Here's what you can learn from this company's hero-to-zero tale of illusionary success…
| From the desk of Miles Everson: Happy Tuesday! Welcome to “Return Driven Strategy (RDS)!” RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these concepts help businesses achieve their organizational objectives. In today’s article, let’s talk about this framework through a particular business case study. Read on to know more. |
Imagine walking into a company that seems unstoppable… Stock prices are climbing, profits are soaring, and everyone—from employees to investors—believes this is a place destined for greatness. On paper, it looks like the dream organization: innovative, ambitious, and laser-focused on growth. … but beneath the glittering surface, cracks are forming. Short-term wins are celebrated while long-term consequences are ignored. Suddenly, the very foundations of the company crumble, and the fallout leaves thousands of lives and billions of dollars in ruins. Oh no… This is the kind of story that keeps business schools and corporate boards awake at night, and it’s a story with a lesson that aligns perfectly with Tenet 1 of the Return Driven Strategy (RDS) framework: Ethically Maximize Wealth. Enron: A Glimpse into a Former Giant Enron Corporation, founded in 1985 and based in Houston, Texas, was once hailed as a revolutionary force in the energy sector.
Originally a natural gas pipeline company, Enron evolved into an aggressive player in energy trading, broadband, and international projects. Its strategy was bold: Transform a traditional utility into a trading powerhouse, constantly seeking high-growth opportunities and maximizing earnings. By the late 1990s, Enron appeared unstoppable. Its innovative approach to energy trading, combined with aggressive financial engineering, allowed it to report explosive profits, doubling earning power between 1998 and 1999. Analysts and investors were dazzled, and Enron became a poster child for corporate success. The Business Strategy That Both Built and Broke It Enron’s business strategy was a blend of market innovation, diversification, and financial creativity:
On the surface, these strategies looked brilliant. However, they also introduced ENORMOUS risk and ethical vulnerabilities, which would later prove catastrophic. Despite outward appearances of success, Enron’s collapse was rooted in a complete disregard for business ethics, particularly toward investors and employees. By prioritizing short-term profits and executive gain over long-term, sustainable value, the management team violated the most fundamental principle in the RDS framework: The ETHICAL creation of wealth . The consequences were staggering:
Basically, the unethical practices—especially the use of off-balance-sheet SPEs and misleading financial reporting—undermined everything else Enron had built. Its apparent “earning power” became meaningless because it was not grounded in real , sustainable value creation. Lessons for Tenet 1 of Return Driven Strategy According to Professor Joel Litman and Dr. Mark L. Frigo in their book, “Driven,” Tenet 1 of RDS emphasizes that all business strategies must be anchored in ethical wealth creation. A company may show strong profits and rapid growth, but if these gains come at the expense of ethical conduct, stakeholder trust, or long-term sustainability, they are illusory and ultimately destructive. Enron is a textbook example of what happens when Tenet 1 is ignored:
In essence, Enron’s story demonstrates that no amount of strategic brilliance can compensate for unethical leadership and misaligned incentives. The company’s spectacular rise—and devastating fall—serves as a cautionary tale for any business trying to maximize returns. Clearly, the Enron saga is more than a historical scandal; it’s also a living lesson in strategy. It reminds us that Tenet 1 of RDS is non-negotiable: Companies must commit to creating long-term, sustainable wealth ethically . Without this commitment, even the most innovative strategies, cutting-edge markets, or impressive earnings growth can collapse, leaving devastation in their wake. For leaders, investors, and managers, Enron is a stark warning: Success is measured not by short-term gains, but by the ethical, sustainable creation of value that stands the test of time. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful. Stay tuned for next Tuesday’s Return Driven Strategy! This aerospace firm didn’t become a behemoth through expertise alone. Its leadership utilized a strategy that ensured long-term growth. Learn more about this playbook in next week’s article! |
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
