The scam
Theranos was a startup founded in 2003 that managed to reach a market value of $10 billion until it ceased operations in September 2018. ¿Why? For not focusing on the product.
The Wall Street Journal’s research reporter John Carreyrou describes in the book Bad Blood the detailed investigation he conducted to uncover the scandal behind Theranos.
Theranos was a start-up called to transform the medical industry by bringing blood tests to every patient’s home using a very small amount of blood. That was the idea of its founder, Elizabeth Holmes, when she started this project at the age of 19. She was horrified by the needles and wanted to eliminate them at any cost.
Elizabeth, according to Carreyrou, was such a faithful follower of Steve Jobs that she copied many of his rituals, liturgies and outfits (she was often seen wearing a black turtleneck), so much so that they began calling her the new Steve Jobs.
With its great ability to attract large investors, some were trapped by its magnetic personality, everyone thought it would be a great unicorn, but … Carreyrou discovered that the giant had mud feet: the product was not working.
The case of Theranos shows us how dangerous it is to rely excessively on magnetic personalities and not check, nor see, the actual product they are selling, because…
Let’s not forget the importance of the product
Holmes’s team did not show the product to anyone, they were always dragging their feet, putting obstacles in the way and that was because the product was not working, their technology was a fraud according to the findings of The Wall Street Journal. They were in a freefall, because they forgot that what really matters is the product.
The Lobbie
Recently another fraud has been uncovered related to a consulting firm lobby that supposedly raised the price of products/services to be provided to the public administration. The modus operandi was that the consulting firm who wanted to win the tender was responsible for making an impeccable offer and, at the same time, generating other complementary offers to cover theirs with some deficiencies that did not make them competitors. (More information here)
As in the case of Theranos, when we forget about the software product and instead focus on prices, rates and hours, we lose the perspective of what a software development is and we get into something that is difficult to check if the cost follows the market price or not. And in that case the rogues have the power to win.
The Product is the King
The European Union has just taken an important step towards mitigating this situation. It has clearly opted to focus on the software product in its large tenders to avoid situations like those we have mentioned.
He has recommended the use of the standard of the software product estimation as a measure to control the expense and the cost of the bids that will be made. With this you can use market price to check if the cost proposed by the different bidders is in line with the market or if they are crazy (either because they are very high or very low).
This model is not new, as several governments have already been using it, such as Brazil, Japan, France, Mexico and Italy. Also many companies that depend on suppliers to develop software have been using it in their models to optimize costs and improve the quality of their developments as leading companies in the telecommunications sector, banking, insurances, etc.
The product is the safe value, it is what we understand and what we need. Any other measure that takes us away from it, is distracting us from the real objective we are pursuing and is taking us away from the standard unit of the software product that allows us to ensure that what we are doing is right.
