What problem are they facing?  Examples on ways to solve the problem?

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
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What problem are they facing? 

Examples on ways to solve the problem?

### Blood, Brilliance, Blind Ambition, and Fraud

How can you change the world of medicine, or at least medical testing, monitoring, and diagnosis? One potential way is to invent a device that performs more than 240 tests with just a couple of drops of blood, faster, more effectively, and with less pain than existing approaches. Coming up with the idea is one thing, but raising the funds and assembling the necessary talent is another. It’s not enough to have an idea, you need to bring it to life. If you were to do this it would help to be extremely intelligent, even more driven, and be willing to do anything it takes. Anything. This describes Elizabeth Holmes and the company she founded, Theranos, which aimed to revolutionize medicine with a new blood testing technology.

#### FORECLOSURE OF A DREAM

Unfortunately, the technology didn’t work. But that didn’t stop Holmes from telling investors, customers, employees, the press, and everyone else it did. Her ambition transformed to fraud and resulted in the death of Theranos. The testing that supposedly certified the efficacy of the company’s product has since been discredited, and it is now known that some of the demonstrations of prototypes of the company’s products were rigged.

The billions of dollars in estimated value of Theranos are gone, along with it the accolades once showered on Holmes as being the youngest self-made billionaire at age 30. At one point $9 billion but now $0. Also gone is the $700 million of investors’ actual money, and the jobs of many very talented employees who were either fired or quit during the company’s existence. These employees, along with the unfortunate few who stayed to the end, may have tarnished reputations for years to come as a result of their association with Holmes and her company. Holmes is now faced with the fallout and is confronted with criminal charges related to defrauding investors, customers, employees, and most anyone else connected to the company. Her ex-boyfriend, and Theranos’s president and COO, Ramesh Balwani is also facing many of the same charges. He acted as confidant, advisor, and as many insiders eventually learned, was seemingly the only other person within the company besides Holmes who knew the truth.

#### HOW DID THIS HAPPEN?

She went from Stanford undergraduate engineering student and celebrated female entrepreneur, to the founder and leader of one of the most astounding frauds in science and business in
Transcribed Image Text:### Blood, Brilliance, Blind Ambition, and Fraud How can you change the world of medicine, or at least medical testing, monitoring, and diagnosis? One potential way is to invent a device that performs more than 240 tests with just a couple of drops of blood, faster, more effectively, and with less pain than existing approaches. Coming up with the idea is one thing, but raising the funds and assembling the necessary talent is another. It’s not enough to have an idea, you need to bring it to life. If you were to do this it would help to be extremely intelligent, even more driven, and be willing to do anything it takes. Anything. This describes Elizabeth Holmes and the company she founded, Theranos, which aimed to revolutionize medicine with a new blood testing technology. #### FORECLOSURE OF A DREAM Unfortunately, the technology didn’t work. But that didn’t stop Holmes from telling investors, customers, employees, the press, and everyone else it did. Her ambition transformed to fraud and resulted in the death of Theranos. The testing that supposedly certified the efficacy of the company’s product has since been discredited, and it is now known that some of the demonstrations of prototypes of the company’s products were rigged. The billions of dollars in estimated value of Theranos are gone, along with it the accolades once showered on Holmes as being the youngest self-made billionaire at age 30. At one point $9 billion but now $0. Also gone is the $700 million of investors’ actual money, and the jobs of many very talented employees who were either fired or quit during the company’s existence. These employees, along with the unfortunate few who stayed to the end, may have tarnished reputations for years to come as a result of their association with Holmes and her company. Holmes is now faced with the fallout and is confronted with criminal charges related to defrauding investors, customers, employees, and most anyone else connected to the company. Her ex-boyfriend, and Theranos’s president and COO, Ramesh Balwani is also facing many of the same charges. He acted as confidant, advisor, and as many insiders eventually learned, was seemingly the only other person within the company besides Holmes who knew the truth. #### HOW DID THIS HAPPEN? She went from Stanford undergraduate engineering student and celebrated female entrepreneur, to the founder and leader of one of the most astounding frauds in science and business in
### Holmes's Leadership Style

Holmes was single-minded and unwavering in pursuit of her vision. She ruled the company like a dictator, making all critical decisions herself, sharing information on a need-to-know basis, and expressing enthusiasm and positivity even in instances of flat-out failures, such as demonstrations and presentations to investors and potential customers. She quickly soured on, then avoided, and even retaliated against those who questioned her or her ways. Absolute loyalty, which meant agreement and obedience, was demanded by Holmes. Individuals and groups who spoke out or otherwise fell out of favor were quickly dismissed, as was any feedback that was inconsistent with Holmes’s desired message or outcome.

