Dirk Riehle's Industry and Research Publications

Too many points of failure (at Theranos)

I just finished reading John Carreyrou’s book Bad Blood, which presents the story of the rise and fall of one-time Silicon Valley unicorn Theranos through his eyes as the journalist who broke the story. In case you missed it: Theranos was a healthcare company promising to sell a machine that could perform quickly and reliably a large number of blood tests needed by medical doctors to aid their patient care. The hitch: The technology never worked and Theranos managed to hide this from investors and the public for a long time.

The book does not mention one litmus test that I would applied to see whether this company had any chance of succeeding. There were two layers of innovation being pursued, each a major achievement of their own if fulfilled: The invention of new blood tests for the various ailments of people and the packaging of those into one small machine and service that could perform these tests at scale. These are two very different types of innovations, one basic research, one engineering innovation. Each of them represents a major potential point of failure.

The odds of succeeding at two very different innovations seem slim to me, not only in hindsight. If Theranos’ chances at succeeding at each category was 50%, the combined chance would be 25%. It seems like an insane bet. I’m sure experienced investors do this anyway, but the litmus test then is to look at the main potential points of failure for a new product. There should ideally be only one, not two or more.

Which brings me to the second point of my post: Entrepreneurs should (and do) work with universities and other research institutions to pick up solved research problems and turn them into products by focusing on the engineering innovation.



Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Posted on

Share the joy

Share on LinkedIn

Share by email

Share on X (Twitter)

Share on WhatsApp

Featured startups

QDAcity makes qualitative research and qualitative data analysis fun and easy.
EDITIVE makes inter- and intra-company document collaboration more effective.

Featured projects

Making free and open data easy, safe, and reliable to use
Bringing business intelligence to engineering management
Making open source in products easy, safe, and fun to use