Ten (really Eleven) Lessons from Counsyl

After ten years and ten months, July 31st, 2018 was my last day at Counsyl.

I tried to put together a few lessons I learned along the way leading an INCREDIBLY talented 500+ team of scientists, engineers, clinicians, salespeople, marketers, generalists and laboratorians, all the way through our acquisition by Myriad Genetics. Our team was just FIRE. Those individuals' work helped over a million patients at critical times: before conception, during pregnancy, and before a cancer diagnosis.

I hope this doesn't come off as preachy, but more things that came in handy and non-obvious (at least to me) stuff I wished I had known earlier when starting the company with my cofounders. I presented to this to the company on my last day, and I thought I would share this more broadly in the hopes that some of these ideas may be useful to you.

A lot of the time, you hear stuff like "follow your passion, follow your instincts" and so on. You'll also hear more nuanced advice like "don't ignore negative instincts about people." All that is true. This isn't intended to diminish that advice, but supplement.

Let's go!

1. The importance of termination clauses

Invariably, you'll find yourself in a working relationship that no longer works - for whatever reason. You'll hear people tell you to "watch whom you work with,” which is essential, but what if you (or the other person) made the wrong decision? Now, it's time to think about "what is the price and time of termination?"

That is, the price of termination can be emotional, reputational or economic. But you will bear the cost. So pre-nup yourself in business: know the termination clauses and do your best to figure out the cost if the relationship doesn't work.

Now, some may consider this a depressing worldview - where is the romance?! NO! When you capture the downside and know how to terminate a deal, you can be MORE of an optimist. And, then, once both parties know the cost, they are HOPEFULLY in the deal (employment or otherwise), because they want to, not out of coercion or other bad reasons.

2. Charge a price for bad behavior

If it's costly to run you over, it will happen less -- so charge a "price" for bad behavior.

This lesson needs to be handled gingerly, but this isn't about being rude or disrespectful to your colleagues, suppliers, customers, and so on. The lesson is about "charging a price for bad behavior." In this track, DMX (aka X) describes an apprentice who betrays him. X ignores the betrayal, and the apprentice takes advantage again.

And now X has a real problem - X is losing credibility with his own crew since he's willing to tolerate this bad behavior. In the end, X exacts a price from the wayward apprentice, and all is right in Yonkers.

Now, many people, when encountering bad behavior - might think, “let me put my head down and deliver.” That's what I thought.

That is, indeed, the true long standing antidote. And DEFINITELY do that. Put your head down and deliver, and that is for sure your longest term antidote that will leave you with a clear conscience.

BUT, also make it costly to get “run over," particularly with people who are dishonest. As Adam Grant pointed out in his book, these people are called "Takers," and they will take advantage of you if you let them.

This is simple economics: the more something costs, the less likely it is consumed. If it is costly to run you over, it will happen less.

Now, this doesn't refer only to simple financial costs, such as penalties and fines, although people definitely pay attention to those. Consider what other costs you can impose if financial costs are not in the picture: reprimands, revocation of specific privileges, reduced responsibility, and so on. Now, I say this should be gingerly interpreted because the VAST majority of people you will encounter are helpful and don't need this sort of approach. But you'll know when it is needed.

3. Put your team on

You sink and swim by the quality of your team. The quality of our team is why Counsyl has done well over a decade. And when we haven’t done well, that fell on me, as the leader. And for those of you who lead teams, that falls on you - even if you have an underperformer who, by all accounts, isn’t pulling their weight. The selection, evaluation, dismissal, and promotion of people within that team is the leader’s top responsibility.

Putting on your team on makes sense because:

• Practically, you can’t do it all yourself: you'll put out bad quality work if you just try to do your team's work on their behalf
• Economically, it's pointless to hire bright people and then ignore their advice - you should just then fire them if you're going to do it yourself (Don't worry, they will quit anyway if you employ this strategy ;)

So don’t be a dummy - put your team on. This is not an argument for doing all work via consensus and groupthink, but instead, giving a team a specific, actionable goal and helping them achieve that goal.

4. Paying customers' opinions matter the most

This isn't to say your boss, your direct reports, shareholders and outside analysts are irrelevant.

But in the hierarchy, if you're a paying customer, your opinion matters the most!

Paying customers cannot be fooled in the long run, and very few in the short run, depending on the price.

In the lab business, insurers are generally financially responsible and most lab companies negotiate with insurers over payment.

In the lab testing business, physicians don't bear any financial cost, but "pay" with their reputations.

From the outside world, many people, analysts and so on thought Counsyl was in the "genomics" industry. And there are dozens of analysts and pundits who would say that genomics is the "next big thing," or genomics is "inevitable" but those analyst reports mean very little to a practicing physician.

The practicing physician knew we were in the "actionable information" business.

