We’ve all heard these larger than life claims made about some innovation. If it’s too good to be true, it probably is. Bogus innovations cause serious damage. They hurt consumers, employees, investors, and the innovator community as a whole. But how do you know if it’s fake? There are telltale signs that should cause you to dig deeper. These tells will clue you in to a bogus innovation.
The 4 Tells of Bogus Innovation
Before you invest in that startup, join that cutting-edge innovation company, buy the latest device, assess. Check the organization and innovation against these four tells.
- Unvalidated claims
- Technical oversight
- Fact checking
- Organizational governance
Don’t take for granted that someone else, perhaps a well-known board member, is standing by it. Do the due diligence yourself. Be aware and avoid the expense and pain of being fooled by bogus innovations.
Tell Number One
Companies often promote their innovation as the next big thing. But, claims without validation should be treated with great suspicion. To a degree, most companies want to protect the secret to their innovation. But when a company insists on keeping the entire input secret and expects you to trust them, alarm bells should ring. The company should be able to demonstrate an input and the resulting output to back up their claim.
I am often asked to sign a non-disclosure agreement (NDA) before I ever lay eyes on an innovation. I won’t. An NDA binds you even if you uncover some fault with the claims. It requires a level of secrecy and trust before validating the claim. When a company goes to great lengths to protect their own testing and status of the innovation, beware. Dubious companies may use NDAs, employee agreements, arbitration agreements to create a fear factor. These could be a firewall for a false narrative.
Theranos, the now defunct medical technology company, made unvalidated claims. They claimed their blood testing equipment could perform a number of blood tests with a single drop of blood. Many bought into their claims without validation. The day of truth came and Theranos claims were proven false. But not without first hurting a number people and creating a lot of damage.
Best practices to validate claims are emerging in the wake of bogus innovation scandals.
- Get independent lab results throughout the funding phases.
- Have senior leaders (CEO, CIO, CTO) attest to the results.
Tell Number Two
A lack of technical oversight should be another red flag. The lack of industry and technology experts on the boards of companies is shocking. Many companies stack the board of directors with big names, former CEOs or CFOs with backgrounds in sales or finance. There’s a dearth of technical expertise. Bernie Madoff bilked millions from investors. No one questioned the lack of technical oversight until it was too late.
I’m a big proponent of diversity, with a particular interest in neurodiversity. On the board of directors, diversity of expertise is essential. The board should include an independent, deep technical expert who can push back and challenge where needed. This expert should not be the inventor or closely linked to the innovation. There’s an alternative to a technical board member. Set up a Science and Technology Advisory board to investigate and validate claims.
- Include an independent technical expert on board of directors, or
- Have a Science and Technology board.
Tell Number Three
Simple fact checking could reveal something’s amiss. Many biomedical innovations have claims of FDA approval. A quick fact check could reveal if this is true. Companies may make other government endorsement claims. Theranos made false claims that the Defense Department used their product on the battlefield. This was not the case.
Hire a fact checker to research every claim a company makes. Should any claims prove misleading or false, make them public and have them corrected.
Companies should consider supporting an ombudsman type role. This would be the company’s point of contact for external concerns about false or misleading claims. An ombudsman investigates claims and reports directly to senior leaders.
- Hire a professional fact checker to go through each claim a company makes.
- Talk to every customer a company claims to have sold to.
- Make misleading or false claims public and correct them.
- Companies should appoint an ombudsman to field outside concerns and investigate.
Tell Number Four
Organizational governance is tell number four. Many companies caught in fraud had stellar innovation leaders on their boards. The fact is, many board members fail to do the due diligence. They instead do what I call due diligence by proxy. They assume the other members of the board have done the research. Many people on boards are serving on too many boards. They are lending their name without making the effort to ensure that what they are backing is real innovation.
- Ensure each board member has done his/her own due diligence.
- Review board participation to see if they are fully behind the company.
Keep the Bogus Innovation at Bay
I’m concerned about the growing list of bogus innovations. Fake and false claims hurt people – investors, employees, customers. Keep a lookout for the four tells of a bogus innovation. It’s up to those of us who are passionate about innovation to raise the bar. Keep lies, fraud, and false claims out of the innovation arena.
To hear the telltale signs about bogus innovation, listen to this week's show, 4 Ways to Sniff Out a Bogus Innovation.
If you have an example or comment about this, join me at The Innovators Community (https://www.theinnovators.community/). The Innovators Community is a free community of innovators, designers, creators, and futurists. I hang out there every day. It’s where we can collectively go deeper on topics like bogus innovation. Head over there to continue the conversation.
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