One startup CEO explains how “the same confidence that helped launch my company nearly killed it” and how he’s learned a better balance.
[Photo: Flickr user hannaneh710]
In 2008 the bottom dropped out from my business, and it was probably the best thing that could have happened.
After years of steady growth, I’d gotten used to ignoring critics. Some initially said we’d never get people to buy home improvement products over the Internet; others, that we’d we’d never find a way to ship thousand-pound orders to people’s doors. As we grew to one of the biggest sellers in the world, I learned to turn a blind eye. And then the global recession made me wake up. I’d grown arrogant, then was swiftly humbled.
My experience has since taught me that there’s a proper time for each. The key, for entrepreneurs and startup founders, is to know when—and act accordingly.
The Arrogance-Humility Cycle
Call it the “arrogance-humility cycle.” Despite our best efforts at understanding the differences between confidence and arrogance, humility and half-heartedness, almost invariably, there are times when our outlook proves mismatched to circumstance.
In general, founders starting what they hope will become the next big thing need to have ambition in excess. When you’re aiming to change the world, pretty much everyone will tell you that you’re nuts—and it takes quite a bit of confidence, even arrogance, to push through. We tend to downplay the value of stubbornness in this era of the easy pivots and lean-startup flexibility. But when you’re just getting out of the gate, it can be the difference maker.
Later, though, that same confidence that gets you through your earliest phase can prevent you from learning and adapting later, when you most need to. Once you’ve found traction, dialing down the bravado and putting your ear to the rail becomes critical.
Typically there’s no signal that lets you know when it’s time to do that. Instead, when the revenue is finally flowing and it feels like you’ve proved everyone wrong, that’s especially hard to do. In the end, the same confidence that helped launch my company nearly killed it. It took a near disaster for me to re-learn how to be humble again. Here’s what I found out along the way.
Adapt Your Process, Not Your Vision
When Eric Ries coined the phrase “lean startup” in 2008, he popularized a philosophy that many entrepreneurs were already practicing: the art of the pivot. The central idea here is that it’s okay for startups to change course—early and often. Growing lean means trying lots of new things, seeing what sticks right away, then throwing resources at that. It’s a trial-and-error approach to building a business that depends on constant feedback.
But that same approach can easily become a crutch and even a handicap. While it’s great to pivot in terms of process—the way you do things—pivoting on vision—what you’re doing and why—is something else entirely. Bold ideas, especially industry-changing ones, often require a long runway. (Where would Tesla be now had Elon Musk listened to detractors back in 2005?) It’s during this phase that listening to too much feedback and paying too much attention to naysayers, at least when it comes to your vision, can be really detrimental.
I started BuildDirect in 1999 with an investment of $20,000 and a plan to change the $500-billion home-building industry. We saw a massive opportunity to solve a brutal customer painpoint: distrust in the building industry as a result of expensive supplies, unreliable delivery, and limited selection. It seemed obvious to us that there was a need for a service that let people order everything from flooring to patio furniture online and have that shipped right to their door.
Then we talked to insiders in the industry. “You’ll never get people to pay up front for big shipments,” they said. “Not to mention, there’s no practical way to get this stuff to people’s homes.” At the time, it was hard to order books and CDs off the Internet, let alone bathtubs and skylights.
In many ways, they were right. As we quickly realized, there was no FedEx of door-to-door heavyweight shipping that we could just latch onto; we had to build a global logistics network from the ground up. Our first effort failed. Then our second one did, too. We sunk millions into the platform with nothing to show for it, and even my own investors began to lose faith. The word “pivot” came up more than once. But by this point, I had a chip on my shoulder and was determined to prove them wrong.
After all, the truly game-changing platforms of the past few decades have all faced similar resistance. At the time, I was sure we were going to be the next RIM, which had struggled early on before hitting it big with Blackberry. We’d be like Netflix, I told myself, which critics once contended would never be able to dethrone Blockbuster, much less go up against the cable content providers.
That pigheadedness paid off. In 2002, with a small team of exhausted and overworked developers and just a few weeks from the lights shutting off, we turned the platform on. It worked exactly as we said it would. The revenue flowed: $20,000 in that first month, then $1 million, $14 million, $28 million—and it kept flowing.
Dialing Down The Bravado
As we profited in good times and then in bad, even through the housing crisis, we thought we were invincible. With time, our biggest critics became our biggest boosters. For the next six years, it was smooth sailing. And at that time, the confidence I’d maintained through the toughest times seemed wholly justified.
But while it had served us so well at first, that same attitude was quietly becoming a liability. I’d stocked my advisory board with people who thought like me, instead of critics who’d challenge me. We ignored innovative ways companies like Amazon were harnessing data to better connect customers and suppliers. Then the 2008 credit crunch hit. My overconfidence evaporated even faster than our revenue stream, which fell by half in one month—and then continued to freefall.
In retrospect, we’d suffered the same fate of so many disruptors, who had beaten the initial odds only to grow complacent. We had become too much like RIM, which—after finally cornering the smartphone market—ignored Apple’s innovations, or like today’s Yahoo, struggling in the age of Google and Facebook despite its search-engine pioneer status.
BuildDirect ultimately fell to the verge of collapse, and it was only by grappling with how much that I’d messed up that we got through it. In hindsight, though, this forced humility was a lucky break. A sour economy had compelled us to adapt, quickly and decisively. With the Blockbusters and Blackberries of the business world, it was a case of the frog slowly brought to boil, a fate that only circumstance, not strategy, had averted for us.
It’s About Balance—And Timing
In the end, I upgraded every part of the team, including our board. I brought on new advisors and implemented systems where hard questions from partners, customers, and employees were welcomed. We hired developers for a rapid relaunch of our platform to better match shippers, manufacturers, and buyers using cutting-edge predictive analytics.
All this was almost too little, too late—and, in near-desperation (and in a grim irony for the founder of home-building company), I had to sell my house to meet payroll. But even with the economy sputtering, something started to click. With better data, we were able to consistently sell out of all our supply—a revelation that changed how we do business. And this year, we’re poised for even bigger heights than ever.
It takes overconfidence to stay the course through adversity but a humble mind to evolve and iterate. How, exactly, do you know when it’s the right time for each? The moment where success is knocking down your door and everyone starts telling you that you’re right—that’s the time to get humble, fast. In the end, this cycle of arrogance and humility is something too many entrepreneurs get backward and even the best struggle to time perfectly.
Timing is so often out of entrepreneurs’ control. But it isn’t entirely outside our influence; you may not be able to affect what happens out there—in your market and in the wider world—but you can adjust your response to it, and decide when you do. Get this right (think Apple, IBM, or even Google), and you might end up being the rarest of unicorns: a disruptor that keeps on disrupting.