The “Strategic Direction” Thing
Takeaway: An entire economic system is floating weightlessly from here to there, without a strong notion of origins or destination.
Team 23,
We wanted to let you know that the 23andMe Board issued a press release this afternoon stating that all of the independent directors have resigned from the Board, effective immediately.
I am surprised and disappointed by the decision of the directors to resign.
I have been committed to the mission of 23andMe for the last 18 years and believe strongly in the potential for genetic information to transform healthcare and the therapeutic discovery process. I remain committed to our customers, my employees and to our stockholders to achieve our goals. I continue to believe that we will be better positioned to achieve our mission and goals outside of the short term pressures of the public markets and that taking 23andMe private will be the best opportunity for long term success.
We will immediately begin identifying independent directors to join the board. I want to thank the directors for their service to the company and its stockholders.
I don't have additional information to share at this time, but we will update as we can at Thursday's Feisty.
Anne
Listen to Hardcore Zen
What WeightWatchers, 23andMe, Walgreens, Stellantis, McKinsey and Nestlé Have in Common
All seven independent directors of 23andMe resigned last week. Among those quitting were big VC brands and backers, like Sequoia Capital's Roelof Botha and xFund's Patrick Chung.
It’s rare when the board of a publicly-traded company resigns en masse. The directors said they differ (to put it mildly) with CEO Anne Wojcicki on her “strategic direction” for the company and, because of her voting power, it was best they resign. But the catastrophic collapse in 23andMe shareholder value — its valuation is just $7 million more than the cash on its balance sheet; that’s a 99.9% decline from its $6 billion peak just after going public in 2021 — is a reminder of something bigger, deeper and wider:
Shareholder value is not just about business performance. It’s also about story performance.
In her memo to employees (above), Wojcicki said the action by the board left her "surprised and disappointed" but she still believes in the potential for 23andMe to “transform” healthcare.
Welcome to The Big Transformers Club.
Every species of brand and business — every animal in the herd of disrupters stampeding across the landscape of healthcare — believes their technical potential has the potential to “transform” the largest and most lucrative market on Earth, creating “tremendous growth” from the process. Yet no one has been successful.
Why is that?
Narrative matters. The hard fuzz that gets ignored is defining the end state for all the transformation we’re about to receive. We’re not investing enough intellectual and creative energy positioning the objective that gives direction to the strategic direction.
Instead of the why, we obsess over the what.
23andMe also said it was shutting down its drug discovery business in a bid to conserve cash, now “pivoting” to launch a GLP-1 telehealth service. The drug discovery business had been a foundational piece of Wojcicki’s plan to profit from the company’s DNA database, which is roughly the same commoditized capability and overgrazed market Walgreens is now betting on for its “transformation strategy”.
Ramita Tandon, chief clinical trials officer, said Walgreens wants to leverage its operational capabilities — community relationships, data-driven clinical trials solutions — to help identify and reach potential study participants for clinical trials. Walgreens sits on what Tandon refers to as "a live breathing network" of patients and the company's clinical trials unit can index those patients by race, gender, ethnicity, social determinants of health, even by zip code
"We wanted to design the business model that would look to sort of solve some of the pain points that pharma faces as they think about their R&D portfolio and as they think about their trials. A big part of the pain point is finding patients for trials, getting those trials done in an efficient fashion so they can get to the FDA for approval," she said. (Walgreens competitor Optum offers same thing; so does McKesson and HCA; so does Northwell Health; so does the VHA.)
But as anyone who has worked in the commercial side of the pharmaceutical industry will tell you, winning regulatory approval to promote the technical potential of drug — its feature/benefit story — is table stakes. Arguably the bigger pain point for pharma is the “perverse drug rebate system” of which Walgreens (and Optum) is a part, and the reason why Optum is now getting sued by the FTC. (For more insight on this: “Big PBMs and Big Market Power: Who Really Controls the Practice of Medicine in the United States?”)
"We launched our clinical trials business in June of 2022 with the idea of just redefining that patient experience and really looking at ways to tackle the issues around lack of patient access and lack of representation that has plagued our industry for a very long time," Tandon told investors at TD Cowen’s 9th Annual FutureHealth Conference.
A $5 trillion system of markets is infected with groupthink at a staggering, and staggeringly expensive, level. (For more on this, listen to the Blue Spoon audiocast, Why the Pharmaceutical Industry Needs to Think Like Quentin Tarantino)
Note: Anyone who held Walgreens Boots Alliance stock for that past five years would be nursing their metaphorical wounds, since the share price has collapsed 84%, now floating around a 27-year low.
Better Story Performance
For the most part, we are either asking the wrong questions, or our questions are based on the wrong framework. Our strategy stories are unoriginal. We are competing with cliché.
If the search for direction is premised on the technical potential of technology, if we buy the sell that "transformation" and "innovation" and "progress" should be framed in technical terms, the odds are that the American Way of Healthcare (and the British Way of Healthcare, for that matter) will stay lost in the same confused haze that has kept the system operating in "crisis" mode for more than 50 years.
"Healthcare is now arguably oversaturated with innovations," say Ryan Vega and Kenneth W. Kizer in a commentary for NEJM Catalyst not long ago, echoing what more than 300 million payers — patients, families, caregivers, employers — in the United States already know, and have known for generations. "Most have neither produced dramatic improvements in outcomes nor spread at at the pace and scale needed to materially bend the cost curve."
In terms that big business and big VC would understand, the EBITDA from a $5 trillion investment is not delivering. To wit, via The Commonwealth Fund last week: U.S. ranks last in health care compared with nine other high-income countries.
