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The Marketing Lesson to be Learned from Theranos Fiasco



Walgreensby Kenneth Rudich

According to the hype, Theranos, the high-tech blood-testing business startup, was poised to become the next big thing in the advancement of efficient and reliable ways to detect diseases.

Founded in 2003, the company claimed it could “quickly process the full range of laboratory tests from a few drops of blood.” Such a value proposition carried the potential of sharply reducing one of medicine’s higher costs, and this became the basis for arousing a great deal of excitement.

Only thing was, the hype itself had been artificially generated by what amounted to a smokescreen distraction.

As often happens when big money venture capitalists like Silicon Valley movers and shakers get involved, its valuation suddenly skyrocketed into the billions, which triggered a barrage of media attention.

And with all eyes focused on the amazing story of “overnight financial success” for Theranos founder and CEO Elizabeth Holmes, nobody seemed to notice the problem that was brewing just below the surface of the hype.

Theranos Dirty Little Secrete

Walgreens and TheranosNobody noticed, that is, until nearly 13 years later, on October 15, 2015, when the Wall Street Journal published a front-page investigation questioning Theranos’ blood tests — the core of its business.

According to the expose, Theranos’ perceived ability to serve was at odds with its actual service.

Then, in April 2016, came grim headlines about a new possible fate for the high-flying company. The Journal wrote, “Theranos, which had a valuation of $9 billion late last year, may see that number drop to zero.”

The early evidence about the cause of this unraveling seems to suggest it was mostly due to a practice many start-ups tend to rely on – namely, a “Just Do It” approach that embraces a “learn as you go” philosophy. This was, in fact, the unnoticed problem — the red flag — festering just below the surface of their seeming success.

Such an approach and philosophy are contrary to the fastidious nature of the scientific context/community in which they were operating, with formalities like peer review, a scientific methodology and strict regulatory controls.

It was two separate worlds joined together by what can only be described as artificial means — that is, the razzle dazzle craze of BIG MONEY.

If anyone had taken the time to look beyond the immediate allure of Theranos’ sales pitch, to carefully examine their culture and flush out these differences, they would’ve seen how unlikely it was this marriage could work as is.

After all, lax habits seldom sit well in an environment where strict protocol and discipline are an absolute norm.

Unless Theranos could modify its operation as needed, something but success would soon be afoot.

Theranos Credibility Failure

brand managementAnd none too surprisingly, something else eventually happened.

As things began to unravel for Theranos, the company allegedly made matters worse by resorting to tactics that crossed over the line of propriety and truth.

Here’s WSJ’s account: “…the reasons Theranos may lose all of its value have been bolstered by an SEC criminal investigation into whether management knowingly made false statements to investors about the results of tests. Additionally, writers at the newspaper reported:

‘People familiar with the matter said the subpoenas seek broad information about how Theranos described its technologies and the progress it was making developing those technologies.’”

This led WSJ to speculate: “Presumably, that leaves the results useless to doctors, and the company’s credibility has been ruined.”

Followed by: “Theranos’s position as a viable company likely has ended, which might well drive its value to zero.”

Walgreen’s Questionable Assessment

Walgreens and TheranosWalgreen’s missed it too!

They did not see the mismatch of the two contexts while considering the possibility of entering into a relationship with Theranos – a relationship that would, by the way, place their customers squarely in the middle.

They did not see the material reality that lurked behind the pulse of the idea, or the razzle dazzle of big money.

They did not seem to ask and answer the question, on behalf of their customers, whether it appeared Theranos could execute on it.

Nor did they look for evidence of proof that the blood-testing company could carry it out – in an environment, no less, where it’s commonplace for such proof to exist, because that’s at the core of its formality and discipline (which includes the impartial validation of peer review).

Walgreen’s failed to adequately do their homework, which is another way of saying something went wrong with their vetting process. They did the equivalent of a variation to an old military command, which in this case says, “Ready, Fire, Aim!”

So now they have to take a step backward, and they have to hope against hope nobody notices how they allowed themselves to be duped.

As reported by the Huffington Post: “On Sunday, pharmacy giant Walgreens abandoned the embattled blood-testing startup accused of failing to deliver accurate results with its tests. The move came roughly nine months after The Wall Street Journal exposed major problems with the company’s technology, which claimed to be able to run more than 240 blood tests using just a drop of blood.”

Brad Fluegel, Walgreens’ senior vice president and chief health care commercial market development officer, said in a statement, “We have carefully considered our relationship with Theranos and believe it is in our customers’ best interests to terminate our partnership.”

As opposed to, say, admitting upfront they made a mistake…asking customers and stakeholders to forgive them…and pledging to do better on their behalf moving forward.

Think about it. Would you prefer honesty and integrity upfront, or ambiguity and half-truths bolstered by omissions?

Lesson to be Learned

Don’t be fooled by Razzle Dazzle.

An opportunity must be thoroughly and impartially vetted during what is called a Market Opportunity Analysis (MOA). That includes looking at it from all possible angles, not just a select few that support a pre-conceived notion or the possible influence of Group Think.


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