DCL 600M week 10

1The Downfall of Theranos
Group 2
University of Maryland Global Campus
DCL 600M Decisive Thinking, Communicating, and Learning in Multidisciplinary Fields
Dr. West
December 13th, 2022
2
Theranos
Even the most impressive ideas can fail if not properly executed. This is exactly what
happened with Theranos. Theranos was a start-up company with revolutionary ideas for
medical devices that provided blood tests that were thought to change and potentially save
lives (Hartman et al., 2022). As great as this idea started, the company rose and fell quickly,
with the majority of the blame falling on the creator, Elizabeth Holmes.
The Creation of Theranos
Elizabeth Holmes grew up with big dreams. Business Insider writers have reported that
Holmes’ family often described her growing up as competitive, determined, and a great student
with excellent work ethic. She studied hard and even decided to take on learning Mandarin as
well. This determination would take Holmes to Stanford to study chemical engineering. Holmes
did well in school and was considered a scholar, even being awarded with funding towards a
research project during her first year. Her success in school also led her to internships and
gaining the approval of a professor when she brought the idea of starting a company. This
company would eventually become what Holmes is best known for: Theranos (Hartman et al.,
2022).
The company that would go on to be named Theranos was created in 2003 by Elizabeth
Holmes. She was still in college and just 19 years old at the time. The idea behind Theranos was
to change the way blood work was done by only needing a few drops of blood rather than a
tube of blood, the typical sample size (Lerman & De Vynck, 2022). The Theranos device would
be able to use a small blood sample to test for multiple things, at a cheaper price. Some of the
critical things that the device was aimed to help with would be cancer detection and
3
cholesterol concerns (Hartman et al., 2022). This innovation had potential to change the
medical world.
As the idea of Theranos became a reality, Holmes decided it was time to take this on full
time. She dropped out of Stanford just a semester after starting her medical technology
company. Holmes had an extreme desire to make her company succeed. To become successful,
she knew that the company needed more funding. Up until this point, an outsider would view
Holmes as an inspiration. The idea of the blood test devices was innovative and had a purpose.
She was a young, female revolutionary who would do whatever it took to make her company
succeed. Holmes used her passion to persuade investors that her and her company were worth
the risk. She would end up bringing in over $700 million from investors (Forbes).
Although Holmes was able to persuade the investors, some would say it was done in an
interesting way. Holmes took a page out of Steve Jobs’ book and wanted to keep secrecy within
her company and was able to get investors to agree to giving money while withholding some
important details such as how exactly the technology worked. She would also keep the final say
in any important decisions, thus holding all of the power within the company (Hartman et al.,
2022). This should have been a major red flag on how she would lead the company, as she did
not want to share all information with the investors and enjoyed having the most power.
With this new power and her company on the rise, Holmes’ odd personality traits began
to come out. She would become notorious for her black wardrobe, insane dedication to always
working, and the deeper voice that she would speak in that was not natural. Some would say
this was imposter syndrome while others could try to defend her as trying to keep up in the
very male dominated tech world. Holmes wanted her team to be as dedicated as her and often
4
made her team work extremely long hours. Another odd choice involving her employees is that
she made her then-boyfriend, Sunny Balwani, the COO and president of Theranos and second
in command (Hartman et al., 2022). This decision stands out due to the lack of experience the
COO had as well as his questionable leadership skills. He was not known to be the nicest to the
team and tended to micro-manage. Holmes would later make more questionable hiring moves
when she hired her younger brother and his friends. Her brother did not have a background of
relevance.
Along with the strange hiring, Holmes made sure that security was top notch. There was
no shortage of security within the walls of Theranos. Non-disclosure agreements were a regular
thing for visitors. Visitors also were escorted around by security. It was very clear that Holmes
did not want information leaving the building. She remained big on secrecy and withholding
information.
Despite all of the strange occurrences that were happening inside the walls of Theranos,
they were gaining a lot of popularity and interest. The tech world was intrigued by Holmes and
her company. She would speak on panels and TED talks. Theranos would soon go on to spark
the interest of powerhouse pharmacies and clinics. Interest grew and testing centers began to
open, including centers involved in deals with Walgreens and Safeway (Hartman et al., 2022).
Along with the company’s success, Holmes was a billionaire at Theranos’ peak. Unfortunately
for Holmes, her success would run out and her practices to get there would catch up with her.
