Saturday, June 03, 2006


End of Conglomerate Synergy? Time Warner Thinks so..

We had debated that the network era is about thinking of a corporation as a portfolio of capabilities through relationships, not vertical integration through ownership of assets.

One of the aberrations during the shift from the industrial era to the network era was the Time Warner-AOL merger in 2001. Steadily, it appears that Time Warner has concluded that the synergey was never created and captured by the merger. Here is the WSJ article that provides a good update. Recall that Google and AOL entered into an equity stake recently. Google-Dell link to preinstall Google Pack. Yahoo-eBay link and so on. At the same time, mergers wont go away (Ebay + Skype is a recent example).

Will we see less mergers and major acquisitions and more alliances in the network era? I will have to say Yes unless managers still rely on the logic of industrial era focused on economies of scope that has proved elusive.

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