People make mistakes, and it’s easy to be insightful in arrears, so I’m not writing today to tweak Jerry Levin. I do worry, though, that in exhorting his colleagues to take “personal responsibility” for their own bad decisions, he risks obscuring a very real problem with mergers and acquisitions: making them work is hard work.
In an article from November 2000 (available at the time of the transaction), Harvard Business Review offered its readers four “rules to make integration work”:
- Inject speed. If AOL was expected to offer a platform on which existing media businesses could grow, the traditional outlets needed to see that quickly and adapt. TimeWarner had never been a company that moved quickly, and while it could have learned (and would have benefited from doing so), the company’s leadership did not focus on shifting the old culture or blending it with the new one.
- Create structure. Although there was a flurry of activity after the merger/acquisition, AOL quickly became just another of the six types of media businesses that made up the company. Integration teams came and went. Instead of serving as a catalyst, AOL was soon measured against prior periods more than by its contributions toward meaningful growth.
- Make social connections. Not suprisingly, the customs, language and cultures of AOL and TimeWarner were markedly different. Standardizing them would not have been a good goal, but acting as if the differences didn’t exist made integration next to impossible. The contempt between business units was sometimes palpable.
- Engineer success. While there is good reason for traditional media companies to have adopted digital strategies, there is more than a moat between those companies and a massive ISP that licensed most of its content from others. Planning needed to be targeted and short-term (100 days or less). A decade ago, each company could have learned much from the other, but the focus was on other things, including damage done to stock price and the 401(k) plans of TimeWarner employees*.
These aren’t cutting-edge lessons, and that’s the point. Failing to understand how AOL TimeWarner would manage any one of these four areas should have been a warning sign. Falling short on all four signaled the disaster the transaction became.
With appreciation for Levin’s candor, the problem wasn’t the decision. It was in the execution, and not just on his watch.
*Full disclosure: The 401(k) plans of former Time Inc./TimeWarner employees were also affected; count mine among them.
Added January 11: In line with the tenth anniversary of the merger, the New York Times has compiled an “I was there” timeline that captures the observations of the principal players in the deal.