Why culture is critical to success?

Creating the right culture in your business is critical…

Personally, we don’t think many people rank its importance, but if you don’t get it right it can bring an organisation down, no matter their size.

AOL Time Warner is the perfect example:

At the end of 1999 AOL had 22 million subscribers and were valued at $163 billion, but they were worried that the internet mania might end.

AOL were keen to make a major acquisition to expand their portfolio and cement their valuation.

They were torn between buying a content creating organisation like Disney, expanding their communications offerings through a brand like AT&T, or acquiring other internet companies.

Each one worried them…

Over time they thought content would become commoditised, AT&T’s core revenue streams would be eroded by new technologies and acquiring other internet companies was too safe and wouldn’t give them the diversification they required.

In the end they decided that Time Warner would be a perfect fit, who’d grown into one of the world’s biggest media companies, and included Warner Brothers movie studio, Warner MusicTime IncHBOCNN & TBS.

Along with these brands and critical to AOL, they also owned Time Warner Cable, one of the largest cable companies, which would give AOL a clear path to develop and provide broadband.

On the face, it seemed a match made in heaven. Time Warner was no shrinking violet either with $30 billion revenues and $8 billion profits.

After months of negotiations AOL agreed to purchase Time Warner for $164 billion in the biggest merger in history (now 2nd), and the company was renamed AOL Time Warner.

The cracks started to show almost immediately…

Yes, it seemed like the perfect marriage, but unfortunately AOL’s due diligence never included comparing the cultures of both organisations, to see if they had synergy.

After peeling the layers back AOL senior executives found that Time Warner operated like a portfolio of independent companies, each largely autonomous, complete with their own culture and mission.

AOL found out when it was to late, they weren’t really merging with Time Warner, it was engaged in nearly a dozen different mergers simultaneously, and each was slightly different.

At the time of the merger announcement several companies asked the US government to block the deal, citing the combined company would be too powerful and no one could compete.

But just 3 years later Time Warner stopped themselves…

Former AOL CEO and then AOL Time Warner chairman Steve Case said:

“There were factors like the stock market meltdown that played a role. But mostly it came down to people. It came down to emotions and egos and, ultimately, the culture itself.”

In 2003 Times Warner sold off Warner Music for $2.6 billion, then in 2009 spun off both Times Warner Cable and AOL, eventually selling AOL to Verizon Communications for $4.4 billion, before being bought themselves by an old AOL acquisition target AT&T for circa $85 billion.

You can’t put a price on creating the right culture, it’s not something you can see or touch, it’s something you live and breathe, which can launch you into the stratosphere or bring you down.

We’ve spent years creating the right culture in our other businesses, and we’re starting out on the culture journey again in our electric car charger installation business.

It’s not an overnight thing, it’s about finding team members that share the organisations values and mission. But it’s more than this. It’s what Jim Collins wrote about in his book ‘Good to Great’.

“You not only need the right people on the bus, but you also need the right people in the right seats”.

…and why creating the right culture in your business is critical.