Next Section
5
Conclusion
6
References
Forbes. Elizabeth Holmes Profile. https://www.forbes.com/profile/elizabethholmes/?sh=5285fd5b47a7
Hartman, A., Jackson, S., Cain, A., Haroun, A., & Lee, L. (2022, November 18). The rise and fall of
Elizabeth Holmes, the former Theranos CEO found guilty of wire fraud and conspiracy,
who was sentenced to more than 11 years in prison. Insider.
https://www.businessinsider.com/theranos-founder-ceo-elizabeth-holmes-life-story-bio2018-4
Lerman, R., De Vynck, G. (2022, November 18). Elizabeth Holmes sentenced to more than 11
years in prison. The Washington Post.
https://www.washingtonpost.com/technology/2022/11/18/elizabeth-holmessentencing/
1
The Downfall of Theranos
Group 2: Jimi Banda, Dashonda Hooks, Melissa Noratel, Garrett Shipman
University of Maryland Global Campus
DCL 600M Decisive Thinking, Communicating, and Learning in Multidisciplinary Fields
Dr. West
December 13th, 2022
2
Theranos
Impressive ideas often lead to an impressive result; however, as in the case of what
happened to Theranos, sometimes impressive ideas lead to failure. Theranos was a start-up
company with revolutionary ideas for medical devices that provided blood tests that were
meant to change and potentially save lives (Hartman et al., 2022). As great as this idea started,
the company rose and fell quickly, with most blame on the creator, Elizabeth Holmes.
The Creation of Theranos
Elizabeth Holmes grew up with big dreams. Business Insider writers have reported that
Holmes’ family often described her growing up as competitive, determined, and a great student
with an excellent work ethic. She studied hard and even decided to take on learning Mandarin
as well. This determination would take Holmes to Stanford to study chemical engineering,
where she did well and was considered a scholar, even awarded funding towards a research
project during her first year. Holmes’s success in school also led her to internships, and she
gained the approval of a professor when she brought up the idea of starting a company. This
company would eventually become what Holmes is best known for, Theranos (Hartman et al.,
2022).
The company that would go on to be named Theranos was created in 2003 by Elizabeth
Holmes. She was still in college and just 19 years old at the time. The idea behind Theranos was
to change how blood work was done by only needing a few drops of blood rather than an
entire tube of blood, the typical sample size (Lerman & De Vynck, 2022). The Theranos device
could use a small blood sample to test for multiple things at a lower price. Some of the critical
3
things that the device aimed to help with would be cancer detection and cholesterol concerns
(Hartman et al., 2022). This innovation had the potential to change the medical world.
“Leadership” Practices
As the idea of Theranos became a reality, Holmes decided it was time to take this on fulltime. She dropped out of Stanford just a semester after starting her medical technology
company. Holmes had an extreme desire to make her company succeed. To become successful,
she knew that the company needed additional funding. Up until this point, an outsider would
view Holmes as an inspiration. The idea of the blood test devices was innovative and had a
purpose. She was a young female revolutionary who would do whatever it took to make her
company succeed. Holmes used her passion for persuading investors that she and her company
were worth the risk. She would bring over $700 million from investors (Forbes).
Although Holmes persuaded the investors, some viewed this method skeptically. Holmes
took a page out of Steve Jobs’ book and wanted to keep secrecy within her company. She got
investors to agree to give money while withholding some essential details, such as how exactly
the technology worked. Holmes would also keep the final say in any important decisions, thus
holding all of the power within the company (Hartman et al., 2022). These actions should have
been a major red flag on how she would lead the company, as she did not want to share all
information with the investors and enjoyed having the most power.
With this new power and her company rising, Holmes’ odd personality traits began to
emerge. She would become notorious for her black wardrobe, insane dedication to always
working, and the deeper voice she would speak in was not natural. Some would say this was
4
imposter syndrome, while others could try to defend her as trying to keep up in the very maledominated tech world. Holmes wanted her team to be as dedicated as her and often made her
team work extremely long hours. Another odd choice involving her employees is that she made
her then-boyfriend, Sunny Balwani, the COO and president of Theranos and second in
command (Hartman et al., 2022). This decision stands out due to the COO’s lack of experience
and questionable leadership skills. He was known to be someone other than the nicest on the
team and tended to micro-manage. Holmes would later make more questionable hiring moves
when she hired her younger brother and his friends. Her brother did not have a background of
relevance.
