Steve Case's Fresh Take And Lasting Insights On The Doomed AOL-Time Warner Merger

On paper it sounded perfect: AOL would move into the broadband age, Time Warner into the digital age. It never happened. Here, lessons on pride, ego, trust, and managing relationships.

"One day you're the smartest company in the world, and you’re going to take over the world," Steve Case recently told the New York Times, "and the next day you're the dumbest company in the world and you’re going out of business."

If anyone knows how true that is, it's Case. He's the guy, after all, who cofounded and then ran America Online, back when it was a service synonymous with young Internet.

Talking with the Times, Case is frank about the fallout of the AOL-Time Warner merger, one that hoped to move the companies into the broadband-digital age.

"Well, it didn’t happen," he says. "The reason it didn’t happen is because the execution wasn’t up to the vision ... and the primary reason was there were not the relationships and trust with people."

Let's distill Case's chain of causality:

  • vision requires execution,
  • execution requires relationships,
  • relationships require trust.

Why is that? Connections create value. As Don Peppers will tell you, trust is a lubricant for decision making--and people in a merger must make many decisions. Moreover, trusting someone is a form of vulnerability, and if you can't be vulnerable to the people you work with, you limit your potential for awesomeness.

The side effects of withdrawal

After the merger Case stepped aside as CEO--he moved to chairman, taking him away from operating responsibilities. He thought it was the best thing he could do to help the companies merge: If he focused on long-term strategy with the board, he wouldn't look like he was "meddling or trying to exert undue influence."

Looking back on it, Case says withdrawal from day-to-day managing was "perceived as arrogance or maybe indifference." If he would have focused on building relationships through the company, he says, he could have created more trust and more alignment. But back then, Case thought that building relationships would have undermined execution--though the opposite is true: company connectedness predicts success.

That, Case says, is his core lesson:

... you’ve got to focus on (people) to understand what’s going on, what the context is and make sure you get people aligned around the right priorities ... it came down to poor execution of what I thought was a good idea, and that was largely attributable to people and relationships and resentments and pride and egos.

When Attackers Become Defenders, Innovation Is Lost

[Image: Flickr user Kevin Dooley]

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1 Comments

  • Don Peppers

    Nice article and thanks for the mention, Drake.  While I think Steve Case is definitely talking the right talk about AOL, the fact is that his company never did walk the walk on trust. Even before the Time-Warner merger, AOL was a paragon of cheating - they would trick customers into paying higher subscription fees than they needed to, make it difficult to quit, and so forth.  The history is clear.  And the fact that this very dominant player in the dial-up ISP space wasn't even able to make the transition to broadband is the outcome of this.  Apple's customers would follow it anywhere.  Amazon's customers, Best Buy's customers, Whole Foods' customers - but AOL customers?  Fugeddaboutit, NFW.