Enron CEO Predicts More Business De-Integration

Using his own company's experience as a model, Enron CEO Jeffrey K. Skilling predicted last week that more businesses would become "de-integrated" in the future, creating new markets. Skilling, who was keynote speaker at the Las Vegas' Strategic Directions 2001, also used his well-known wit to lampoon the California energy crisis following his presentation.

"Enron's primary business goal now is to create markets," Skilling said of the Houston-based energy giant. Still the U.S.'s largest buyer and seller of natural gas and electricity, Skilling said the company took the business plan that grew its commodity business and used it to shape completely new markets.

The key to the modeling is specializing for specific audiences, and intersecting that with the lowest cost, he said. Enron's model allows the company fluidity and flexibility, which it completes by outsourcing some business services and focusing on its own competitive advantages. The company and its many affiliates then can more quickly react to the ever-changing customer trends.

Skilling's presentation followed up comments he had made last year, when he suggested that oil and gas companies trash their business model and follow an example set by Toyota. He said then that companies should define themselves not by their industry, but rather by their skill base. Toyota changed the U.S. auto industry by outsourcing its production, offering customers exactly what they wanted cheaper and faster.

"Traditional business models are slow moving, rigid and tightly vertically integrated," Skilling said last week. "The next trend is de-integration, where companies will move to a business model more similar to Enron's. That is happening in the energy industry and is spreading to other vertical industries."

Companies wanting to install flexibility into their business models "will have to be rebuilt on scaleable, flexible infrastructure platforms," he said, using conference co-sponsor TIBCO Software as an example. TIBCO offers infrastructure software to enable businesses to integrate systems in real-time.

For companies considering the virtually-integrated business model, Skilling advised attendees to "rethink your business and figure out three or four things your company does best that gives you a competitive advantage. Outsource the other functions, products and services as inexpensively as you can."

Following the presentation, Skilling answered some questions from the audience, and well known for saying what he thinks regardless of who's listening (see NGI, April 23), was asked in the webcast conference about California. Sprinkling his answers with a few one-liners, Skilling offered Enron's take of the ongoing problems in the state, lambasting the state's deregulation laws.

"It is absolutely mind boggling that anyone, other than the Soviet Politburo, would come up with this market structure," he said, adding that the worst part was that it prevented utilities from signing long-term contracts for protection in the spot market.

Drawing applause, Skilling asked the audience what the difference was between the State of California and the Titanic. Answering, the CEO answered that "at least the lights were on when the Titanic went down."

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