Theranos: The latest tale of all hat and no cattle

Not following the Theranos trial? Given what a big deal this story is across the Pond, our US readers might be surprised to hear that many Brits still aren’t familiar with one of the most fascinating corporate fraud trials in recent times.

For those of you who have somehow missed out on what it’s all about, Theranos was a wildly ambitious health tech business that claimed it could diagnose all manner of conditions with a prick of the finger and a single drop of blood, from diabetes to cancer, using a revolutionary box the size of a deskjet printer, called the Edison. It would end the age-old need for labs, tubes and needles for diagnostic blood tests – in turn making healthcare faster, cheaper and more accessible.

The technology behind Theranos turned out to be somewhat of a joke – and not a funny one, especially where it so glibly toyed with the public. Nevertheless, hugely exaggerating its technology, while letting very few people actually try out the Edison, enabled Theranos to raise (and burn through) $600 million of US business and government leaders’ investment.

But as is the case with all jokes, it’s how you tell them. And the farceur behind the debacle is Elizabeth Holmes – the mindbogglingly fascinating founder and architect of Theranos whose emotional and inspirational narrative about the revolution she and her business would bring to healthcare sits at the core of this story.

All good PR pros will tell you, appealing to the heart and the mind of your audience is an incredibly powerful way to engage an audience. Holmes knew this all too well – her keynote speech focussed on a mission that unrelentingly captured the imagination of her audience: “That less people will have to say goodbye too soon to people that they love.”

Another thing all good PR pros will tell you is that you need to substantiate your narrative – an amazing story built on sand cannot be upheld and will sink the business.  Everyone loves a great story. But for a business’ back story to have any bearing on its success, the narrative needs to be backed by real products and services that are truthfully evaluated based on how well they meet the expectations of customers.

Elizabeth Holmes’ story was mostly all a show – the nano containers that held a drop of blood was far from sufficient to deliver consistent and conclusive results; the Edison broke and became clogged with blood when carrying out diagnostic tests; customer success stories were faked such as when Holmes claimed the US Army was using the Edison to help US troops on the frontline.

I encourage you to watch a documentary to learn more about the Theranos backstory called The Inventor: Out for Blood in Silicon Valley or read the book Bad Blood: Secrets and Lies in a Silicon Valley Startup. It’s a story that is so similar to many corporate disasters that have come before it – starting with a vision to change the world, the founder eventually gets in over their head trying to reconcile two realities: one – being a touted as an exciting and successful visionary by the world; the other an ever-growing awareness that the business is on a downward spiral and that the funding keeping it going will eventually dry up.

Pumping investment and hope into a business with hyperbole at its core has made for similar viewing/reading in the past:

• You can’t help but recall Enron the Smartest Guys in the Room and remember CEO Jeff Skilling. Just as he was proclaiming on TV ads that he was ‘trying to change the world’, he was booking projected profits on defunct deals like partnerships with Blockbuster and overseeing a business that caused power outages just to drive demand for their energy services

• Or, another example, it’s like reading Boo Hoo: A Dot Com story from concept to catastrophe about Ernst Malstem building the first truly international online fashion and sports e-tailer – he managed to justify financial support of J.P. Morgan, Goldman Sachs and Benetton, as well as from LVMH’s president, Bernard Arnault – flying around on private jets and concordes and partying with Kate Moss, Jean-Paul Gautier and Johnny Depp in all aid of developing something that only a few people with broadband at the time could access.

• More recently, we hear a similar story in a new documentary about the ambition of WeWork co-founder Adam Neumann – as the Guardian puts it “the singularly bombastic face of a glorified real estate company….and an emblem of eccentric, over-hyped tech CEOs who lap up investments in exchange for inflated promises or outright scams.”

• I’m sure most people by now have watched FYRE: The Greatest Party That Never Happened; Billy McFarland’s deluded attempt to create the world’s most luxury music festival failed amidst his ambition to achieve the impossible – one of a string of founders chose to continue to build hype rather than come clean about the pending doom that was becoming ever apparent, which would inevitably cost a tears and money for customers and investors.

What is it that fascinates us about these doomed leaders? Theatrical tragedy plays a part, but from a PRs the fascination lies in one person’s vision, ambition and hubris mixed with an ability to attract a whole herd of followers to whole-heartedly believe in ‘too good to be true’.

Back to Theranos: the trial started at the beginning of September and is set to last until December. Now in full swing, it is a fascinating story in and of itself. First off, the fact that the trial was delayed not least because Holmes gave birth to her first child – will this have any impact on the sympathy of the jury? That is if there are enough jurors left – a third juror was recently dismissed from the trial of Elizabeth Holmes on Friday for playing Sudoku during testimony, leaving only two alternatives left and a risk of mistrial if too many jurors are lost.

Hype, hype and more hype will only take a business so far. Great communications can be such a powerful means to grow the profile of your company, but to have the world eating only dust out of the palm of your hand is a hiding to nothing. Everyone loves a great story. But you cannot gloss over cracks – the truth will emerge. Elizabeth Holmes’ ‘fake it till you make it’ approach was, like so many before her, flawed – you cannot gloss over cracks, and as they grow bigger, the business will unravel.