For startups, finding the sweet spot usually takes some pivoting (SoMedia Networks)

By Tony Wanless, Financial Post, 16/07/2013

In today’s common law of the business jungle, the putative story is that a company starts up on a shoestring and a prayer, makes a hit in its market and earns its first million within 18 months; and its absurdly young founders become Internet stars. In most cases, however, the reality is that a business starts up with an idea, realizes that because of market changes that idea isn’t working, and continually changes direction by refining its products or services and trying different markets.

It’s rare for a startup to hit it correctly right off the bat. It is usually forced to undergo several changes of direction – a process referred to as pivoting – in recognition that the original plan misread the market, misunderstood its offering’s ability to fill a need, or the market changed.

“Most successful tech companies likely pivoted some major aspect of their business before becoming successful,” said Gary Yurkovich, an angel investor and managing partner of Vancouver’s Espresso Capital, a financial services firm that provides risk capital to young technology companies.

“It is guaranteed that whatever idea or business plan you come up with will be misguided in some way. You will either tweak the plan and product, pivot to a new set of customers or product in the current marketplace, or reboot to a new market and customers.”

That pivot isn’t always a quick, fundamental change. More commonly, as was the case with Vancouver’s Somedia Networks, it can be a continuous evolution until a market and company are in alignment. Somedia began in 2006 as a cloud-based local news service that crowd-sourced video journalism throughout North America. It was a new and different concept; so new it was difficult to get quality video.

This necessitated a change, and by 2008, Somedia had become an operation that provided video for the education and information markets, which are mandated by the Federal Communications Commission in the United States to supply a certain amount of free material for television. Somedia produced 30 episodes before the 2008 recession hit with a thud, forcing it to shut down the TV production operation. But it had learned a few things along the way, primarily about the need for quality control and process management.

The next year, with the growth of YouTube, demand for video skyrocketed. Somedia wanted to meet that demand and knew a lot of video suppliers, but those suppliers were frequently not able to deliver the marketing content that was needed.

“They had a lack of reach,” said George Fleming, chief executive of Somedia. “We had learned how to distribute work to videographers around North America. But we had no ability to scale. We needed to create a repeatable process.”

If this is starting to sound like a franchise operation, it is similar in some ways, primarily in method of production. For the next two years, Somedia broke down the marketing video process into 60 different actions and standardized them so that anyone with a good video camera could create a professional product.

Meanwhile, as a testing ground, it supplied video to among other operations, U.S. television networks that needed 2010 Vancouver Olympics coverage.

Somedia’s radical change also resulted in the development of a new business model. It began meeting a growing demand for video by distributing through a large network of web services companies that created and managed websites for small businesses. But the change didn’t stop there.

By 2012, Somedia was also selling cloud-based marketing-video systems directly to small businesses. Customers were sent a detailed questionnaire that supplied the information needed to format a video. All that was required was someone to hold the camera.

“Every aspect of the process is standardized,” Mr. Fleming said. “We had turned videographers into content gatherers and so could produce videos at low cost. When we took it to market it really took off.”

This latest pivot has resulted in yet another, completely different, market. Late last year, Somedia launched in beta what it calls Automated Video, which allows very small businesses to build a marketing video via the cloud.

And it’s soon launching an initial public offering to fund another service that uses its standardized video production service. Somedia News Services Canada will supply online video content to newspapers and independent television stations.

In a way, Somedia’s long evolutionary journey has put it back where it began, but with a much better alignment with the market.


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