Pivoting Isn't Enough: Principled Pragmatism and Strategic Reorientation in New Ventures

New technology ventures often experience deviations from their original plans that oblige them to reorient in pursuit of better fit between their evolving products and target customers. Yet research is largely silent on how entrepreneurs explain and justify their ventures in the wake of fundamental redirections in strategy. Since ventures attain legitimacy and resources based on original aims that constituencies find compelling, entrepreneurs’ initial claims are likely to complicate subsequent course corrections. To shed light on how ventures effectively manage strategic reorientations, we conducted an inductive, longitudinal field study of two startups in the “robo-advisor” sector. Despite similar initial profiles, parallel reorientations, and comparable end products, the startups’ fortunes diverged in a conspicuous way that is difficult to reconcile with prior research. We develop a theoretical model introducing principled pragmatism—a novel strategy process that enables entrepreneurs to make changes to their fledgling businesses while portraying faithfulness to enduring aims. Our framework suggests that technology ventures’ success depends not only on sensible redirections, but also on how entrepreneurs anticipate, communicate, and pace these changes to various external supporters. In other words, how they explain strategic reorientations may matter as much or more than the changes themselves. Successful entrepreneurs do not merely generate and test hypotheses, like scientists, to find viable product solutions; they also resemble adept politicians—convincingly justifying deviations from plan to diverse constituencies.