Question

What lessons can be learned from the corporate governance failures at Theranos?

The Theranos case offers several lessons in corporate governance. First, the importance of transparency and honesty. Theranos made bold claims about its technology that were not backed by reality, leading to a loss of trust and eventual downfall. Second, the need for proper oversight and checks and balances. The company's leadership made decisions without proper testing or validation. Third, the dangers of overpromising and underdelivering. Theranos promised to deliver a product that it was not capable of producing, leading to significant reputational and financial damage. Lastly, the importance of ethical leadership. The leaders at Theranos were found guilty of defrauding investors, highlighting the need for leaders to uphold high ethical standards.

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With two massive deals on the table, Theranos had a new problem. Both companies were promised that Theranos devices could perform hundreds of blood tests. In reality, the Edison could only perform a limited group of tests. Theranos hired engineers to build a new device, the miniLab, which would be capable of doing multiple types of tests. To do this, the miniLab would need far more components than the Edison. While most components were commercially available, the engineering challenges came from Elizabeth's focus on miniaturization. As soon as a barely-working prototype was ready, Sunny began placing component orders for a hundred minilabs based on the prototype. A manufacturing facility was leased for production. The engineering teams were shocked at how a barely tested prototype was assumed to be a finished product. This could have dangerous consequences.

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