long-term risk was losing the Walt Disney Company as a financial and commercial partner, leaving them having to go off on their own and figure out distribution channels, promotion, and everything else that Disney brought to the table that made their involvement so valuable.

So, Pixar decided to pivot. They scrapped the entire first draft of the movie (losing millions of dollars) and started over.

Production was going well: great story, great characters, great emotion. But, right before Toy Story 2 (the second version) was ready to be released, something happened. The developers at Pixar were working on improving some small visual features and that involved writing over the code in some folder. But, they used the wrong command: ask a programmer and they will let you know that this is easy to do! So, when they went to delete and replace the folder, the command instead started deleting every file it encountered. And…a developer accidentally entered that command. After a moment, they started seeing files disappearing and realized what was happening.

Everything was deleted. Woody, Buzz, Mr. Potatohead, everything! They scrapped millions of dollars on the first movie and then accidentally deleted the entire second go-around of this movie. Normally, this wouldn’t be an issue. Everyone knows to backup important work, right? Except the backups were untested, and failed when they tried to retrieve their work. All seemed lost.

However, they had a lifeline. One of their employees who was pregnant was granted the opportunity to work from home (back when working from home wasn’t the norm). Every week, she would back up the entire movie on her home hard drive. After they realized this, they dashed to her house to find out whether or not their entire project was truly gone.

The Pixar team drove to her house, picked up her hard drive and…it was all there!

The movie released and was a total success and laid the groundwork for Pixar to create: Monsters Inc., The Incredibles, Finding Nemo, and so many other movies that became instant classics.

Pixar had an original goal: to make 2 movies with Disney. They could have stuck to the original version of Toy Story 2, but that could have led to lost business and opportunities down the line (the equivalent of a leaky bucket).

Pixar chose to pivot in the face of adversity for the opportunity to set themselves up in the long-term.

They created the Brain Trust which is a quality control team that meets with directors weekly to ensure that the movies they are directing are on track and quality.

They also implemented technical systems that prevented employees from losing everything in their system, and ensuring that their work is backed up, that their backups are backed up, and that those are backed up too!

Technically, Pixar didn’t need to make either of those pivots to make 2 movies. But to make 2 high quality movies that would sustain the success of their business for years to come, these pivots were absolutely necessary.

The point: having goals is a great first step. But to maintain your success, you are going to need to be vulnerable enough to acknowledge that what you are doing now isn’t perfect and will be improved. There are some activities that may not directly drive your outcome in the short-term, but will absolutely lead you to success over the long term. Knowing when, how, and just being open to pivoting is critical to your success as a leader and as a company.