Dave Balter's ego almost ruined BzzAgent, his fourth start-up, before Tesco's Dunnhumby bought it for a reported $60 million last month. Here, he implores entrepreneurs to find humility.
This is a message to every entrepreneur, CEO, and leader: Dig a hole, throw your ego into it, and pour concrete on top. Find humility instead.
Hello, my name is Dave Balter, and I'm a CEO who used to be totally ego-driven. (There. I said it.) This ego gave me the confidence to be a great leader, but also nearly destroyed BzzAgent, the word-of-mouth pioneer I created. Had I not dramatically adjusted my leadership style, in all likelihood my partners and I wouldn't have found our way to a successful exit: This spring Tesco subsidiary Dunnhumby acquired BzzAgent.
I believe—due to an inflated market, easy cash, and entrepreneur glorification—that there are thousands of companies destined to fail if their leaders, who may feel like business deities today, don't immediately turn their hubris into humility.
I learned the hard way that a CEO isn't God. I launched BzzAgent, my fourth start-up, in 2001. By 2005 I had a tiger by the tail: Venture capitalists were wooing us, competitors studied us—and the media swooned. BzzAgent was featured on the cover of The New York Times Magazine and the company was the subject of two Harvard Business School cases. I was called a genius, and I believed it: In 2004 we generated $3 million in revenue. That rocketed to $8 million—profitably—in 2005. Our clients included some of the biggest companies in the world—from Procter & Gamble and L'Oreal to Penguin Publishing. In January 2006, the company closed a groundbreaking $14 million round of institutional financing.
At the same time, my entire style evolved from confident to cocky. When I heard rumblings that members of my family were put off by my "inflated self-worth because of BzzAgent," I chalked it up to being shortsighted. When I interviewed job candidates, I was less conversational and more confrontational. I refused to attend conferences that didn't choose me as a keynote speaker. By the time 2007 rolled around I was blinded by my own press and felt BzzAgent was unstoppable. Sure, I thought I listened to others, but looking back I realize now the only voices I heard were the ones in my head: I made every product decision, shunned investment overtures, and ignored competitors as wannabes and copycats. I believed my vision was untouchable. These were signals of CEO behavior that could doom any company, even in good times.
Then came 2009. The recession started to pull against BzzAgent. It was a tough period for many businesses, but it was especially hard for us because of my outsized ego and the way I was leading the company. New rivals emerged and social media platforms evolved. My attitude prevented us from seeing changes coming until they were choking our business. Innovative clients who wanted to try new concepts didn't get it. In the world according to Balter, there was only Balter's view.
BzzAgent's revenues flattened, which made our budgeted expenses unsustainable. In 2009, we let go of more than 40 people—nearly half of our staff—in three separate rounds of reductions. Talented 'A' players who weren't let go ended up taking other jobs. My partners and I strategized and debated and fought and, in scarier moments, wondered if this was the end of the road for BzzAgent.
Board meetings became tense as we recognized the problems stretched beyond the economic climate, but struggled to identify the root cause. After one such meeting in early 2010, our chairman pulled me aside and said it was the worst meeting we'd had in five years but not because of how the business was faring. My attitude was the problem. That was the wakeup moment.
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The Humility Imperative: How I Changed
I was forced to grasp that I didn't have all the answers. In fact, I had to face the fact that I was pretty lousy at some things—the process of product development, for instance. Humbled, I started to change my mindset. I became a student and a sponge. I sought and analyzed as many different perspectives, management styles, and corporate structures as possible. I joined a CEO group and learned to listen to and communicate with a dozen other leaders who had experienced similar challenges and understood the reality of needing to evolve.
I changed the way I made decisions, too. Rather than just say I valued input from employees and peers, I followed their opinions. I turbocharged BzzAgent's social media efforts, and embraced social networks as an important tool for our volunteer citizen marketeers. I even started housing start-up companies in our Boston office. From individuals to recently funded companies, I literally surrounded the company with other innovators, ideas, and points of view. Gradually, my inward gaze turned outward.
With persistence, BzzAgent came out leaner, better, smarter, and stronger. While the effort we made to redefine our vision, and become a client-driven business helped us tremendously, none of it would have happened had I not embraced vulnerability and humility.
I worry now that other entrepreneurs are about to repeat my mistakes. There's a bubble brewing in the rich and frothy start-up market. A new class of CEOs and entrepreneurs are finding it easy to get funding from top-tier VCs or big-name executive backers from Facebook or Groupon. Their names pop up in TechCrunch and AllThingsD.com, and they're on the map. They're being recognized at the Google I/O Developer Conference or slapping one another on the back over bacon and eggs at Henrietta's Table, a Cambridge gathering spot for the best and brightest. Man, oh man, they're even dressing up for fashion shoots. The biggest concern for the class of 2011? A dearth of talent to build bigger teams now. But the easy money and the fashion shoots will dry up. Cheerleaders will disappear, rivals will emerge, and the market will become less forgiving. Arrogant CEOs won't see the changes coming.
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The Humility Imperative: How to Make It Work for You
The humility imperative is simple: If you're an ego-fueled leader, find humility today, before it's too late. Disregard the fawning fanboys and king-like power you feel right now. Instead, choose to recognize your place in the universe is no more important than anyone else's. Know you can learn from every single interaction—no matter the person's credentials. Understand that your competitors are smart—perhaps (gasp!) even smarter than you. Believe that media glory is fleeting. Remember that fundraising is a tactic, not a strategy. Your reputation isn't forever golden because VC firm Kleiner Perkins Caufield & Byers backed you. Here's what matters more: You treat your employees with kindness; You are willing to be wrong; and—yes, this is hard—you share the spotlight.
Having trouble admitting your ego is out of control? Ask your family, friends, or most trusted adviser. Find someone willing to tell you straight. Your business will be much better for it and you'll truly have the opportunity to create something great. Humility will prepare you for the endurance test to come. It will give you the flexibility to create a business that can thrive in good times and survive the bad.
Have humility, or your hubris will have you.
Dave Balter is the founder and chief executive of the social marketing company BzzAgent. He is also a founder and executive chair of skill-testing platform Smarterer, and an investor or advisor to a dozen start-ups.