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4/14/2006
06:00 PM
Rob Preston
Rob Preston
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Down To Business: Business Technology Is All About Execution

Sure, we all need a place at "the table" of business decision making. But as Enron's unraveling showed, those who just talk the talk are sure to fail.

Former Enron chief Jeffrey Skilling took the stand last week, holding to the old Sgt. Schultz defense: I knew nothing. The man who engineered Enron's rise from a natural gas utility to a Fortune 10 commodities trading juggernaut testified in federal court that he was oblivious to the rampant internal fraud that led to the company's demise in 2001.

I had the opportunity to interview Skilling and his top minions around the time of Enron's peak, in 2000, the year it reported revenue of $100 billion. In hindsight, they were masters of generalization and oversimplification in championing their business worldview.

Their premise was that vertically integrated industries such as energy, paper, and telecommunications would be transformed by a new, Internet-based business model, where accomplished market makers like Enron would match buyers and sellers in real time and take a cut of the action. Owning physical assets like pipelines, mills, and networks didn't matter to the market makers. What mattered was liquidity--the ability to find and package the lowest-cost supplies and guarantee delivery as the trusted middleman. Enron would make a killing, they said, by making electronic markets in everything from gas and electricity to data storage and logistics services.

Skilling and crew were brilliant at paving over the technological complexity of that vision. Take telecommunications. By 2000, Enron was already calling itself an "energy and broadband company," despite the fact that it hadn't yet made a dime from telecom services. What it had was an ambitious plan: Develop software-based switching hubs or "pooling points" nationwide to provision high-speed circuits to customers--from its own fiber-optic network and those of third-party operators--in a matter of days, even seconds, compared with the weeks and months it took the telephone companies. "The system we're putting together will provide you bandwidth in real time, and if you want the bandwidth for 15 seconds, you won't have to wait for a month and buy it for a year," Skilling told me in August 2000. "If you want to reserve it for next year, you can. That's a real market."

That's also really hard to pull off. The telcos may be slow, but Enron couldn't hope to reinvent their industry overnight. In pleading guilty to securities fraud in 2004, the former CEO of Enron's broadband services unit, Kenneth Rice, admitted that the company's "revolutionary" network provisioning scheme was smoke and mirrors. The software that was to underpin those pooling points never got beyond the early development stage, even though Enron had said its switching capacity was "up and running" and that customers were climbing on board. Rice, who had little telecom experience before taking charge of Enron's broadband unit (he had run an electric utility in Portland, Ore., that happened to operate a fiber ring around the city), apparently had underestimated the technical task at hand--and then stuck to the script long after it had lapsed into fiction.

Other Enron execs also were in over their heads. Mike McConnell, the sharp deal-maker who once ran Enron's global technology unit, was proud of the fact that he was "anti-technology." His VP of IT infrastructure wasn't a technologist, either. No wonder Enron didn't have the infrastructure to deliver on its tech-based market-making vision. A bunch of ex-traders were calling all the shots. They talked the talk of business technology alignment with the best of them, but they never did much walking. Of course, plenty more was wrong with Enron than its simplistic approach to technology, but you get the picture.

For more than 15 years running, the No. 1 concern among members of the Society for Information Management has been "business and IT alignment." Sure, such alignment is important. You must be "at the table" of business decision-making. But as Enron showed, having a place at the table is only the first step. Only those who can execute will win.

Rob Preston,
VP/Editor In Chief
rpreston@cmp.com


To find out more about Rob Preston, please visit his page.

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