Start-ups thrive on agility, but success comes from planning for pivots before they're needed. In Cogwear CEO David Yonce's latest article, he shares Cogwear's approach to optionality has helped us stay ahead of market changes, reduce risk, and create value for investors. Don’t wait for a crisis—plan your pivots from day one.
Start-ups are often celebrated for their agility—their ability to quickly adapt, shift direction, and seize new opportunities. But what if I told you that the key to long-term success isn’t just about being able to pivot when necessary? What if the real secret lies in planning for those pivots from day one?
After all, start-ups are paradoxes. Founders and their leadership teams are repeatedly asked to be certain about the uncertain. They must be sure about a business that has never before existed. They must focus (but be ready to pivot!).
In fact, the need to pivot is almost a given. You can never be 100% sure. Market dynamics shift, customer needs evolve, and sometimes the original plan doesn’t pan out as expected. Unfortunately, many start-ups treat these pivots as emergency situations, scrambling to find a new direction under pressure. This approach increases the risk of failure and often leads to missed opportunities.
As the CEO of Cogwear, a brain technology company, I’ve taken a different approach. My team and I have built optionality into our strategic plan from the beginning. We have multiple viable pathways to success at any given time. To some people, this may look like a lack of focus. But that couldn’t be further from the truth. We are intensely focused on giving ourselves the best shot at success by creating economies of scope.
To quote Harvard Business Review, “Economies of scope exist where the same equipment can produce multiple products more cheaply in combination than separately.” In Cogwear’s case, that means investing a little bit more attention and resources now in developing a handful of products (based on the same platform technology), rather than developing a single product at a time.
This approach is a more efficient use of our R&D budget, gives us control over our own destiny by providing optionality, reduces risk for all involved (including investors), and can exponentially increase the value of the company with a relatively small investment up front. It’s not a singular focus or tunnel vision, but focus nonetheless.
In this article, I’ll share why planning for pivots offers leaders options, and overcome the universal paradox of being a start-up. I’ll also explain how creating economies of scope with a platform technology has given us the flexibility to navigate different challenges. If you’re an entrepreneur, I hope this perspective makes the start-up journey smoother for you, your employees, and your investors.
In the fast-paced world of start-ups, the need to pivot is practically inevitable. Studies show that a high percentage of start-ups will need to change their product, target market, or business model at some point in their journey. These pivots are often driven by unforeseen challenges or opportunities that arise as the company grows.
However, the problem isn’t that pivots happen—it’s how unprepared many start-ups are for them. All too often, founders are caught off guard when their initial strategy doesn’t go as planned. They scramble to find a new direction, often making hasty decisions that can lead to long-term setbacks.
But what if pivots weren’t treated as emergencies? What if, instead of being reactive, start-ups could approach them with a clear, well-thought-out plan? This is where the concept of optionality comes into play. A 2022 study found that 75% of startups that pivot by making a fundamental shift in their business strategy are successful.
Optionality is about building flexibility into your start-up’s strategy from the outset. By doing this, you’re not just waiting for a crisis to make a change—you’re actively preventing the crisis in the first place and controlling your company’s future.
At Cogwear, we embraced this mindset early on. We understood that while our initial plan might be solid, the market could change, we would learn along the way, and new opportunities could emerge. So, we built optionality into our strategy from the start, giving ourselves the ability to pivot smoothly and confidently when needed.
Cogwear was founded with a clear vision: to take powerful technology for reading brain waves out of the lab and into the hands of people. Our initial plan was to go to market with a wearable device that measures anxiety and depression. Millions of people struggle with these brain conditions and yet diagnosis and treatment rely on subjective screenings and trial-and-error medication protocols. We saw a huge and growing problem (i.e., a huge and growing market) with an unmet need for faster more effective diagnosis and treatment. Our team spoke to about 100 clinical psychologists, therapists, and patients to better understand their challenges and needs.
What we built, and continue to develop, is like a “thermometer” for anxiety. It looks and feels like a soft headband but it contains tiny sensors that can measure the brain directly to monitor anxiety, fatigue, joy, and other emotional states.