Although it was Holmes’s company, and she hoarded authority, other factors supported her ultimately disastrous approach. Her vision, charisma, conviction, and delivery persuaded many wealthy and otherwise powerful people and organizations to support her cause. For instance, two of the largest investors were Betsy DeVos, now education secretary and part of the founding family of Amway, as well as Rupert Murdoch (the media mogul who owns Fox among many others). The board was stacked with celebrities from government (Henry Kissinger and George Schultz, both former secretaries of state). Along with others with impressive track records from Apple and other tech companies, these prominent individuals gave Holmes and Theranos credibility.

### What About the Board?

The company also had a board of directors, which, as in other companies public or private, was charged with ultimate oversight and responsibility. Members of the Theranos board had impressive resumes and should have been up to the task, such as Avie Tevanian, who was Steve Jobs’s right-hand man at Apple and head of software engineering, and Don Lucas (chair of the board) a long-time and successful venture capitalist. However, they were relatively silent or when they did speak up, as Tevanian did, they were dismissed. Apparently, Holmes grew tired of his increasingly confrontational insistence she “open the books” and justify her seemingly wildly and overly optimistic revenue projections.

But the real truth is coming to light from books, documentaries, and legal proceedings. Walgreens, one of Theranos’s marquee customers, is suing for $140 million, the SEC has charged Holmes and Balwani with fraud, and other investors are sure to follow. This raises the question: how could this have been avoided? How can this be prevented in the future?

---

**Note:** This content is presented for educational purposes,
Transcribed Image Text:### Holmes's Leadership Style Holmes was single-minded and unwavering in pursuit of her vision. She ruled the company like a dictator, making all critical decisions herself, sharing information on a need-to-know basis, and expressing enthusiasm and positivity even in instances of flat-out failures, such as demonstrations and presentations to investors and potential customers. She quickly soured on, then avoided, and even retaliated against those who questioned her or her ways. Absolute loyalty, which meant agreement and obedience, was demanded by Holmes. Individuals and groups who spoke out or otherwise fell out of favor were quickly dismissed, as was any feedback that was inconsistent with Holmes’s desired message or outcome. Although it was Holmes’s company, and she hoarded authority, other factors supported her ultimately disastrous approach. Her vision, charisma, conviction, and delivery persuaded many wealthy and otherwise powerful people and organizations to support her cause. For instance, two of the largest investors were Betsy DeVos, now education secretary and part of the founding family of Amway, as well as Rupert Murdoch (the media mogul who owns Fox among many others). The board was stacked with celebrities from government (Henry Kissinger and George Schultz, both former secretaries of state). Along with others with impressive track records from Apple and other tech companies, these prominent individuals gave Holmes and Theranos credibility. ### What About the Board? The company also had a board of directors, which, as in other companies public or private, was charged with ultimate oversight and responsibility. Members of the Theranos board had impressive resumes and should have been up to the task, such as Avie Tevanian, who was Steve Jobs’s right-hand man at Apple and head of software engineering, and Don Lucas (chair of the board) a long-time and successful venture capitalist. However, they were relatively silent or when they did speak up, as Tevanian did, they were dismissed. Apparently, Holmes grew tired of his increasingly confrontational insistence she “open the books” and justify her seemingly wildly and overly optimistic revenue projections. But the real truth is coming to light from books, documentaries, and legal proceedings. Walgreens, one of Theranos’s marquee customers, is suing for $140 million, the SEC has charged Holmes and Balwani with fraud, and other investors are sure to follow. This raises the question: how could this have been avoided? How can this be prevented in the future? --- **Note:** This content is presented for educational purposes,
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