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That ever enterprising Tech community favorite, Elizabeth Holmes It’s now an example of what can go wrong if you don’t know what you’re doing. Holmes was a co-founder of Theranos and Ramesh Balwani. The company hoped to develop a technology that could quickly and inexpensively analyze blood samples.
The goal was to create a type of computer that is essentially a miniature blood laboratory that can be used to determine whether patients are suffering from diseases such as diabetes or cancer. Theranos worked with Walgreens and the U.S. Department of Defense to make this technology available to the masses.
However, it turned out that the company operated on the basis of lies and half-truths that made the former darling of Silicon Valley a warning story. On March 14, the Security and Exchange Commission indicted Holmes and Balwani for deliberately misleading investors and business partners.
Instead of serving as an immortal source of inspiration, Holmes’ story offers business people six warning lessons to learn from when building a business.
1. Talented advisors are useless if you are not honest
Theranos formed an excellent board of directors with some of the most respected leaders from all walks of life. Executives included George Shultz (former Secretary of State), James Mattis (current Secretary of Defense) and Dick Kovacevich (former CEO of Wells Fargo).
Although Holmes was surrounded by excellent mentors, he could not benefit from their advice. As claimed in a number of reports, Holmes’ employees and consultants have been kept in the dark about the challenges facing his organization.
Since she was not honest with her board of directors, she could not benefit from her experience. Although motivated entrepreneurs may find it uncomfortable to discuss mistakes and failures in order to be successful, managers need to get advice if something goes wrong. This is in the best interest of the organization, its employees and its investors.
If Holmes had chosen to seek advice from his managers, he might have been able to avoid disaster.
2. Transparency is the key to strong business partnerships
The Security and Exchange Commission (SEC) claims that Holmes has cheated on business partners like pharmacy giant Walgreens. Holmes claimed that the Theranos mini-laboratory was able to evaluate about 200 diseases. The SEC report shows that the device can actually detect about 20 diseases.
Maybe that’s why Walgreens has decided to sue Theranos for $ 140 million in 2016 for breach of contract. Although the parties reached an out-of-court settlement, it seems clear that Holmes has misled his business partners and led them to believe that his company was able to provide services that were years before its delivery. Legally, this type of misrepresentation is called fraud.
The only way to set up a trade association is full transparency. Anything that is not so condemns the relationship to failure as soon as the truth comes out. After all, business relationships are like everyone else: they thrive on the basis of truth.
3. Raising capital is not a panacea
In 2010 Theranos raised $ 45 million in investment capital. The company would raise a total of $ 400 million over the next eight years. Many entrepreneurs make the mistake of assuming that raising capital will solve a company’s greatest challenges.
The idea is this: if you can’t find a suitable product market, more money will surely help you hire the necessary engineers and product managers to fix the problem. If you don’t reach your sales goals, you can hire an experienced vice president of sales with more money while keeping existing salespeople. If you don’t get the press’s attention, a big round of donations will show the media that your brand is worthy of attention.
However, the truth is that raising capital from investors can also exacerbate existing problems, especially if they are related to corporate culture or managerial errors. Theranos should serve as an example to other entrepreneurs that capital is not a solution. Before building a relationship with investors, managers should first make sure that the basics of their business are solid.
4. The public loves leaders who apologize publicly
Elizabeth Holmes escaped her responsibility as the leader of an organization that was reportedly focused on helping people live healthier lives economically. It appears to have deliberately created a top secret organization that operated in the shadow of the technology world for about 10 years. On the way, he manipulated investors, business partners and journalists and knowingly offered an unreliable product.
This is not a recipe to gain public trust. Typically, people prefer leaders who admit they made mistakes and take responsibility for their actions when mistakes occur.
Unlike Elizabeth Holmes, there is Mark Zuckerberg who runs Facebook. After finding that his organization had made a serious mistake by not adequately responding to a consumer data breach, he took full responsibility for his brand’s actions and posted full-page ads in newspapers reading Facebook- Apologized to users. .
5. Fail quickly or you will fail big
As previously mentioned, Holmes chose to work in “stealth mode” for nearly 10 years of its history. By deciding to act in secret and withholding important information from employees and consultants, Holmes may have missed his chance to fail quickly. As a result, she and her company failed largely.
If Theranos had worked more transparently, it would be conceivable that the organization would have solved some of the problems that resulted in the company not offering enough later.
Instead of acting in secret until the organization is 100 percent successful, entrepreneurs should use the lean start method known as “building, measuring, learning”. This framework encourages entrepreneurs to start a business that quickly builds products, measures the outcome of the product in question, and learns from the results.
Applying this framework requires an open mind, where employees can collect customer feedback and executives can honestly report on employee performance through employees and consultants.
6. What you say to the media can have legal consequences
The first point in the SEC’s lawsuit against Elizabeth Holmes mentions that Holmes has deliberately tricked media representatives into misrepresenting Theranos technology.
While exaggerating your business is certainly a widely recognized part of media work, deliberately misrepresenting a brand can be ethical. In Theranos’ case, it even appears to have been illegal.
Holmes is accused of using the media to mislead Theranos investors, partners and customers. s need to know how to use the media. Promoting your business is one thing; Telling direct lies to get the press’s attention or save your face is another.
s struggling to build a successful business could easily find themselves in situations similar to Elizabeth Holmes’ when she built Theranos. Readers must remember that integrity is tested in times of struggle.
In difficult times, you should opt for transparency instead of cheating and manipulating. Asking your counselors, partners and employees for advice and help is often the best way to overcome professional difficulties.