But we didn’t stop there. From the outset, we recognized the potential for this technology to serve multiple markets. We mapped out strategies for other applications in healthcare and non-healthcare sectors. For example:
Early diagnosis of Alzheimer’s disease during annual doctor visits (without the need to go to a specialized clinic)
Screening athletes like football players for traumatic brain injury or CTE as they play (without the need to go to a hospital for a brain scan)
Assessing the emotional response of consumers to specific ads (without the need to sit in a lab wearing dozens of electrodes on their heads)
Why did we do this? Because we know markets are unpredictable. Not only that, we recognize there are known unknowns, as well as unknown unknowns. That’s why creating economies of scope to give ourselves options has been important.
Let me share a recent example. GlassView, a neuromarketing company focused on digital advertising, is one of Cogwear’s first paying customers. Together we commercialized our solution for ad tech. Now, if the Cogwear team got hung up on the fact that our future core business will be in healthcare applications, we would have missed a major opportunity. The revenue from our work with GlassView helped fund Cogwear’s pilot study for early detection of Alzheimer’s disease. Additionally, because the technology we offer GlassView is essentially the same technology we intend to use for healthcare applications like Alzheimer’s and anxiety, we were also able to more thoroughly test our wearable device and algorithms outside of a clinical setting. In other words, what may appear on the surface as a distraction from our core business was actually a way to advance our technology readiness while bringing in early revenue. It’s a prime example of economies of scope.
The other reason our work with GlassView is a great example is that it shows how a start-up can leverage the expertise (and sales teams) of established commercial partners to gain traction in a new market. At Cogwear, we’re doing this with multiple partners and markets to maximize economies of scope while giving ourselves the freedom to focus on our expertise — providing brain insights.
At the heart of Cogwear’s strategy is our platform technology—a versatile, scalable system that serves as the foundation for multiple applications. Platform technology is a powerful approach because it provides a built-in level of optionality. Instead of being locked into a single product or market, a platform allows you to pivot to different applications as needed. This flexibility also offers huge potential for growth.
For Cogwear, our platform technology has been a game-changer. It has allowed us to explore different markets (each worth more than $1 billion) without having to start from scratch each time. Whether we’re working on anxiety measurement, CTE monitoring, or advertising technology, our platform provides the flexibility we need to pursue multiple pathways to success.
This approach not only makes our company more resilient but also more attractive to investors. They can see that we’re not a one-trick pony—we have multiple irons in the fire, all backed by the same powerful technology. This reduces their risk and increases their confidence in our ability to deliver returns.
Investors are always looking for ways to mitigate risk, especially when it comes to start-ups. By nature, start-ups are high-risk ventures with uncertain outcomes. However, one way to reduce this risk and increase the value of returns is through the strategic use of optionality.
When a start-up plans opportunities for pivots from the beginning, it shows that the leadership team is thinking ahead. They’re not just hoping their initial plan works—they’re preparing for different scenarios and making sure they have multiple ways to succeed. This reduces the risk of failure because the company is not reliant on a single product, market, or strategy.
Additionally, it can be attractive for investors when a company is not just betting on one idea. Cogwear’s investors appreciate that we have several potential revenue streams that make their investment safer and more likely to pay off. And by maximizing economies of scope as we develop our product, we show that we are effective at creating value from our current funding (including the potential for exponential returns).
The start-up journey is fraught with challenges, and the need to pivot is almost inevitable. However, the key to success isn’t just being able to pivot—it’s about planning for those pivots from the start. By building optionality into your strategy and considering economies of scope, you can control your company’s destiny, reduce risk, and increase your chances of long-term success.
Cogwear's shows that when you build your “pivots” in from the start, you’re not just reacting to change—you’re leading it.
If you’re an entrepreneur, I encourage you to rethink your approach to strategic planning. Don’t wait for a crisis to force a pivot. Plan your pivots from day one, and give yourself the flexibility and control you need to succeed.
For more insights into leadership, innovation, and the start-up journey, follow me on LinkedIn. Let’s continue the conversation.
