Many of the intellectual underpinnings of Enron came from McKinsey & Co. thinkers. Here's how the firm promoted its ideas in its influential journal, The McKinsey Quarterly
ASSET-LIGHT STRATEGY
"Enron was not distinctive at building and operating power stations, but it didn't matter; these skills could be contracted out. Rather, it was good at negotiating contracts, financing, and government guarantees--precisely the skills that distinguished successful players." -- MQ, 1997, No. 2
OFF-BALANCE-SHEET FINANCING
"The deployment of off-balance-sheet funds using institutional investment money fostered [Enron's] securitization skills and granted it access to capital at below the hurdle rates of major oil companies." -- MQ, 1997, No. 2
WORK THE STREET
"Enron has convinced Wall Street of the favorable long-term prospects of its new businesses; about half of its current market cap is attributable to businesses that have yet to generate annual earnings. As a result of this persuasiveness, Enron trades at a price-to-earnings ratio of 60, in contrast to an industry average of 14." -- MQ, 2001, No. 1
ATOMIZATION
"Enron has built a reputation as one of the world's most innovative companies by attacking and atomizing traditional industry structures--first in natural gas and later in such diverse businesses as electric power, Internet bandwidth, and pulp and paper. In each case, Enron focused on the business sliver of intermediation...." -- MQ, 2001, No. 1
LOOSE-TIGHT CULTURE
"Provide `elbow room' to allow executives room to maneuver; `head room' to allow them to make decisions without seeking constant approval from above; a clear link between daily activities and business results (even if not a P&L); something new to work on as often as possible." -- MQ, 1998, No. 3
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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