The practicing physician doesn't care about those analyst reports about genomics. Busy physicians care about providing the best clinical care for their patients with the least hassle. This is an example of "whose opinion matters the most." The doctors, insurers and patients' opinions mattered most.

If you listened to the pundits, it sounded like all these physicians, insurers and patients just couldn't wait to get their hands on a new genomic innovation. In reality, most clinicians couldn't care less about how a technology is implemented, were only passably interested in genomics, and just wanted to know if we could provide better clinical outcomes, and prove our assertions in peer-reviewed literature (we did!).

It seems obvious, but listening to paying customers’ opinions matters the most for the success of your business. If you have delighted paying customers, no media, and are ignored by wall street, you can still build a good business (for many years until accepting outside investment, Atlassian did just this, and they continue to). By contrast, if you unhappy paying customers, fawning media, you will have a bad business (i.e. Theranos).

5. Your customer is right, even when they are "wrong"

The acceptance of "max out of pocket programs" (MOOP) in the lab business are a great example of a customer preference being right, even if it seems "wrong."

In this case, the customer I'm referring to is a physician, although the physician doesn't actually pay anything. Confused yet? It's about to get crazy.

These programs work as follows:

• A lab will tell a doctor that "no matter what, our tests will only cost your patients $25"
• The doctor, relying on this assurance, will tell their patient that "The test I'm ordering for you will only cost $25"

Now, it starts to get fun:

• The lab receives the patient order, and bills the insurer an inflated amount (usually 20X over a common list price), so $10,000 for a $500 bill
• Here's what gets nutty: through a loophole, some insurers automatically discount, say 60% of billed charges, no matter what
• So the insurer says, we'll pay $6,000 ($10,000 * 60%), but 80% needs to come from the lab and 20% the lab needs to get from the patient
• The lab just got a check for $4,800 ($6,000 * 80%), but....
• ...the patient is on the hook for $1,200 ($6,000 * 20%)!

The patient is furious. "You told me this would cost $25, and now I'm looking at a $1,200 bill!" The patients then call the doctor, the lab and everywhere in between.

The lab writes down the balance of this bill to $25.

So what's the lab's haul?

• $4,825 = $4,800 from the insurer and $25 from the patient... from what should have been a ~$500 test, or a ~10X increase

PHEW. How did we get here? A mistaken understanding of the physician's real problem.

We ourselves made the mistake of implementing a more primitive version of this system, before we became in-network with insurers.

Physicians considered it a major pain point to explain lab charges to patients. Remember, the doctors themselves received no compensation from explaining how much a lab would bill for a test.

Doctors didn't join medicine to explain what another referring service provider (MRI, lab) makes per result. The MOOP program tried to solve this problem in a very clumsy way. The MOOP programs would artificially "guarantee" a fixed $25 price per patient, which allowed the doctor to state with certainty in an exam room what a test cost. This artificial guarantee came at the expense of very angry yelp reviews, as patients complained (rightfully) about feeling misled.

In this case, the doctors were right about the problem - explaining lab charges to patients - even if we thought their solution ("MOOP") was not sustainable.

Recognizing the truth of the physicians' problem forced us to develop "price estimates." In this program, we sent patients a reliable estimate of their out-of-pocket charges, taking into account their deductible and so on, before a test was run. This meant that patients could get reliable estimates of charges, and physicians no longer had to be the middlemen in explaining a lab's prices.

6. Discover the "authentic" signal

Instead of watching for flowery praise or assurances, watch for quantifiable actions and quantifiable progress.

In football, good defensive linemen frequently watch the "snap" of the football by the center to the quarterback. Those linemen do their best to ignore the calls of the quarterback - those quarterback noises are intended to distract and get the defensive lineman offsides.

In this case, the snap of the ball is the most "authentic signal" the lineman needs to track to make sure he can attack the offense.

So find the authentic signal that helps you track progress.

• If someone says your service is better than competitors, are you earning a price premium for that service? Or gaining market share faster? Those are the truest forms of signaling
• At work, if someone keeps telling you, you are doing a good job, are you getting more responsibility or additional compensation over time?

Find that authentic signal, track it, and improve it.

7. Quantify an emotional problem

Juicy J told us that it’s hard to even keep score, but you must if you want to make progress! This isn't about one-upmanship, but rather showing to yourself that you are making progress.

If you have an emotional problem, see if you can quantify that problem.

Up until 2015, we ran an organization that only focused on women's health. Lured by the siren song of being able to commercialize some of our women's health technologies for an oncology audience, we began an oncology business unit.

However, almost immediately after we greenlit the expansion of our oncology sales force in March 2016, we could see that something was wrong. The company was overstretched, we were missing deadlines and missing projections, and this wasn't working. Emotionally, Oncology wasn't working, but that was a gut instinct that we needed to quantify further.

