AOL, Culture and Success: They Just Don't Get It

Crazy times these days in new media land. One day I see Jon Miller give a very lucid and sensible overview of the re-positioning taking place over at AOL (at the Web 2.0 Summit), and the next day he is gone. One day I hear Ross Levinsohn talk about his successes and challenges over at Fox Interactive Media, and the next day he is gone. What is going on here? I'd like to look at Jon Miller's (and subsequently Jason Calacanis's) departure, its ramifications for the AOL business and the signal it sends to the AOL, new media and investment communities. In short, I believe the signal it sends is really, really bad, and will only serve to damage the nascent recovery happening over at AOL and the value of an asset that is critical to the Time Warner stock price.

The story in the New York Times depicted Jon Miller's departure in the following terms:

In recent months, Mr. Calacanis said he was considering leaving AOL to start a new company. His decision to resign was hastened by the news that Time Warner, AOL’s parent, had replaced Mr. Miller with Randy Falco, the president of the NBC Universal Television Group.

“I’m not inclined to start over with a new guy,” Mr. Calacanis said in an interview on Thursday. As for what to make of the treatment of Mr. Miller, who discovered he was being replaced after a reporter called AOL asking about Mr. Falco’s appointment, Mr. Calacanis said only: “I’m perplexed. Why now?”

On his blog (www.calacanis.com), Mr. Calacanis wrote a long entry on Wednesday praising Mr. Miller and calling it “a very sad day.”

Several AOL executives said morale at the company had been shaken, and that many of the people who reported to Mr. Miller saw the shakeup as an affront, given the amount of work they had put into creating a new strategy for AOL.

This year AOL has moved to sharply scale back its Internet access business to create a free advertising-supported service on the Web. AOL executives say early signs show that the service is taking off with consumers.

Good question, Jason. Why now? AOL recently announced its tectonic transformation from a subscription-driven ISP to an advertising-driven portal, with all of the risks and opportunities presented by such a radical shift. Jon Miller was clearly the catalyst for this strategic shift, and he was Jason's mentor and protector. And Jason has been a key driver of the change in culture that has taken place, giving AOL an element of edginess and swagger that it hadn't had since the Time Warner merger. This kind of culture shift was essential to giving AOL a fighting chance in the hyper-competitive portal space, knocking heads with the likes of Yahoo!, Google, MySpace and many, many others. And the changes appeared to be working, albeit the jury was still out on whether or not AOL could succeed as a stand-alone portal. But they were trying to re-build brand value one brick at a time, and the Jon and Jason Show was certainly making headway.

So in the face of these huge changes and in the midst of a brutal competitive landscape, Time Warner decides to force Jon Miller out, which has the collateral effect of pushing Jason out as well. The two guys working to change things. The two leaders around which a previously weakened and despondent AOL staff had started to rally around. All one can ask is why, why, and why? And unless Jason is one of the greatest actors in America today, the comments on his blog illustrate his shock and sadness of Jon Miller's departure:

Today was a very sad day for me. One of the few mentors I've had in my life, Jon Miller, was replaced as CEO of AOL.

I feel in love with the challenge of AOL 18 months ago when Jon Miller, Ted Leonsis, and Jim Bankoff courted me and my team to join their revival of the company. The goal was ambitious: move AOL from a multi-billion dollar subscription business to an advertising business--in real time. It was a crazy mission, and as you can probably guess I'm always up for a crazy mission.

Leading this mission was Jon Miller, a quiet samurai of a leader who built our turnaround team and plan--and then lead us into battle as we relentlessly executed against it. I watched him masterfully turn around AOL firsthand. It was impressive considering when I got here the company was torn between the two business models (subscription and advertising), and a year later we were CRUSHING Yahoo's growth rate and were second only to Google's. It wasn't easy to turn this huge ship around, but we did it thanks to Jon's leadership.

Jon gets the Internet, but most importantly he gets people.

Honestly, I wouldn't want to manage someone like myself, but he embraced it. Whenever he was in town we spent time together and he would randomly setup calls to chat me up. He was 100% open with me about all the challenges of his job and AOL's future. He took me to dinners with all kinds of famous and powerful folks, and proudly introduced me to them as "someone you need to know and spend time with."

He made me feel like part of the team which was something I frankly didn't think would happen when we sold AOL our business. He did this with everyone however. He would get to know you and then he would drill down into the finest details of what you were working on. He would look at Engadget, Netscape, and my personal blog every day and send me comments. He would ask me about things I wrote six months ago--he's a detail guy like that.

At the same time he didn't assume he knew better than "the kids" he had working for him. He made us feel like peers and he listened intently to our opinions and advice. He asked great questions and he pushed us to think big.

What did Jon Miller help create at AOL? CULTURE. What skills did he both display and cultivate in others? LEADERSHIP. This is a guy you show the door? And at a time so critical to the business unit's turn-around? If you are a high-quality and sought-after employee at AOL today, are you inclined to stay under new management? I know I wouldn't. I'd be pissed, depressed and utterly lacking in confidence about Time Warner management's vision and efficacy. Unless I am missing something deeply profound in the facts about which I am aware, this change only serves to reinforce the series of missteps promulgated by Time Warner management over the past several years. It is all about culture and leadership, boys, and if it is these two attributes which you seemingly feel are so unimportant then you deserve neither Jon nor Jason in your firm. Or the top employees that were previously under their wings. And your stock is a short. Because any management team seemingly so out-of-touch with its employees and the market deserves little support - and neither does the stock.

Comments

[Yaser Anwar]

"Mr. Miller had largely failed to win broad acceptance among AOL's rank and file during his four-year tenure, a fact that insiders say hampered his ability to effectively manage the business."

You've gotta be kidding me, right? Unfortunately for AOL, no. I wonder how Mr. Miller led AOL in most tumultuous times in its corporate history, oversaw AOL's turnaround with stellar results (the most recent Qs ad sales growing at 40%+), not be able to manage effectively? It sure beats me...

Given the crucial strategy shift at AOL, talk about bad timing. It's sad to see office politics leading to the outster of the man AOL should instead be promoting for the top job.

Roger do you think sharing of the top job would have worked? If Time Warner management wanted someone with extensive experience in the advertising business, like Mr. Falco, they could have split the top job between Falco and Miller, because Falco has never run an internet company. This way they have the best of both worlds- Internet + Advertising. Or is that too much of a culture clash?

Sort of like Goldman Sachs. Most of GS's divisions have co-presidents who oversee the various aspects of the businesses (except the CEO).

IMO- a culture that would suit John Miller would be Apple.