There's a commercial withering from thinking in cliché, a vacuum of different words to lead differently, that threatens to calcify The Collapse beyond anything the thin and threadbare language of "patient centricity" can handle as a guide to economic competition. Any realistic appraisal of the next few years of action to reshape the business of healthcare has to be weighted heavily on the side of ‘continuous health engagement’ as the orientation for big market innovation.
Which is really The Nut everyone — 23andMe, Walgreens, Optum, the pharmaceutical market, the retail pharmacy market, the healthcare delivery market, the diagnostics market, the market in the United States, the market in Europe, the market in China…everyone — is trying to crack.
Saabira Chaudhuri covered Nestle's move to "jettison its chief executive officer" for the Wall Street Journal. Her story about two weeks ago (Nestlé CEO Abruptly Ousted as Board Seeks Better Cultural Fit) is a good read on understanding the personal professional risk in confusing operations for strategy:
"On an investor call, the incoming CEO talked about how he wanted to improve market share and productivity, raising eyebrows among some analysts who said the ideas, while sound, weren’t in any way new. “While we absolutely understand that he will not have had much time to gather his thoughts, his priorities around market share and sales growth, investment in the business and productivity savings do not sound radical,” said RBC analyst James Edwardes Jones, after the call.
Navigating the 'transition space' to compete differently takes creative, courageous leadership. That process starts by sweeping the old concepts out of the saddle. The comfortable mental furniture used as the centerpiece of product management — principles of branding, positioning, message and even “strategy” itself — is coming apart at the seams, unable to accommodate the seismic instability happening the world over. Existential crises abound and confound.
Note: At Friday’s close, Nestlé’s shares dropped to their lowest level since early 2019.
Different Expertise Required
The only surprise in all of this is anyone who continues to be surprised, taken aback by accelerating, amplifying and disorienting change. So the storyline on earnings calls is finding “strategic fit” to the mess, but the implied message on top of deteriorating EBITDA and collapsing shareholder value is the big idea machine is broken, at least the commercialization part of it is, the top-line innovation part, which is the part that earns revenue and shifts the balance of power. Which is the part that really matters. Our solutions are not mind-stretching enough.
WeightWatchers said Friday (September 27) that its CEO Sima Sistani, who shifted the weight loss giant’s strategy to prescribing obesity drugs, is stepping down from her role, effective immediately. ( Longtime board member Oprah Winfrey relinquished her seat in May, and WeightWatchers’ stock price has plunged about 90% this year to less than $1.)
In a media release announcing the leadership change, the company said Comonte is taking over as it focuses on improving its operational and financial performance. Sistani posted a note to team members on LinkedIn in which she said the decision to leave was hers, as the company now “requires a renewed focus and different expertise.”
Indeed.
The unmet market demand is original narratives from executive management, in business as well as government. Failing and flailing at that, we are stuck in a loop in time. We study the study, trying to decide how to decide. There is so much change working through our systems these days, it feels like a whole new magnitude. The biological nature of the new economic order means that the sudden disintegration of established domains will be as certain as the sudden appearance of the the new.
We are all looking to accumulate to signals, data and networks, developing new habits, new reflexes.
On Monday (September 30), Chrysler owner Stellantis became the latest automaker to warn of an increasingly tough car market as the industry contends with shaky demand, rising competition and a bumpy transition to electric vehicles. The auto giant, which also houses the Jeep, Ram, Fiat, and Peugeot brands, on Monday cut its full-year earnings guidance, saying it would accelerate costly plans to trim bloated U.S. inventories and faced weaker demand across many of its markets.
Shares in Stellantis dropped more than 14% in European trading, approaching a two-year low.
The warning from Stellantis comes after its big European rival Volkswagen on Friday cut its sales and profitability forecasts, citing a deteriorating outlook for its namesake brand. Mercedes-Benz and BMW have also reduced their sales and earnings targets in recent weeks as sales in the Chinese luxury market have slowed. Their problems were echoed by British manufacturer Aston Martin on Monday, which said weak demand in China and supply-chain disruptions will hurt delivery volumes.
Even McKinsey could use some of its own advice. After guiding the strategies of some of the world’s largest companies for nearly a century, the elite consulting firm finds itself under criminal investigation related to its recommendations to drugmakers on how to “turbocharge” sales of opioids. The firm is also rethinking how it runs itself. It announced layoffs earlier this year, and launched a 30-person “partnership modernization” task force, which is debating issues tied to McKinsey’s governance.
The harsh news is that instability and disequilibrium are the norms: optimization won’t last long. Writes Sven Birkets:
“If we treat the danger shruggingly, it’s because we still have our remnant contexts to take refuge in. But that could change in a generation. It’s not that hard to imagine a future where people not only are not sustained by any sense of coherence but can’t imagine that anyone else might be, who see no argument against floating weightlessly from here to there without a strong notion of origins or destination.”
It’s the leadership margin that now separates.
The era of linear solutioning is over. And while avoiding ambiguity and shying away from complexity is understandable, pretending it doesn't exist is foolish at best and fantasy at worst. It's time to work with a whole new theory for growth and market development.
Dr. Seuss would explain it this way to The Board:
“You can get so confused that you'll start in to race down long wiggled roads at a break-necking pace and grind on for miles across weirdish wild space headed, I fear, toward a most useless place. The Waiting Place….”
/ jgs
John G. Singer is Executive Director of Blue Spoon. To engage with a mind stretch: john@bluespoonconsulting.com