Risk vs return: knowing when to business pivot
Knowing when to pivot your business can be essential for surviving a downturn, but how do you manage the risks? Yume’s Katy Barfield shares her experience.
During tough economic times, quick and bold business innovation is often necessary – not just to get through turbulent times but to come out stronger on the other side. However, any business pivot or growth strategy is always a huge balancing act between risk and return. How can you effectively maximise your opportunities – and avoid potential pitfalls – when there’s so much economic uncertainty?
Founder and CEO of Yume, Katy Barfield, knew she needed to innovate quickly when her company – an online B2B marketplace for surplus food – lost nearly 40% of its business overnight due to COVID-19.
“When COVID hit, we had a complete imbalance in supply and demand. Distributors were left with stranded stock originally destined for hospitality venues or big catering events. We had to think on our feet and ask: how are we going to redirect this food to where it’s needed?”
Yume’s business concept has always been agile, where staff have regular stand-up meetings and product development is done in iterations, or ‘sprints’. This turned out to be an advantage. It enabled Barfield and her team to adapt and pivot quickly when demand for their services receded. Strong communication with external parties was also key to facilitating the change successfully.
“From day one, we spoke to our buyers and suppliers to hear what their biggest problems were. This helped us identify the opportunities with the lowest barriers to entry, and the maximum impact and ROI.”
The charity sector offered one such opportunity, having seen a huge increase in demand and an injection of federal government funds. This, alongside other opportunities, enabled Yume to sell their surplus food to new markets. “It allowed us to start our recovery phase quickly and successfully,” says Barfield.
So, what can other companies learn from Yume’s success in making innovation part of its business model in the COVID-19 economy?
Asking ‘why?’ can help you gain more clarity and focus when re-assessing your business and its role in the market. “The most important thing is to research your idea and understand your market,” says Barfield. “And don’t be afraid to put it out there and have people give you honest, critical feedback. Then you can develop an innovative product which solves a real problem.”
What unique solution are you able to offer customers? Knowing who your competitors are is critical. “If you don’t have competitors, you basically have to write the rulebook, which is very challenging,” Barfield admits. “In our case, we chose not to deviate from our core business, which is about reducing food waste. We had to be clear about what our capabilities were, what our UVP/USP was and how to breathe life into it.”
Keeping a close eye on financial and business metrics is key to effectively managing business risk through times of change. “We do continuous financial forecasting, and keep track of lots of other data points, such as abandonment rates, customer stickiness and customer acquisition cost. These are the guiding lights of the business, so it’s important to know what you want to measure.”
Barfield thinks it’s also important to know what you’re good at – and not try to be all things to all people. “In other words, keep what’s working and lose what’s not. We have been very disciplined in only selecting the projects that give the greatest ROI and impact, and are true to our long-term mission. Exercising constraint with your finances is actually great for innovation, because it forces you to be smart and disciplined.”
Barfield’s final piece of advice is that it’s all about the people. Passion and resilience are vital, for both your team and yourself. And, be prepared to see your plans change. “It’s a marathon – not a sprint – and make sure you’ve got some good armour on.”
This article is a general overview and should be used as a guide only. We recommend that you seek independent professional advice about your specific circumstances before acting.