Harvard Business Publishing

When a startup company sharply shifts its strategy, does that mean the company is in trouble? That's a natural question after Dash Navigation, a startup in the GPS space with a novel business model, announced a sharp shift this week. These shifts can actually be good news--if the shifter has the time and ability to iterate towards a successful business model.

Dash introduced its first product--the Dash Express--earlier this year. The device mimicked many of the features of devices sold by companies like Garmin and TomTom, with an interesting service model. Customers pay a modest monthly fee to have access to real-time traffic information. Even more interestingly, the real-time traffic information comes from aggregating data from Dash devices. Further, Dash created open protocols to allow developers to create "mash-ups," such as a way to find the cheapest gas near a driver at a particular time.

Dash's approach certainly had a disruptive feel to it (as highlighted in Innosight's Strategy & Innovation publication).

Clearly Dash's business model would have its greatest chances of success if Dash were able to get its device in the hands of tens of thousands of consumers in a particular market. Unfortunately, Dash has struggled.

User reviews suggest that Dash's device didn't do a good enough job with the basics. Of 161 reviewers on Amazon.com, 65 gave the product three stars or lower. A typical review contains language like, "It frequently thinks I'm exiting the freeway, even though I'm not. When driving down the street it will all of a sudden decide to reroute me around a block of houses, as if it believes I turned, when in fact I'm still going straight."

It's tough enough to be a late entrant into a field populated with big companies. If your device doesn't cross the "good enough" bar on critical dimensions, you are in real trouble.

This week Dash announced that it would lay off close to two-thirds of its workforce and would exit the device business. Its new model is to license its software to other GPS and cellphone manufacturers and turn into a service provider.

While it seems like Dash's strategic shift is drastic, it's not necessarily bad news. A steady stream of research suggests that most successful companies have to iterate to find a winning strategy. Google had no business model in the first few years of its existence, Netflix started with a model that looked like a traditional video rental retailer (late fees and all), Intel focused on commodity Dynamic Random Access Memory chips until it shifted to microprocessors, and so on.

As discussed in Chapter 6 of The Innovator's Guide to Growth, companies that get it right aren't those that start with brilliant strategies. They are those that recognize the need to shift strategy before they run out of time and money.

So along some dimensions, Dash's shift is encouraging. The company is emphasizing its true differentiators--its software and business model. Having Dash software power multiple devices could facilitate the creation of a scale network that provides truly real-time information. My colleague Andrew Laing praised the move over on Innosight's blog.

Dash is certainly not out of the woods. In the current economic climate the company might not have the time or money to execute its strategic shift. It still has to develop a compelling way to translate its new strategy into profits. And there are other emerging technologies that can provide real-time information on the go. But the fundamental recognition that a course correction was required at least gives Dash a chance of success.

While sudden strategic shifts seem like desperate moves, they are consistent with long-term success patterns. Whenever you see such a shift, watch carefully to see whether the company has iterated towards a successful business model and whether it can, in fact, deliver on its new strategy.