128 The Theranos Scam: Implications for Entrepreneurs, Startups, VCs & Marketing Leaders
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All of you have probably heard about Theranos by now, and the huge impact it made in the industry. Though no matter the outcome of the trials of Elizabeth Holmes ( Theranos founder & CEO) and Sunny Balwani (Theranos COO), their actions represent a demarcation point for Silicon Valley, startups, VCs, and marketers.
If by chance you don’t know this story, I would recommend you search “Theranos” on Google or Youtube and get your popcorn ready, because it is one hell of a story. Short version of it was Elizabeth Holmes offered a technology that could revolutionize healthcare, but it all turned out to be a scam. What made the story interesting is how long Theranos had strung people along, until the inevitable caught up with them and it all crashing down.
So in this episode of Lochhead on Marketing, let’s dig into the three major things we should learn from in the wake of Theranos and Elizabeth Holmes, and how the new line VCs need to walk because of her.
Don’t Fake It ‘Til You Make It
One of the biggest BS axioms in the industry is “Fake it til you make it”. It promotes the idea that people should project proficiency, even if they don’t have the right skill set for it. There’s actually an episode in Follow Your Different where we talked with Sabrina Horn (FYD 228) on why following this mantra is such a bad idea.
So what’s the difference between being a visionary, an optimist, a CEO, or a marketer versus being a scam artist? Let’s be crystal clear about the Difference between these 3 things:
- Future Vision
- Current Capabilities
- Past Performance
Is it okay to have a huge vision to have a radical category design, Hell yeah! As a matter of fact, it’s the people who have huge visions, those who allow themselves to be radical and be unencumbered by the present and the past, that create new categories and massive new value.
Though it is okay to lie about what your product or service does now? No. N.O. No way. We can’t make promises to customers that we know we cannot keep.
The Difference between Category Creators and Scam Artists
In our last Lochhead on Marketing episode, Al Ramadan (Coauthor, Play Bigger) and I unpacked Rivian and their new IPO. Though before that IPO, they also had another revolutionary idea, which was the Tank Turn. It was a cool feature to have for your car, and people where hyped for it.
Unfortunately, Rivian couldn’t make it happen. They did not have the technology for it at this time. So what did they do? Well, they admitted that they could not do it. No BS, no cover-ups. Just straight-up admission and apology.
While it did cause them to take a hit, they actually ended up building trust and affinity between them and the customers and the ideas that they are pursuing. Looking at it now, Rivian is poised to have a massive multi-billion IPO, and it’s all thanks to the trust that they have built up for being radically transparent about their mistakes and overall process.
Compare this with Theranos, who did almost the exact opposite in everything. While the initial idea for a compact medical testing machine would’ve been an amazing product, the fact that they strung investors along and straight-up faked results to keep up the facade was abhorrent.
Unfortunately, they are not the only ones who seem to operate like this.
Due Diligence and Good Governance Matters
We cannot lie about what our products and services currently does. Also, legendary companies are radically transparent. The second you know your product is not performing up to task, you have to tell people, regardless of the impact on your revenue and stock.
Due Diligence and Good Governance matters.
When asked why they turned down Theranos, Bill Maris, founder of Google Ventures, told Business Insider that there were so much misdirection and disconnect in Theranos’ pitch that it did not add up. So they sent someone to try it out, and it didn’t take long to figure out that things may not be what Theranos wanted everyone to see.
The failure of Theranos is a failure of BOTH Due Diligence AND Governance.
Bio
Christopher Lochhead is a #1 Apple podcaster and #1 Amazon bestselling co-author of books: Niche Down and Play Bigger.
He has been an advisor to over 50 venture-backed startups; a former three-time Silicon Valley public company CMO and an entrepreneur.
Furthermore, he has been called “one of the best minds in marketing” by The Marketing Journal, a “Human Exclamation Point” by Fast Company, a “quasar” by NBA legend Bill Walton and “off-putting to some” by The Economist.
In addition, he served as a chief marketing officer of software juggernaut Mercury Interactive. Hewlett-Packard acquired the company in 2006, for $4.5 billion.
He also co-founded the marketing consulting firm LOCHHEAD; the founding CMO of Internet consulting firm Scient, and served as head of marketing at the CRM software firm Vantive.
We hope you enjoyed this episode of Lochhead on Marketing™! Christopher loves hearing from his listeners. Feel free to email him, connect on Facebook, Twitter, Instagram, and subscribe on Apple Podcast! You may also subscribe to his newsletter, The Difference, for some amazing content.
