It’s been a busy week for Elizabeth Holmes, the wunderkind CEO of Theranos, a blood-testing company under fire after a news article questioned the effectiveness of its products. She’s done an admirable job of defending the company since, but that task would have been easier if she’d avoided four risk communication mistakes.
Theranos found itself in a place other companies have been. A reporter from a major publication raises questions about a fast-growing company and its new technology. The company, privately-held and unaccustomed to scrutiny (and naysayers), largely rebuffs the reporter. The ensuing article alarms customers, staff and regulators and creates an immediate crisis.
Theranos made four common mistakes in handling this matter. But they’re also doing one thing right in its aftermath.
Mistake number one for Theranos was not taking the WSJ’s inquiries more seriously. The reporter, John Carreyrou, is no whippet. He’s a two-time Pulitzer Prize winner with dozens of investigative reports under his belt, and he worked for months on the Theranos article. He was well sourced, knowledgeable and not likely to be deterred by an uncooperative company.
Mistake number two was sending out the lawyers instead of the CEO.
It’s never a good sign when the company’s lawyers threaten former employees and the widow of its former chief scientist to keep them quiet.
The company also let its general counsel speak to the WSJ to rebut the critics, but a lawyer’s response is inherently less credible than a CEO’s. Her statements amounted to squabbles over details. Without the CEOs voice in the article, the accusations against the company carried much more weight.
The third mistake by Theranos was to rein in its marketing claims and edit its website instead of announcing sweeping policy changes. Those small steps looked sneaky, poorly conceived and designed mainly to limit legal exposure. In the five months the WSJ was working on the article, Theranos could have strengthened its policies and procedures, all of which would have made for a more convincing defense of its business practices.
The fourth and in some ways most fatal mistake it made was to assume that a hot technology startup was immune from criticism. No one gets a pass, particularly in the healthcare sector, even if you have a star-studded board and pots of venture funding.
Ms. Holmes differed from many CEOs however in her response once the article appeared. She faced her critics on their turf, speaking at a WSJ conference just a few days later. Most CEOs would have stayed in the bunker.
It was a good step after a bad start, but the crisis won’t subside until Theranos offers specific, detailed answers about the efficacy of its tests and compliance with FDA standards. It has promised more details in the near future. We will stay tuned.