It took an off-site in October 2016 where we quantified the specific dollar impact and basically “bridge to nowhere” that our overextension into Oncology created. There was no clear dollar path to profitability for our company to execute and invest in the opportunity in women’s health and ALSO create an oncology division.

This analysis turned an emotional problem into an easily quantifiable one. We couldn't be profitable running both divisions simultaneously. Quantifying this emotional problem allowed us to make a clean cut of the oncology division and move forward with total focus on women’s health.

8. No victim mindset

No "woe-is-me" mentality: no feeling sorry for yourself. In the opening scene of the Godfather, Johnny Fontane (apparently modeled on Frank Sinatra), complains to the Godfather. Johnny whines that he's being blacklisted from a movie part that would make him a star, and that the director is being petty and vindictive. (Of course, the director Jack Woltz had his reasons, but that's a story for another day.)

The dam bursts, and Johnny weeps, “Oh Godfather, I don't know what to do, I don't know what to do.” At this point, the Godfather gives him a proper, ear-ringing slap. That shakes Johnny out of his misery. Then, Johnny and The Godfather start brainstorming solutions.

When a setback happens, we tried to ask, “How are we going to turn this into something good for Counsyl?”

That’s what we did with:

• the max-out-of-pocket challenge I described above,
• the excision of the oncology salesforce

Each challenge, while hard, gave us something important as a company. For example, attacking the real cause of the max-out-of-pocket gave us the price estimate program, and forced us to sell much more on value as opposed to lowest price.

The excision of our oncology sales force decisively cured us of fear of missing out and restored tremendous focus on our core in women's health.

When a setback happens - try asking: “How can I turn this into something good?”

9. Go out like a warrior

There's an amazing scene in the 1987 movie, Predator. The premise of the movie is that an Alien ambushes an elite military squad in the middle of the jungle. The squad is led by Arnold Schwarzenegger's character, Dutch, and one of the quiet soldiers on the team is Billy Sole, played by Sonny Landham.

The Alien makes mincemeat of the squad, one-by-one. Towards the end of the movie, the team is attempting to escape to higher ground. During a frantic run across a makeshift bridge, Billy suddenly stops. Dutch and the rest of the team shout at him to keep moving, but Dutch realizes Billy has made a different decision. The rest of the team leaves Billy at the bridge.

Billy, now alone, throws his weapon into the river. He cuts himself on the chest, drawing blood. Billy knows that he will lure the Alien out into combat. You don't see what happens next, but you hear Billy's dying battle cry. Billy's fight against the Predator bought Dutch and the rest of the team crucial time to famously get to the chopper.

Billy went out like a warrior when his team needed him.

There were many hard decisions at Counsyl, and during some of those decisions, I experienced fear. That fear made it hard to act swiftly.

The biggest antidote I found for fear during this time was deciding to go out like a warrior, and actually visualizing Billy Sole's decision. When Billy makes up his mind to fight the Predator on the bridge, he quietly turns calm. The same thing happens when you have to make a major showdown, and make the decision to go out like a warrior.

In some moments -- a key termination, a major lawsuit, an explosive negotiation -- I knew I was going to go out either like Billy or Dutch - and either way, I could have a clear conscience.

The side effect of going out like a warrior is you will naturally be more focused. Your downside, your fear melts away, and you won’t have to psyche yourself up to the task at hand.

10. Practice good habits

Had I read something like what Romelu wrote 10 years ago, I would have been deflated. I didn't try to tear the cover off the ball every time. It all seems too superhuman to do. But you know what? You can practice intensity and get there.

• Practice showing up early to meetings
• Practice preparing in advance
• Practice dry-runs
• Practice intensity

And don’t worry if it doesn’t come to you on the first try. Practice - you will get there.

As our SVP of Operations, told me:

• if you get the day right, you get the week right
• if you get the week right, you get the month right
• if you get the month right, you get the quarter right, and
• if you get the quarter right, you get your year right

So get your practice right, and your performance will follow.

And a last bonus lesson:

11. Have fun

It might seem contrary to practicing intensity, but it’s not. Work does not have to be a dull boring chore, but if you practice complaining, it will be.

I learned this as well - to try to have fun through both dark and light moments. It's called gallows humor for a reason. If people in the middle ages can have fun while about to go under the guillotine, you can too during a conference call.

I hope you find these lessons useful for some of your journey. Thank you.

As a recap:

1. The importance of termination clauses
2. Charge a price for bad behavior
3. Put your team on
4. Paying customers' opinions matter the most
5. Your customer is right, even when they are "wrong"
6. Discover the "authentic" signal
7. Quantify an emotional problem
8. No victim mindset
9. Go out like a warrior
10. Practice good habits
11. Have fun

PS - Thank you to the hundreds of Counsyl employees who helped me along the way, and the individuals who helped review this draft.