Along with the strange hiring, Holmes ensured that security was top-notch. There was no
shortage of security within the walls of Theranos. Non-disclosure agreements were a regular
thing for visitors. Visitors also were escorted around by security. It was obvious that Holmes did
not want information leaving the building. She remained big on secrecy and withholding
information.
Despite the strange occurrences inside the walls of Theranos, they were gaining a lot of
popularity and interest. The tech world was intrigued by Holmes and her company. She would
speak on panels and TED talks. Theranos would soon go on to spark the interest of powerhouse
pharmacies and clinics. Interest grew, and testing centers began to open, including centers
involved in deals with Walgreens and Safeway (Hartman et al., 2022). Along with the company’s
success, Holmes was a billionaire at Theranos’ peak. Unfortunately for Holmes, her success
would run out, and her practice to get there would catch up with her.
5
Thera-No More
By 2015, investigations by the FDA into Theranos’ claims and practices were underway.
Once they determined there were “major inaccuracies”, the snowball of struggles for Holmes
and her company continued to grow. Despite charges of fraud and accumulating fines, Holmes
remained CEO of Theranos and even was so bold as to ask for additional funding from investors.
In 2018 she finally stepped down as CEO and was immediately charged with more counts of
fraud, which ultimately led to Theranos finally shutting down. Holmes and her COO, Balwani,
were convicted on several counts of fraud and sentenced to 11 and 13 years in prison
(respectively). The question remains, however, could all of this have been avoided. Did we see
an intentional, malicious defrauding for the sake of profit, or did Holmes believe her own lies to
an extent that her delusion ultimately triumphed reality.
Assuming there would have been any amount of openness from Theranos leadership to a
course correction, there are several practices they could have implemented to have a better
outcome. First of which would be to not pursue funding for an idea that wasn’t proven. Seems
more than obvious, but it is apparent that Holmes was immediately drawn in by the attention
her preliminary idea was receiving. she completely got swept up in the “what could be” and she
overlooked fundamentals. A good alternative to garnering investors towards the unproved
technology would have been to raise money for research into her idea. The idea itself was a
great one, and who’s to say if it was feasible or not. The very least that could have been done
was to apply the greatest minds, and yes money, to the basic research around bringing the idea
to life.
6
Holmes also made a grave error in bringing people to the table and building her
leadership team with people who had limited to no experience and were likely only seeing
dollar signs. Again, we can debate if this was due to malice or delusion, but a first step with any
startup or grand idea is to put the best players in place to ensure dedicated attention to all
necessary elements of success. A more experienced team around her hopefully would have
served as voices of reason and saved her from herself.
Lastly, patents and FDA/regulatory approvals should have been first on the list of to-dos
and the first condition for funding from any investor. The misguided approach of moving
forward with funding before any testing, proof, or approval is made cannot be rationalized in
any way.
Conclusion
Theranos is a unique case study on organizational behavior…to say the least. There was
no model or formula that was followed by Holmes and her colleagues. They paved their own
path, for better or worse, and created a situation that can only be analyzed using hypotheticals
and “what-ifs”. Their behaviors seem to have no rhyme or reason other than to make money no
matter the sacrifice. Which doesn’t open the door to receptiveness on how things could have
been handled better. At the very least, Theranos serves as an interesting, and sometimes
disturbing, glimpse into human behavior and what drives actions that can ultimately lead to a
business’s success or failure.
7
References
Forbes. Elizabeth Holmes Profile. https://www.forbes.com/profile/elizabethholmes/?sh=5285fd5b47a7
Hartman, A., Jackson, S., Cain, A., Haroun, A., & Lee, L. (2022, November 18). The rise and fall of
Elizabeth Holmes, the former Theranos CEO found guilty of wire fraud and conspiracy,
who was sentenced to more than 11 years in prison. Insider.
https://www.businessinsider.com/theranos-founder-ceo-elizabeth-holmes-life-story-bio2018-4
Lerman, R., De Vynck, G. (2022, November 18). Elizabeth Holmes sentenced to more than 11
years in prison. The Washington Post.
https://www.washingtonpost.com/technology/2022/11/18/elizabeth-holmessentencing/