The Big Chill

One can only imagine what horrifying disclosures will emerge as the Enron debacle continues to be unraveled. Just when you think you've heard the worst, along comes something even more outrageous. But among the most unfortunate consequences of Enron's failure—although certainly not in the realm of accounting fraud, employee rip-offs and campaign finance law manipulation—will be the inevitable chilling effect on business innovation. Much of the analysis and condemnation of what transpired at Enron has identified the company's "anything goes" culture as key to the disaster. The conventional wisdom is that the financial and legal fall-out were caused by the organization's creativity and success in creating new energy-based derivatives and financial products, its vision of a deregulated energy market, and the way in which a whole array of employees were empowered to come up with new and unproved ways to build business and revenue streams.

That's true, but only to a point. The fact that things went sour financially has to do with greed, hubris and self-interest, not imagination, aggressiveness and innovation. Although Enron took the concept of technology-based securitization of a product or market to new, and obviously inappropriate, extremes, it remains a viable alternative risk strategy. Similarly, redefining a market, reinventing a slow-moving industry, is what winning companies do.

Sadly, with all of Enron's (deserved) bad press, along with the weak economy, attendant budget limitations, and overall nervous corporate environment, innovation and creativity probably will be out of fashion for a while. What company is going to want to take risks and innovate in the current climate? "Look where it got Enron," is likely to be the reasoning when new concepts and projects are squashed or put on hold.

But no insurer that intends to be a competitor for the long run can afford to defer innovation. If you don't encourage creativity, how can you flourish? Unfortunately, many managers will draw the wrong lessons from Enron's cautionary tale.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio