A company in a traditional sector like pharmaceuticals can avoid the pitfalls experienced by Theranos by ensuring transparency in their operations and maintaining good corporate governance. They should avoid making bold claims that cannot be substantiated and ensure that their products are thoroughly tested and reliable before they are marketed. It's also crucial to have experienced leadership and to take concerns raised by employees seriously. Revenue projections should be realistic and not overly optimistic. Lastly, they should not defraud investors by providing false information.

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Bad Blood

Learn why and how a $9 billion dollar company vanished in a few weeks. The story of Theranos is the Silicon Valley equivalent of the Enron scandal rep...

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Todd Surdey, a Theranos sales executive, realized that the company's revenue projections were wildly optimistic. Each contract with a pharmaceutical company was contingent on Theranos proving that its blood analysis system worked. Worse, the devices often malfunctioned. During a demo for Novartis, all three Edison readers displayed error messages. He took his concerns to Don Lucas saying that the revenue projections were vastly exaggerated given the unreliable state of the Theranos product. This time Don took the complaint seriously. He convened an emergency meeting and Elizabeth was asked to wait outside. The board decided that Elizabeth was too inexperienced to head the company and decided to make her step down. When Elizabeth was called in to be informed, she agreed that there were shortcomings and promised to correct them. In the course of the next two hours, she managed to win back the confidence of the board, in a manner that even experienced CEOs would have found hard to pull of...

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To prevent similar corporate scandals, the lessons from "Bad Blood" can be implemented in several ways. Firstly, companies should ensure transparency in their operations and maintain open communication with their stakeholders. Secondly, they should have robust internal controls and governance structures to detect and prevent fraudulent activities. Thirdly, companies should foster a culture of ethical behavior and integrity. Lastly, they should not over-promise and under-deliver, as this can lead to unrealistic expectations and eventual downfall.

The story of Theranos has had a significant impact on corporate strategies and business models in Silicon Valley. It served as a cautionary tale about the dangers of overhyping a product and misleading investors, which has led to increased scrutiny and skepticism towards startups with bold claims. It has also highlighted the importance of corporate governance, transparency, and the need for companies to have a viable, tested product before going public. This has resulted in a shift towards more responsible and sustainable business practices in the tech industry.

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