Size Counts

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"There is a natural size needed for any company to be the best in the world at what it does. Sometimes that requires significant size (for example, Wal-Mart must be large to be the best at what it does), but other times it requires being smaller. (Patagonia must remain small to truly be the best at what it does.) The real question is not, How do we become bigger to compete? but, How do we become the absolute best in the world at something, and what size do we need to be to be the best?"

Amir Malin, 46
CEO, Artisan Entertainment, New York City and Los Angeles
Revenues: $400 million
Status: Midsize film company in an industry with both very large and very small players

"We're obviously not one of the large major studios. On the other hand, we're not one of the very small independent companies out there that are involved in a handful of projects, probably doing $30 million, $40 million, $50 million in revenues. We're kind of in the middle, and the great thing that we have is the ability to duplicate all the functions of a major studio at a fraction of the overhead costs that exist at the major studios. So I think that's a big positive.

"On the other hand, the large studios are involved in a wide variety of businesses above and beyond film and entertainment. That gives them another income source to offset the rough days we all experience.

"However, the larger the entity, the more difficult it is to make decisions. There's no reason today that we need the overhead structure that exists in Hollywood in order to effectively market and distribute films. But it's a legacy that exists because the people that move into those positions are happy with the status quo. It's a business that's very much driven by revenues, so the cost structure in generating that revenue is never looked at carefully, and I think that's a big problem inherent in our sector.

"We tend to be a little more strategic -- a little more innovative -- and use a little bit more guile and ingenuity, or we try to, in coming up with our campaigns. And that, I think, was evidenced by what we did on The Blair Witch Project.

"Given the businesses that we're in, I think we're at a perfect size. That being said, we may expand into other areas, and that will require us to increase in size. So we'll see."

Michael Powell, 60
Founder and owner, Powell's Books Inc., Portland, Oreg.
Revenues: $44 million, including $9 million in online sales
Status: Seven-store chain and Internet bookstore in an industry in which small independent bookstores have lost significant market share to a few much larger national chains

"I come from an industry that traditionally has a lot of small players and two or three large players. We are in between. Size certainly matters, and not always in a positive way. One can look at Borders, which did not have an Internet strategy; at Barnes & Noble, which is having a difficult time executing theirs; and at Amazon -- everyone knows its dilemmas. Then the independents are so small that it's very difficult for them to pull the resources together to take on new initiatives, especially technological ones. I think there is a middle area where you have sufficient resources but not so many resources that you become wasteful and lethargic.

Size certainly matters, and not always in a positive way.

"We sell used books, which gives us a product breadth that Amazon doesn't have. You have to have a skill set for used books. Each book has to be selected on its merits and priced based on experience, and that takes a lot of training and a fairly large staff. So it's not easy to replicate, and it does give us a semiprotected niche.

"I enjoy the growth, as long as it's managed and sensible and under control, and I enjoy the neat things we can do with books. But I don't have a number in my head that's somehow a benchmark. I do want to grow, because I think we have to, but I don't feel that we need to grow at some exponential curve. All I see is that getting other people in trouble."

James W. Brock, 50
Professor of economics, Miami University, Oxford, Ohio
Coauthor, The Bigness Complex: Industry, Labor and Government in the American Economy
Status: Professor focusing on issues of corporate size and market and economic power (including mergers and acquisitions and antitrust) for two decades

"It's not like one size fits all. Running the local pizzeria is one thing. To assemble automobiles is obviously going to require considerable size. Some things do necessitate what we would think of as a large organization. But even in those fields, the size can be carried too far to where it becomes a dysfunctional thing. I think the perfect example of that is General Motors Corp. They are so huge that it seems very difficult for them to do anything. And so they spend all their time, it seems, coming up with new reorganizations of the organizational chart, of which one cynic said there are two kinds, ineffective and disastrous.

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