Twenty years ago Thursday, Texas energy company Enron officially declared bankruptcy. While it was big news, it was hardly a surprise when the announcement arrived. For weeks, the nation’s business press had offered revelations of accounting fraud and inflated profits as the stock price cratered. Soon after that day in December, the company became an object of political ambition in Washington, with Rep. Michael Oxley (R-Ohio) holding hearings on Enron and ultimately co-writing the Sarbanes-Oxley bill, which focused on accounting transparency.
The political firestorm that broke out surrounding Enron is over — but the corporate practices that drove it are still happening. For example, Elizabeth Holmes, formerly heralded as a Silicon Valley wunderkind for founding and leading the health-care tech company Theranos (and herself the daughter of an Enron executive), is currently on trial for an alleged act of corporate fraud akin to the years-long practice of cooking the books and inflating profits at Enron. And Frances Haugen, a former Facebook employee turned whistleblower, recently testified before Congress to reveal a range of troubling practices at the company.
In fact, the same business culture that allowed Enron to commit fraud for years has also produced companies like Theranos’s and Facebook. All three of these companies are products of a business-oriented fixation on newness, disruption and innovation that took hold during the first dot-com boom in the late 1990s.
“Innovation,” of course, has been an important business value since the rise of the knowledge economy after World War II, when large corporations invested heavily in research and development. Management scholar Peter Drucker drew a direct connection from this emerging knowledge economy (though he did not use that specific term) to innovation in his 1959 book, “Landmarks of Tomorrow.” For Drucker, by then an established authority on modern business, “innovation” meant “purposeful, directed, organized change.” In other words, innovation was a sober-minded pursuit.
Yet in the 1990s, this focus on newness and innovation morphed into an outright hostility toward tradition.
In 1990, for example, one business writer declared that companies should “break away from the old rules.” It was a sentiment that business reporters and management consultants echoed and amplified over the next several years. Later in the decade, Clay Christensen’s book, “The Innovator’s Dilemma,” introduced terms such as “disruption” into our broader lexicon.