Enron’s Population

The population of Enron was unrivaled—and maybe that was the problem. That probably doesn’t make much sense, so let me explain.

From a population perspective or organizational analysis, for any given actor, whether ant or multinational corporation, the most relevant occupants of the environment are other actors of the same kind (Scott and Davis). Populations can share habits, interests, even company structure. Similar populations offer the most direct competition for a scarce resource and therefore provide the main source of competitive pressure. Who were the other organizations in Enron’s “population” as it created and expanded Enron Energy Services (EES) and its broadband business? A well organized, experienced, patient utility companies in one case, and nobody (from what I understand) in the second case.

Enron was a mismatch for the utility business and providing individual retail or commercial customers’ energy. As one former employee pointed out, Enron was known for its “abrasive, cutthroat culture” and the fact that there was “condescension toward anyone who didn’t work at Enron” (TSGITR). This does not exactly sound like a customer friendly business culture. The “biggest problem of all” was that once Enron entered contracts to provide energy services, “it had to start fulfilling the terms” (TSGITR). Enron did not have the service infrastructure to created a viable business from EES. It entered the population of energy utilities without examining or caring what the traditionally ‘basic’ or ‘boring’ line of business really required: good customer service.

In broadband—the other “Big Enchilada”—Enron was alone. The concept to trade or securitize broadband was new. Although there was the telecom industry, it was a very different population from that of Enron’s.

In both cases it was not the competition from the energy company population that defeated Enron; it was Enron that defeated Enron. With EES it ignored competitors and their services. With broadband the company found plenty of success lining up contract to provide energy services. It was a wide open market in broadband. The way TSGITR makes the story out to be, Enron did not fail as a result of any competitor or outside corporation, but through the failures of itself as an organization.

Advertisements

4 Responses

  1. This is an interesting idea that seems obvious after hearing someone articulate it, but I don’t really think I’ve ever thought about it this way until now. It makes me wonder how often companies implode on themselves versus failing due to external competition. That said, if a company fails due to competition, is it ultimately because the company is fundamentally flawed in some way? Or are there times where even the “perfect” company doesn’t stand a chance against competitors? Basically what I’m wondering is if we can always attribute the failure of a company to its own practices (whether it be resistance to adoption of new technologies, failed advertising campaigns, unethical behavior, etc)…or are there situations where they are doomed no matter what they do?

  2. I think the role played by the environment in Enron’s collapse, was the lack of an active role. The environment catered to Enron, instead of the usual relationship where the actor enacts the expectations of the environment.

    Take a look at this link that I also posted in my most recent post – http://www.time.com/time/business/article/0,8599,193520,00.html

  3. Well, once gas contracts became a more liquid market with more brokerage firms involved, they did have a population. And it was that competition, which lowered margins, which partially pushed Skilling and other Enron strategy-makers to look for new big enchiladas.

    Does the book give us enough of a sense of who their competitors might be? What other organizations are aprt of not their population, but their field?

  4. […] Best Adapted Theory: Dave’s Enron Population […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: