Beyond the Pitch
Comparing Board of Directors: Apple Versus Theranos
A tale of two board of directors
If you knew that you could put some of the best experience and brains in your industry on speed dial, would you consider, for even a nanosecond, passing up that opportunity? Of course, you wouldn’t. That’s the way to think about building a board of directors. The right Board is a trusted cadre of advisors providing a safeguard for the company and you.
Who’s on your Board?
The best board of directors are engaged teams of experts with relevant expertise and industry experience. They are there to provide guidance, direction, and clarity.
As the company founder, it’s your responsibility to build the right Board.
It’s never too early in the life of the company to start thinking about creating a Board. Make a list of potential Board members. They can be people you know now, or they can be aspirational. There’s nothing wrong with aiming high. Building the right Board will take some time, but the process is straightforward; there is no reason to make it complicated.
Different Boards, different results: Apple and Theranos
I’ve found that entrepreneurs can learn quite a bit about the right composition of a Board of Directors by considering the examples of Apple and Theranos at comparable times in their history.
Apple, as everyone knows, has been through some challenging periods and difficult changes in leadership, but over the last 40 years, the company has been delivering positive results for customers, employees, and investors.
The opposite is true for Theranos. Founded in 2003, this embattled Silicon Valley firm, which once promised to transform the blood-testing industry, has been accused of faking tests and results and of improperly reporting financials.
Theranos CEO, Elizabeth Holmes, has been banned from operating labs in the U.S. for two years. Once valued at $9 billion with $700MM invested by VCs, the value of the company is now estimated to be close to zero and Theranos has fired hundreds of employees.
The founders and CEOs of both Apple and Theranos were on the Board, but that’s where the similarities end and the lessons begin.
The Theranos Board had:
- Limited experience in science, technology, or medicine
- Senior government officials, current and former
- Greater focus on the big story than on how the company was executing
The Apple Board had:
- Significant, relevant customer and market knowledge
- Significant startup leadership experience
- Significant relevant technical and/or product experience
And the lessons are:
1. Boards of Directors are not just for window dressing. The Board is there to facilitate active dialogue about the business. Members must have deep domain and industry knowledge and relevant experience, with the business’ functional areas—finance, marketing and sales, operations, and technology.
2. Beware of enormous egos, especially egos that don’t understand your industry or technology. Create Board relationships built on mutual trust and respect. You need people that you can have an honest disagreement with, who will help you be thoughtful and intentional about your business and build it correctly from the ground up.
3. If you plan to enter the market with a disruptive technology, you want someone on your Board who’s done that. A retired Marine Corps general may understand disruption, but not the kind of disruption Theranos was promising.
4. If the company needs extraordinary Board involvement, then the Board must be willing and able to rally together and engage effectively. Mike Markkula (Apple’s third co-founder and long-time board member) supported Steve Jobs, replaced him as CEO, and then collaborated to bring him back—all in the interest of Apple’s success.
5. Seek Board members who hold themselves and the executives of the company to a moral and literal compass. As Thomas Donaldson, an ethics professor at the Wharton School of the University of Pennsylvania, put it when describing the Enron debacle for the NY Times, ”When we do autopsies on corporate Watergates like this, we always find that there were rules, and people knew they were breaking them.”
Entrepreneurs who move past thinking that a Board is there to slow things down, to tell the management team what to do, or to fire the CEO, discover that the right Board can help grow the business in a way no other entity can.
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