Management lessons from Theranos
I’m digging into Bad Blood, the authoritative book on the rise and fall of Theranos.
I would have thought that there were no lessons to be learned for those who toil in ordinary enterprises, but there are some!
Background: Theranos was not all-fraud, all-the-time. The founder’s vision was far too advanced for Silicon Valley engineers to achieve, at least on a non-Apple budget, but the team did try. There were some reasonably competent people from Apple, Logitech, et al., and they did doggedly build devices. Maybe the combined efforts of the best people at Siemens and Agilent (formerly HP) would have sufficed to deliver most of the vision.
One lesson for managers is that firing the disloyal is a good technique for preserving one’s job. Elizabeth Holmes wouldn’t have lasted past 2005 or 2006 if not for the fact that she axed everyone who disagreed with her. A rebellion in 2008 nearly led to a Board vote to remove her as CEO, but she survived via “contrition and charm” and then fired everyone who had exposed her overoptimism and outright lies to the Board.
Another lesson is that incompetence plus sucking up = long-term job. The head of software would reliably say “yes, we can do it” and that enabled him to survive despite a long track record of failure. Folks who were more capable and who pushed back on unrealistic goals were routinely fired.
[Sort of a “management” lesson: the book describes that Holmes had a boyfriend, Ramesh Balwani, who was two decades her senior and provided her with a roadmap to garnering personal cash without necessarily building a real business. Wikipedia says that he made $40 million personally on a company whose investors were wiped out. He used some of this money to guarantee a loan to Theranos when the company had burned through its first three rounds of seed/VC money. The company might not have lasted past about 2010 without Elizabeth Holmes’s personal connection to the rich guy.]
One weakness of the book so far is that it doesn’t explain how the company was able to hire anyone in the face of competition from Apple, Google, Facebook, et al. The author makes it sound as though many of the people had skills to get jobs at the unsinkable behemoths. How did they end up at Theranos in the first place? The magnetic personality of the founder is one explanation.
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