Monday, January 25, 2016

Don't Ignore Operational Competence

Lean Startup methodology emphasizes not over-doing it during product development. Rather, practitioners are encouraged to iterate multiple Minimum Viable Products, in order to develop successive versions of a product or service that potential customers can react to and co-create.  The "lean" approach makes sense during customer discovery.  But when you start seeking real, PAID customers, then product quality and operational competence matter, a lot.

This blog has used blood-testing firm Theranos for multiple object lessons.  This Silicon Valley-based "unicorn" was at one point last year valued at over $8 billion.  Those postings include
During the last quarter of 2015, the technology and inherent value of the company were widely questioned as a result of a series of Wall Street Journal articles, beginning with this one.

Another chapter in the Theranos saga began this week with an article in the Wall Street Journal based on leaked information that the Centers for Medicare and Medicaid Services found deficiencies in Theranos' testing operations at its Northern California lab.  Now a CMS letter has been publicly released, summarizing those deficiencies, including one that poses "immediate jeopardy to patient health and safety."

Theranos' response to CMS' finding gives the impression that this is no big deal.  After all, the Northern California lab only processes about 10% of their testing volume.  (Tell that to the 10% of patients whose blood was tested in that that location!)  To its credit, Theranos has finally hired a qualfied lab leader who is a board-certified pathologist to lead this function in Newark, CA, as well as a clinical consultant.

One take away is that startups under-emphasize operational considerations at their peril.  It may be more fun to focus on gee-whiz  technology and  early adopters who tend to be forgiving about quality issues.  After all, detailed operational procedures and quality systems are unglamorous - they only generate headlines when something goes wrong.  But operational competence is a threshold requirement:  when you advance to mainstream, paying customers (especially those whose health depends on you), consistent quality and reliability are fundamental requirements.