Size Matters - But is Bigger Always Better?

My apologies for the long pause - I was in Texas for a few days. Where everything is bigger. Sky, hair, portions, people, etc. Maybe that's one reason I've become preoccupied with size - though as usual, I'm also writing about a theme that's emerged from different parts of my work.

Last week I was in a meeting for my Harvard Business School job, and one of the professors was discussing possible themes for an upcoming conference. He doesn't seem the type to embrace liberal/hippie theories of the corporation (if you knew him, you'd find that funny) but he did say this: "How can we expect companies to grow at fifteen percent in markets that are growing at five?" It's practically a truism: on average, they can't. And yet they'll lose investors if they don't.

Also, over the weekend I was reading about Wal-Mart (see The Wall Street Journal, 9/25, "Boxed In"), and found out that the world's biggest company reported sales growth of only 9.5% - a disappointment considering that double-digit growth has become the norm over its 34-year history as a public company. But never fear - this year the big-box retailer does plan to expand its stores by about 8%, as ususal. And I thought: that's CRAZY. Can't a company stop when it becomes the biggest in the world? Or does it always have to balloon until it pops?

The article describes how Wal-Mart's "best" untapped markets, in particular Boston, don't seem to like it very much (there are some great quotes by Mayor Menino, who is pretty blunt about not wanting a Wal-Mart). So why not leave Boston and other "tough" markets alone, and continue excelling in the markets that do want and need Wal-Mart? Personally, as the company has come out with so many social and environmental changes recently, I've realized that I'm no longer boycotting Wal-Mart - but I still don't particularly like Wal-Mart. That has a lot to do with its size, and I doubt I'm the only Bostonian to think so.

Recently, I bought a book that I hoped would enlighten this train of thought. It's Bo Burmingham's Small Giants: Companies that Choose to be Great Instead of Big. Unfortunately, I don't find the book itself very compelling - just a collection of mediocre case studies. But the idea has so much potential. I've also had an article lying around called Small is Beautiful, that I keep meaning to read.

The idea that bigger isn't always better seems to have some currency, and to make sense to a wide variety of people, but is still not compatible with the way our capital markets currently work.