Wal-Mart and Microsoft are both tripping over problems associated with being big. In Wal-Mart's case, opponents have attacked on many fronts--the chain's treatment of immigrants and women, its economic impact on communities, and even its power over books and music. These attacks will challenge Wal-Mart's ability to keep growing. Somehow, top management didn't understand that as you become a dominant player, the rules change. To cope with that transition, the top brass needs to shed their small town cultural insulation and work with these different constituencies, thereby taking some steam out of their opponents' sails. That's what incumbents have to do in today's environment.

Microsoft also has struggled mightily with the transition to size, as evidenced by the government's antitrust case. When you're the 800-pound gorilla, you can't threaten to choke off someone's air supply. The legal fight is over, but still the company faces a deep challenge of breaking out of its insular mind-set. The fact that it has just paid more than $30 billion in dividends is tacit admission that it can't make a major acquisition. The regulatory and marketplace reaction would be too severe. Nor did it make sense to Bill Gates or Steve Ballmer to invest that money in product development. They already are spending billions there with little to show for it. It seems that Microsoft is trapped in its monopoly.

How can CEOs avoid the bigness trap? Clearly, it's important to create a culture in which top executives are sensitive to outside perceptions. Denial is not a good defense. And the smartest CEOs create feedback mechanisms that allow some unvarnished truths to reach their ears. It seems those skill sets are becoming more important than ever.

I recently returned from a trip to Germany with a serious concern. Germany is such a wealthy, technologically sophisticated country. Yet in all of my discussions with American CEOs, Germany almost never comes up.

It's true that the German economy is not growing very fast, but there is still big purchasing power. Aside from missing out on sales, U.S. companies also are at risk of not spotting new trends and technologies. In geographic terms, Germany is an important platform for operating in the markets of Eastern and Central Europe.

The fact that American CEOs are indifferent to Germany while German CEOs are racing into the U.S. (think of Bayer, BMW, Deutsche Telekom and T-Mobile, DHL, Mercedes-Benz, SAP, Siemens and Volkswagen) could create a dangerous imbalance. Political leaders on both sides of the Atlantic have a stake in making sure the business relationship remains balanced. And from a strictly business point of view, I'm convinced there are solid reasons why Germany belongs in a CEO's geographic portfolio.

COPYRIGHT 2004 Chief Executive Publishing
COPYRIGHT 2004 Gale Group