THE CULTURE EXCUSE.(how differences in corporate culture affected the merger of Time Warner and America Online )

From the moment, three years ago, that America Online and Time Warner announced that they were merging, pundits and analysts warned that the biggest difficulty facing the new company was an inevitable "clash of cultures": unfettered New Economy pioneers versus buttoned-up old-media statesmen. To succeed, Gerald Levin and Stephen Case, the merger's architects, would have to be corporate Titos, creating a unified whole out of radically different parts. So when the merger failed to deliver on its promise--Case, the last man standing, resigned as chairman a week ago--one widespread interpretation was that cultural differences had trumped business fundamentals.

The idea that success and a strong corporate culture go hand in hand dates back to the early twentieth century, when I.B.M. employees sang songs at conventions and sales meetings in order to instill, as the preface to the company songbook put it, "the fine spirit of loyal cooperation and good fellowship which has promoted the signal success of our great I.B.M. Corporation." The men in suits sang, "We're Watson's great crew, we're loyal and true / We're proud of our job and we never feel blue." Around the same time, as the historian Roland Marchand has pointed out, companies like General Motors urged employees to identify with the corporation the way a man might with his nation or family.

It wasn't until the early nineteen-eighties, though, that promoting corporate culture became an industry unto itself, when C.E.O.s, struggling to deal with foreign competition and subpar performance, seized on culture as a solution to their problems. Ever since, consulting firms in this line (Fortune once called them "corporate culture vultures") have advised companies on how to identify "cultural needs," strengthen "core values," and create "corporate celebration" rituals, by, say, playing Patti LaBelle's "New Attitude" at company gatherings. C.E.O.s look enviously at Hewlett-Packard's legendary "H.P. Way," an ethos reflected in parables about the company founders. And many corporations still have anthems, such as the PriceWaterhouse Coopers classic "Your World": "We don't sell no dogma. / What we got is skill. / PriceWaterhouse Coopers / For each and every client's will."

Curiously, there's little evidence that such employee identity politics really work. One major academic survey of the relationship between culture and business performance, in fact, declared that "the statement 'Strong cultures create excellent performance' appears to be just plain wrong." Culture is important, but so are strategy, technology, and real assets. The challenge at AOL Time Warner was not so much making sure that the two sides played nice as it was justifying the company's hyped-up market valuation. To do that, it needed to come up with a convincing strategy for melding Time Warner's stable of media properties with AOL's distribution ...