Why Did Enron Fail?
In 1985, Houston Natural Gas merged with InterNorth, a Nebraskan pipeline company, to form Enron. Enron, however, incurred massive debt as a result of the merger and the recent deregulation of pipelines, and had to come up with a way to generate profits and cash flow. A young consultant named Jeffrey Skilling helped CEO Kenneth Lay by coming up with a innovative idea known as a “gas bank” in which Enron would by gas from a network of suppliers and sell it to a network of consumers, thus guarantying supply and price. The innovative idea allowed Enron to gain market power and dominate the natural gas market with superior prices and profits. The company continued to grow, and in 1996 decided to expand its “gas bank” idea to electricity as well. By 1997, Enron was the nation’s largest wholesale buyer and seller of natural gas and electricity. Revenues grew to $7 billion, and they were expanding the “gas bank” idea to any products people would buy. They crated Enron Online in 1999, and by 2
Well, there is no real single answer, but reviewing the company’s history may help us understand what happened to the former Fortune 500 giant. Enron’s road to failure was yellow-bricked for nearly its entire existence. The company was formed in 1986 through the merger of two natural gas pipeline firms, Houston Natural Gas and Internorth. Over the next several years, Enron’s natural gas pipeline brought the company much success. Supplying natural gas was a lucrative business, but Enron wanted more. Enron wanted growth. How the company accomplished that growth eventually led to its demise. The man behind the plan was Jeff Skilling, an advisor from one of the Nation’s leading management consulting firms, Mackenzie and Company. Skilling was an egotistical yet passionate entrepreneur who had been partly responsible for Enron’s success during the early 1990s. His innovative policies were welcomed by CEO Ken Lay, who appointed Skilling president and chief operating officer in late 1996. For
