If you follow science or business news, you've probably heard of Theranos. The company was painted as a hero, predicted to revolutionize the medical industry and how we consume health care. It was supposed to be the protagonist - how could it fall from grace so quickly?
- Poor handling of breakthrough product development and distribution.
- In the wise words of Ice Cube, they didn't "check yo self before you wreck yo self."
In layman's terms, courtesy of Urban Dictionary, "check yo self" means: "To reevaluate your actions after realizing that your current course of action is likely to lead you into a troublesome situation."
And Theranos certainly did wreck itself.
Theranos, Product Development, & Industry Standards
What's the situation?
Theranos. You know the name. Whether for its revolutionary blood testing technology, its infamous CEO Elizabeth Holmes, or its Icarus-esque rise and fall. Here's the breakdown:
- Revolutionary blood testing technology: In theory, Theranos's new tech would provide a full workup from a single drop of blood. This would make drawing blood easier, cut out the middle man, and democratize lab tests (making them much more affordable for everyone).
In practice, there were a host of issues with the tech AND the company operations that had investors pulling out. Post haste.
- CEO Elizabeth Holmes: Heralded as the next Steve Jobs, this startup put her net worth at $4.5 billion in 2015. The majority of this valuation came from investors. She was on the cover of Inc., Forbes, and Fortune magazines. Today, her net worth is a whopping $0.
- The controversy: Theranos was a rising star. It was prophesied to turn the medical industry on its head. All eyes were on this project. And then... everything went sideways.
What went wrong?
Everything seemed to be going right for this enterprise.
The timing was right. People are grumbling. We have all of these incredible medical advancements, but we still need a pint of blood to do testing? We are all ready for a new solution. Theranos looked like The One.
The backing was there. Holmes's endeavor was sponsored by $9 billion from investors. The funding is ready, the investors are willing.
The marketing was flawless. People were excited for the prospect of having more control over their own health care. The images and words were compelling. Check it out:
Image from Business Insider.
But there was no external antagonist in the Theranos story. Turns out, its biggest enemy was itself.
From a procedural standpoint:
- Blood samples were not stored at the correct temperature, rendering them unusable. However...
- Test results were still provided to patients, even though the company knew they might be incorrect. One report showed that 81 out of 81 results provided to patients were inaccurate.
- Samples were diluted, which has a major impact on fidelity of results.
- Staff was very poorly trained overall.
In short, it might be easier to list the things they did right.
From a business standpoint:
1. Theranos tried to pave its own way without understanding the industry.
If you want to be a trailblazer, you have to know why the established trails are so popular. Is there a cliff right next to the path? Are there murderous bees waiting for you to take a single wrong step?
Theranos had no medical professionals on its board. Its staff wasn't trained to handle the samples according to modern medical standards. It didn't follow proper medical precautions or practices. Yes, the current health industry paths follow the edge of a cliff - and Theranos stepped right off it.
2. It tried to offer a complex medical service as a commercialized consumer product without considering point #1.
Although this appeals to our desire to cut out the middle man, it creates problems for our own health as well as our medical system. It's similar to Googling symptoms to diagnose ourselves. Most of us have no medical training, no understanding of how bodily chemicals and systems interact, and zero understanding of the intricacies of prescription medication.
In short, there's a very good reason why our doctors stand between us and medical corporations (and our own ignorance).
Maybe someday this business model could work. Certainly, home testing companies (23andMe, Home DNA, blood glucose monitoring, pregnancy tests, etc.) are doing very well as consumer products. However, they are quite established, follow strict standards, have undergone rigorous testing before going public, and are unambiguous for the consumer.
Theranos simply did not look before it leapt.
From a marketing standpoint:
1. Secrecy. Consumers and investors alike prefer transparency. We're fed up with companies keeping us in the dark to protect their own interests. Today, the smoke-and-mirrors arouse suspicion and nurture distrust. Two things you do not want when you're pitching a breakthrough, revolutionary, never-before-seen product.
2. Putting your money where your mouth is. Theranos made some big promises that it couldn't fulfill. It fell into the hype trap, with nothing concrete to back up its big words. In the end, we feel betrayed. Lied to. Disillusioned. Now, the company is paying the price.
Lessons From Theranos
Personally, I have no idea what this company was thinking. It's obvious there were flaws in the operations, the business model, and the presentation. But they pushed forward anyway.
Businesses, startups, businesspeople, and entrepreneurs can all learn important lessons from Theranos' downfall.
- Timing and demand are your perfect storm.
- Always underpromise and overdeliver.
- If you can't walk the walk, don't talk the talk.
- Don't shake things up unless you have the clout to back it up.
- Standards and regulations exist for a reason.
Maybe the company will shape up and we'll see them again in the future. However, this kind of negative press is a death sentence. It will be interesting to see where Theranos goes from here, and who rises up to take its place.