Theranos, Lean Start Ups and How to Alienate Customers

Start ups are hard. When my mind prematurely wanders off to success I have to stop myself and focus on my product and service.  I do know what my values are and what I hope to achieve and I am committed to making the invoice processing system in the UK paperless and smooth. I know my goods and service inside and out, I have a solid grasp of my market and I know a few emerging industry secrets. I aim to build my company through cautious innovation and being the absolute best I can be in existing invoice solutions. Alongside these lofty goals, let’s face it, I do want to grow my fledgling company and make, dare I say it, money.

In some corners of the start up community, this though borders on sacrilegious. Soaked in the ideology of Silicon Valley, start ups throughout seem to have to pretend to be infinitely wealthy and you’d be forgiven for thinking you don’t even have to have a product or service on offer. Just say you’re an entrepreneur or a founder or an innovator and you’re on your way!

The start up guru Eric Ries (author of bestselling The Lean Start up) tell us start ups need such things as: minimal viable product, lean thinking, radical accounting, actionable metrics and other inane counter-intuitive concepts. According to Ries the entrepreneurial spirit in today’s world should aim to make a shoddy minimal viable product and then alienate see what customers think through feedback validated learning and then change pivot or continue persevere accordingly. This thinking has become a movement within the start up community and I’m steering wEll clear of it.

If you look at the hugely successful youtuber “Angry Joe” and his review of DICE’s Battlefield series of video games you’ll get a good idea of how MVP works: A Battlefield iteration will be released that is buggy, crashes the computer and barely works. Angry Joe and his colleagues then entertainingly explain just how gameplay, the crashes and bugs are.  However within their rant is what they to see changed. Over the following months the bugs are ironed out and DICE produce updates, add-ons and premium services with new features that consumers pay for. It’s been a successful business model for some time. Until recently. Over the past two iterations of the video game series we are starting to see a backlash. Their recent Battlefield 5 sales have been reported as weak. Both were released as MVPs and DICE has started to take a strong hit on these products. The more you alienate your customers with shoddy releases MVPs the more they’re going to get unhappy. This all might be harmless when dealing with the bread and butter of Silicon Vallley i.e. software but when we run into areas with importance such as say health we have an issue.

Theranos is prime example of lean start up thinking. They declared they were revolutionising healthcare and founder, Elizabeth Holmes, unashamedly declared she was going to change the planet. She believed as did everyone around her she was the next Steve Jobs. The product she invented was said to be able to do a blood test with a few drops of blood. A cheaper, cleaner and more efficient way of doing blood tests is a panacea to the pharmaceutical industry - and everyone bought into it. At its height Theranos was worth around $9 billion making the wonder kid founder one of Silicon Valley’s youngest self-made billionaires. It was too good to be true. The blood tests were MVPs and prematurely released at the expense of patients who had non-existent conditions diagnosed or existent conditions ignored. Examples of recovered cancer patients receiving blood tests indicating that their cancer had returned are now well known. All thanks to bringing out a MVP that simply did not work. The feedback alienation validated learning she received were blood tests that clinicians and patients were using to see if they were sick. On being exposed, by John Carreyrou of the Wall Street Journal Elizabeth Holmes did not come clean but instead decided to pivot by launching a new product.

This is my concern about MVPs and lean thinking – until you actually have your goods or services settled you are basically lying to consumers. Learning from your mistakes is fine but those mistakes should never be put on the shoulders of consumers being used as guinea pigs.

Elizabeth Holmes has gone from being a multi-billionaire to being worth zero, her investors are out $700 million, her reputation is in tatters and she is now facing the rest of her life in jail. John Carreyrou’s book of Theramos’ story has become a best seller and is soon to be made into a feature film with Jennifer Lawrence as Elizabeth Holmes.

Although Theranos might be an extreme example it is relevant to financial technology start ups which must continually innovate, and it’s tempting to buy into the Silicon Valley ideology of lean thinking. It is essential, however, with financial technology not to set out to deceive, or to provide shoddy products. There’s too much at stake for both consumers and yourself. There’s also clear guidelines set up for us to follow and strict government legislation about procedures to follow.

Any start up and indeed established company must learn and listen to customers but that learning must not be through unethical business practices. This is what transparent and active research is for. In the end it boils down to providing excellent customer service and being transparent in providing that for our customers. This should particularly be the case when we are dealing with the fruits of their labours or the public purse.