“Pivoting” has become a watchword for the UK’s private sector in 2020. As the coronavirus pandemic took hold in the early months of the year, companies were forced to adapt their products, services and business models. It is a challenge that many are still grappling with at present.
Since March, offices have been closed and the majority of the population have been far more confined to their own homes, resulting in significant disruption to business and consumer behaviour. And, while lockdown measures were eased during the summer months, a second spike in COVID-19 cases has resulted in stricter social distancing measures coming into force in recent weeks. These measures are, the Government says, likely to remain in place until March 2021, with tougher local lockdowns now a possibility across the country.
For businesses of all sizes and sectors, the challenges presented by the pandemic have been innumerable. Focusing on the tech sector, cashflow disruption (1) and sudden spikes in demand (2) have been among the most prevalent issues. Pivoting is another that cannot be overlooked: how to effectively reshape a tech company and its offering to a new climate.
Transitioning to a digital landscape
The pandemic has changed people’s – and businesses’ – lives in a myriad of ways. One of the core differences has been the transition from physical to digital interactions; the way products are purchased, services are consumed, and experiences are enjoyed is all now happening in a largely digital landscape.
As mentioned above, this has resulted in greater demand for tech, but it has also forced tech companies to re-evaluate how they are best able to operate and serve customers.
Joint research conducted by Lloyds Bank Commercial Banking and UK Tech News has delved further into this topic, revealing how the country’s technology SMEs have had to adapt – a survey of more than 100 business leaders within UK tech companies was conducted in August 2020.
The study found that between March and August 2020 almost half (47%) of British tech businesses pivoted to make their product or service a better fit to the current market. Indeed, 43% said the pandemic had meant that their company was cut off from its regular customer base or unable to serve customers in the usual way.
Whether the result of not having staff collectively working in the office or the needs of their customer base shifting due to social distancing rules, it is clear that even technology businesses have not been immune from COVID-19 disruption. And evidently, in many instances the result has been to pivot.
Existing strengths, new opportunities
Exactly what a “pivot” looks like varies from SME to SME. For some, it may be a question of changing from a B2B to B2C model – take this common example, an eCommerce platform might have previously focused on letting restaurants order ingredients from local suppliers, yet they had to then adapt the product so vendors can instead sell direct to consumers. Pricing, volumes, delivery methods, payment functionality and even branding might need to change to accommodate such a shift, but the core product remains the same.
Whatever is required, tech SMEs should undertake thorough research and testing when pivoting. Businesses must ensure they are making the right adaptions – speaking to their loyal customers about how they could be better served is a good place to start. Once a new version of the technology is ready, it should undergo rigorous beta testing to uncover any bugs or bigger issues.
Importantly, the process of pivoting the business – its product, service, revenue model or target market – can prove worthwhile beyond ensuring short-term survival. It can help uncover inefficiencies, improve the service proposition and even identify a more profitable marketplace.
There is a telling insight from the aforementioned research by Lloyds Bank and UK Tech News. As stated, 47% of British tech companies pivoted their offering in some way between March and August 2020 – of those, 61% said it is their intention to stick with their new-look business model even once the pandemic subsides, rather than reverting back to their modus operandi from the beginning of this year.
Clearly, although borne out of necessity, tech firms have pivoted for the better, placing them in a strong position for long-term growth and success. This further underlines the importance of thorough due diligence for any business when it is considering a pivot.
Tech businesses pivot to survive
There is no shortage of British tech SMEs that have pivoted successfully in the midst of the pandemic. One such example is WhatWeWant, which launched in January 2020 as a private app-based crowdfunding service where families and friends could club together to buy gifts.
However, the rapid spread of COVID-19 put the startup’s plans on hold almost immediately. WhatWeWant’s CEO, Yiannis Faf, remarks that demand for crowdfunded gifts “fell off a cliff”.
Instead, as friends, families and local communities rallied together to support those in need during the COVID-19 crisis, Yiannis Faf and his co-founders saw that WhatWeWant’s technology would be better put to use if it could enable people to raise money for charities and good deeds. The app developers had to change the functionality of the app to make it easier to share crowdfunding campaigns outside of closed networks, which has proved successful.
“We saw a huge change in the way the app was being used,” Yiannis says. “There have been very few people actually asking for gifts at this time.” Instead, he states that opening the service up to charities has led to a surge in usage, with crowdfunding contributions doubling during the lockdown period.
