We investigate the electronic structure of LaCoO3 across the gradual spin-state and insulator-to-metal transitions using bulk-sensitive hard x-ray photoelectron and soft x-ray absorption spectroscopies. The spectra exhibit strong variations with temperature. The energy gap is reduced by about 0.6 eV in going from 80 to 650 K but the near Fermi level intensity remains small, classifying LaCoO3 as a bad metal even in the metallic phase. We are able to explain the spectra in terms of incoherent sums of low-spin and high-spin Co3+ spectra. We also find that the energy parameters for the two Co sites are very different, revealing that paramagnetic LaCoO3 is a highly inhomogeneous system with local lattice relaxations that are spin-state-specific. This, in turn, provides a natural explanation for the much-debated temperature dependence of the activation energy for the transitions.