At first blush, the lessons of Enron seem obvious. For customers and employees, let the buyer beware. For investors, more cynicism and scrutiny is warranted. For accountants, more oversight and reform is needed. In other words —there is greed at the heart of business, and it must be guarded against by institutions, laws and a vigilant populace. But that’s the lesson of fear. The deeper lesson is one of hope. That lesson isn’t for employees and stockholders, but for business itself. The Enron story is not just about the dangers of trusting business —it’s about the importance to business of being trustworthy. Business can’t just say to the SEC, “stop me before I kill again.” Business owes it to itself to go back to school and remember what makes for real success and real returns, including financial ones. Enron is not a triumph of greed, but a failure of business intelligence —specifically a failure to remember the critical role of trust in business success.

Customers or Competition?

For the last five decades, most thinkers have described business success in terms of competition. We talk about market share and competitive advantage, we use dozens of sports metaphors —all about winning and losing. The other line of thought —serving customers —has never had the intellectual cachet or hot press of the competition model. The Jack Welch stories (“be number one or number two in every business”) have more sizzle and pizzazz than the grind-it-out Nordstrom or Intuit service stories. Books on competitive advantage outsell those on customer retention. But the truth is, the customer service model is more profoundly right than the competitive model. For economists, the role of competition is to improve value to the customer. For business people, the only guaranteed way to win against competitors is to do a better job serving customers. In both views, customer acceptance is the cause; competitive success is the second-order effect. For economists, competition is a means to an end; for business, it is a second-order indicator of a first-order good. For both, the customer is primary, not competitive success. Enron was not alone in forgetting that. To operate from a customer-centric paradigm, a business must believe deeply in the proposition that if it serves its customers well, it too will benefit. To hold this belief requires two things —a long-term perspective, and a collaborative mindset. A business must be willing to wait for a return on its investment —customer-centricity doesn’t automatically pay back within a quarter or two. And a business must believe that the only viable relationship is mutually beneficial. A relationship in which one partner always takes advantage of the other is unsustainable; the only valid definition of success is win-win. These beliefs are not easily held. Enron lost both of them. It focused entirely on indicators associated with the competitive mindset —earnings, growth —to the exclusion of the customer mindset. It mistook effects for causes. As it shifted belief systems, it ceased to believe in being trustworthy, and thus became unworthy of trust. True success in a capitalist system rests on trust. Enron’s untrustworthiness is at the heart of its failure as a business.

Enron and the Dynamics of Trust

Why does anyone trust a business? There are four aspects of trust-worthiness: credibility, reliability, security, and other-orientation. Many businesses make the mistake of focusing too much on the former two, and not enough on the latter. Let’s rate Enron’s trustworthiness.

  • Was Enron credible? It had lots of smart people, and developed some valuable new ideas. Score—A-minus.
  • Was Enron reliable? For a long time, it delivered to shareholders; whether it delivered to customers and employees is a bit less clear. Score—B-minus.
  • Was Enron secure? Could it be trusted to act with discretion and integrity, to not only not lie but also to seek out and tell a great deal of truth? Hardly; what we’ve seen is denial and evasion, not integrity. Score—D.
  • Was Enron other-focused? Here is the biggest failure. Enron saw its customers—as well as its shareholders and employees—as means to its own ends, rather than the reverse. In myriad ways, Enron —or to be precise, some top managers of Enron—appear to have been completely focused on self-aggrandizement. Deals were structured to part others from their money, rather than to create wealth for customers in a belief that Enron would do well as a secondary result. Score—F.


Trust and Lessons Learned

Enron is not a tale of capitalism run amuck, of uncovering greed at the heart of a dishonest business world. It is the opposite —a perverse misreading of what it takes to create long-term success in business. Business success consists of focusing on your customer first. Trust is at the heart of it. Unfortunately, Enron was not a rogue elephant. It was an extreme case of a business culture which has over-stated the competitive paradigm to the exclusion of the customer paradigm. And that bias has tended to skew our view of what trust is. Too many businesses have come to believe —truly, honestly, sincerely —that trust is solely a matter of credibility and reliability. Have the best products and build up a track record, they say, and customers will trust you. But it is not true, and never was true, that trust is gained solely through these two rational trust attributes. Real trust is not founded on rational virtues alone. A trustworthy business is also secure and other-focused. These are the non-rational attributes of trust (not to be confused with irrational, for they do make perfect sense). They are found in personal behaviors, not in business processes. They cannot be engineered in through a CRM system. They are all about the customer, and not the least bit about winning. How to prevent more Enrons? It starts with recognizing that Enron was a tip of an iceberg, not a unique event. Businesses must zealously root out bad thinking. There are three tell-tale signs in daily dialogue:

Sign 1: Short-Term Thinking.

Phrases that may indicate a short-term orientation in thinking:

“Always be closing.”

“What’ll it take for them to close this deal?”

“I can’t keep running over there every time they call.”

“They keep taking advantage of us.”

None of these are bad per se. But they are all phrased in terms of the seller, not the customer. They are also all internal dialogues, held without the customer. And they all talk about short-term without a long-term frame of reference within which to evaluate things.

Sign 2: Control-based Thinking.

Phrases that may indicate control rather than collaboration:

“How can we control this meeting?”

“How can we get them to do xyz?”

“You get what you negotiate.”

“My client is a jerk.”

“OK, what’s our objective going into this meeting?”

Again, none of these are bad per se. But they all betray a belief that customers are things to be manipulated for the seller’s interests, rather than served for their own interests. And again, they are all internal dialogues, not involving the customer.

Sign 3: Non-Collaborative Thinking.

Phrases that betray an absence of win-win thinking:

“We have to discount or we’ll lose the business.”

“They wanted us to discount, but we said no.”

“We need to cull the low-profit customers.”

“How can we get to cross-sell more into them?”

“Our aim is a greater share of wallet.”

All may describe valid situations; but the language is one-dimensional. The issue isn’t discounting; it is finding a mutually beneficial outcome. Culling, cross-selling and shares of wallet are not ends, but possible outcomes of customer-centric dialogues started with a win-win objective. Enron didn’t happen overnight, and its causes won’t be fixed overnight. But if all we learn is preventive, we have missed a major wake-up call. Enron wasn’t so much evil as stupid. Business doesn’t just need to go to church —though that wouldn’t hurt—it needs to go back to school and re-read Customers 101.