How to Pivot or Persevere? Unpacking the Role of Reasoning Models in Entrepreneurial Strategy Formation

Abstract

Despite the emphasis placed on the importance of pivoting, perspectives seem to diverge on an important dimension: the process by which founders and venture leadership teams reason on how to pivot. Drawing upon the conceptual lenses developed by the literature on organizational search, we explore the type of reasoning models that guide pivoting decisions, in the context of early stage ventures. We observe two key reasoning models at play: an inductive reasoning model and a deductive reasoning model. The type of reasoning model that enables early stage ventures to progress forward differs depending on the level of complexity and ambiguity faced by ventures, at different stages of entrepreneurial growth. Our findings shed light on to the tension between the two approaches of strategy formation identified in the literature, namely thinking and doing. Moreover, the comparison of pivoting decisions across the different stages allows us to highlight the possible tools that benefit venture founders while engaging in decision making. In that regard, we identify boundaries to the often advocated “build-measure-learn” approach.