The pivot was crucial. “If it wasn’t for the changes we made, the lights would barely be on,” Yiannis says.
The Furniture Practice – a contract furniture dealer and consultancy for commercial spaces – offers another interesting example. At the start of 2020, the 23-year-old company was exploring ways to move into the eCommerce space; however, when the pandemic suddenly forced organisations globally to begin working from home, it opted for a new strategy.
Instead, The Furniture Practice launched a new sister business: curatd., a fully-integrated online platform designed to simplify the selection, delivery and long-term management of furniture. It allows companies to better support staff who are working from home; via a custom procurement platform, employees can purchase or lease pre-approved and fully compliant furniture and equipment for their homes.
Doug Bodenham, the managing director of curatd., explains: “The Furniture Practice was already well established in providing furniture for a wide range of commercial spaces. But as entire organisations began working from home almost overnight, it was clear we needed to find ways to support clients – and their employees – through this change.
“We had to embrace technology to make it quick and easy for organisations to create a list of suitable furniture for their staff to choose from. In turn, home workers can now go online and within a few clicks acquire all they need to create safe, comfortable and compliant workstations.”
Success stories like this have emerged right across the UK’s tech sector throughout 2020. However, that should not downplay the difficulties businesses face when going through this process. Most notably, there are various financial considerations when pivoting a business.
An existing tech product might need to undergo significant changes; or entirely new technology might need to be developed. Whether either option can be achieved internally or through an external partner, resource will need to be dedicated to the task.
Furthermore, as a tech business pivots, it will need to communicate the pivot clearly to new and prospective customers. The more radical the shift, the greater the need for marketing and communications activities to ensure the target audience is aware of the changes. This again will require more resource and potentially a reinforced marketing budget.
Ultimately, a pivot often requires an injection of capital, which prompts the question: where can tech SMEs turn to for financial support?
State-backed support schemes
Firstly, tech businesses can consider various government-backed financial initiatives introduced in response to COVID-19.
On 24 September, the Chancellor Rishi Sunak unveiled the Winter Economy Plan, with key business loan schemes extended as part of the announcement. More businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund.
The latter will be of interest to many tech SMEs across the UK; the Future Fund scheme provides government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. These convertible loans are appropriate for businesses that are unable to access other government business support programmes because they are either pre-revenue or pre-profit.
Institutional funding and private investment
Tech SMEs can also consider private bank loans and investment. Among them, businesses ought to be aware of the funding options that lie within financial institutions.
Lloyds Banking Group has committed billions of pounds* to help customers looking to minimise the disruption to their overall business operations through the coronavirus pandemic.
Lloyds Bank Commercial Banking has facilities such as invoice finance, overdrafts and term debt. Furthermore, as part of Lloyds Banking Group, we have Lloyds Development Capital as part of our portfolio, our private equity business which for over 35 years has built a proven track-record of backing management.
Seeking support where needed
Pivoting comes with a complex set of challenges. From understanding how to best adapt the business through to actually making (and financing) the necessary changes, business leaders are being tested in ways they may not have been before.
Indeed, the research carried out by Lloyds Bank and UK Tech News revealed that 82% of business leaders within UK tech SMEs have found the six months prior to September 2020 to be more stressful than normal, with 54% also saying that they have felt isolated and alone during the pandemic. It is important, therefore, for business leaders to remember that support is on offer.
As well as the different avenues for financial support that are available, broader advice and guidance can be provided. At Lloyds Bank, we see this as a vitally important part of what we deliver for our business customers.
We have grown our lending and support to businesses across the UK for this very reason: to help with day-to-day business needs. Our relationship managers are experienced in the tech sector and are keen to support further growth of this vibrant industry. Please get in touch today to discuss how we might help your business, too.
Darren Cable, Area Director Technology, Media and Creative at Lloyds Bank Commercial Banking
07841 780 343 || [email protected]
For more information about how Lloyds Bank supports UK tech businesses, click here.
*Figures obtained from Lloyds Banking Group press release dated 23rd April 2020.
All lending is subject to status.
Lloyds Banking Group is a financial services group that incorporates a number of brands including Lloyds Bank. More information on Lloyds Banking Group can be found at lloydsbankinggroup.com.