Ariel Katz is Co-Founder and CEO of H1. More posts from this contributor
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Elizabeth Holmes’ epic fall from grace offers lessons for everyone from CEOs to investors, business partners, the media, social or otherwise, and the Silicon Valley hype machine that’s always hungry for a new shooting star and a unicorn company.
For pharmaceutical companies, especially medical companies, the important lesson from this sad and sordid affair is as simple as it is powerful: Your advisory advice is very important.
Big names, little relevant experience
Those five words characterize the Theranos board. A quick glance shows (former) politicians (George Shultz, William Perry, Sam Nunn, Henry Kissinger, Bill Frist), high-ranking members of the military (Gary Roughead, James Mattis), and corporate leaders with no health care experience (Richard Kovacevich / banking and Riley Bechtel / engineering and construction).
Then there was the sole medical professional, the former director of the US Centers for Disease Control and Prevention, William Foege, unless you want to count on Bill Frist, a heart transplant physician who went into politics a lot. before joining the Theranos board. Holmes herself dropped out of college at age 19, and Theranos COO Sunny Balwani was an IT professional by training and experience.
While big names attract attention and provide credibility, you need domain expertise on your advisory boards from the start. Real practical experience of consultants who know what they are talking about because they have lived it every day.
Except for Foege, no one knew the first thing about diagnostic tests, the technologies behind them, the challenges, the logistics, the economics, or even the biology. Mattis’s testimony at the Holmes trial clarifies this point.
“The whole time I thought we were doing it with the Theranos team,” he told prosecutors, according to The Washington Post. He took Holmes and the senior management team at word that the technology worked. Without any experience in the field, that’s probably all he could do.
What the board needed, and the members should have insisted long before that this expertise needed to be added, were people capable of looking under the hood and scrutinizing every aspect of a system, which, if real, would make all other systems of diagnostic tests that exist. it seems like child’s play.
It was only in 2016 that Theranos added what Fortune magazine called it a “surprisingly well-qualified medical board.” What is what. But by then, apparently, it was too late.
Lessons Learned for Advisory Councils
The first lesson learned from this debacle is intuitive: While big names attract attention and provide credibility, you need domain expertise on your advisory boards right from the start. Real practical experience of consultants who know what they are talking about because they have lived it every day.
Advisory boards of (bio) pharmaceutical companies typically do not have secretaries of state or defense, but the risk associated with a board made up of only high-level international key opinion leaders can be similar: they are highly sought after, incredibly busy, and You might not be in a good position to dig into the data and details. They will be able to present panels at the most prestigious conferences, meet everyone who is in the therapeutic area and post high Journal impact factor magazines, but I don’t see patients.
While advisory boards absolutely need these big names to inform strategic decisions, they also need members who can get into the bush, help answer detailed and relevant medical questions, and identify the unmet medical needs of different patient populations. A diverse and highly functional board of directors is necessary to advise companies from the start.
Once things have gone wrong, even a “surprisingly well-qualified” board might not be able to turn things around.
Job description: rebel with a cause
Lesson No. 2 relates to the interesting case of the only expert on the board: Foege was one of Theranos’s most loyal supporters and the the oldest official of Theranos (except Holmes) when Theranos house of cards collapsed.
As this example shows, people, even experts, get carried away by advertising. That’s why it’s nice to have one or two “rebels” on your board – that is, experts, often rising stars, who question convention, challenge the status quo, dig deep into the data, and aren’t afraid to argue with the luminaries.
While it’s easy to say, “Find yourself a rebel couple driven by the cause of improving patient outcomes,” this is one of the most difficult advisory board positions to fill. Those who question established approaches may not be recommended by the experts they challenge. Therefore, popular ways of creating boards of directors by asking established members for recommendations can prove ineffective or even counterproductive when it comes to these critical members.
This leaves the medical affairs or business teams of life sciences companies with the hard work of finding these emerging experts on an independent streak using different approaches.
Scientific publications can be used as an early indicator of emerging experts. The number of posts, the magazine’s impact factor, and most importantly, the actual work they publish can help identify exceptional talent.
Social networks are an emerging but increasingly important source of information. What healthcare providers communicate and to whom, for example, patients or colleagues, can help paint a more complete picture, especially of newcomers. Awards, active membership in medical societies, especially participation in guideline development committees, and international collaborations are other factors that companies consider.
Once found and onboard, these emerging experts can turn out to be a headache, but if that means not going the wrong way, that pain is well worth it.
The good the bad the ugly
The third lesson is indirect: it takes a lot of time, energy, money, and sleepless nights to form an advisory board. Now use it for whatever it’s worth.
Theranos never did this; They couldn’t, because their board wasn’t meant to provide real oversight or ask tough questions. It was designed to help raise funds, inspire wonder, quell doubts, and end criticism for the power of its members’ reputations. He did it very successfully, until he didn’t.
Criticism, while not pleasant, is vital, and therefore the goal should be to foster a culture of openness that encourages difficult questions, deep examination of data, fact-checking, and constructive criticism.
The advisory board is the ideal place to have those open discussions among experts. As the Theranos example shows: if you don’t address challenges in the trusted advisors circle, you may end up having to discuss them in public or, in this case, in a court of law.
Your advisory advice is very important
Boards of directors are critical to success, whether it’s the success of an entire company or of a specific drug development program. To live up to that expectation, boards of any description need diverse members who are highly qualified, engaged, collaborative, and not afraid to ask and keep asking uncomfortable questions.
The burden on boards of directors in the life sciences industry is especially great because people’s health and lives are at stake. We may never know if the patients died as a direct result of Theranos misdiagnoses, but one “Untold numbers of people were harmed by the erroneous results: some underwent unnecessary procedures, were misdiagnosed with serious conditions and experienced emotional disturbances.”
The burden of investigating, questioning, and verifying the facts is on the board. The burden of building a board that is capable of doing so and takes that responsibility seriously, and enabling it by creating an environment of openness and trust and truly listening to your input and feedback, falls on the company.
Theranos starkly shows the possible consequences of not doing so.