Nearly six years ago, in these very pages, John Kay of the Financial Times and I debated the question of whether a company can ever be too large.¹ The matter now seems beyond dispute: big companies are the big winners in today's economy. In 2003 the world's 150 biggest companies (as defined by market capitalization) accounted for roughly half of the combined net income of the world's top 2,000 companies—up from 38 percent just a decade before. The big are getting bigger, and more profitable too.

Yet big companies have their vulnerabilities. Even their size can work against them: the more workers they employ, the more difficult it is for them to earn high profits per employee. Indeed, of the 25 corporations (among the top 150) that employ 200,000 or more people, only 4—Citigroup, GE, IBM, and Toyota Motor—earn as much as $20,000 or more per employee. In contrast, the weighted average for the entire list of 150 is $60,000.

Overcoming the complexities of scale requires companies to change their organizational design drastically. As Claudia Joyce and I assert in "The 21st-century organization," these changes must involve simplifying vertical structures, abandoning failed matrix and ad hoc approaches, and creating internal knowledge and talent marketplaces as well as formal social networks. Only then can big companies unleash the productivity of today's all-important professional workers.

Big companies must also increase their revenues just to survive, as Sven Smit, Caroline M. Thompson, and S. Patrick Viguerie point out in "The do-or-die struggle for growth." Large companies whose revenues rise more slowly than GDP for an entire business cycle are five times more likely to be acquired or otherwise go out of business than are faster growers. A median-size Fortune 100 company, with roughly $30 billion in revenue, must create the equivalent of a $2 billion business every year in order to raise revenues in line with GDP. Doing so, the authors find, requires more than just good execution: you have to compete in the right places at the right times.

Adding to the challenge confronting big companies is the risk of mismanaging the social issues that are increasingly important to business success. In "What is the business of business?" McKinsey's global managing director, Ian Davis, argues that big corporations should view the relationship between themselves and society as a social contract, with obligations, responsibilities, and mutual advantages. For chief executives, that means articulating the goal of business in terms less dry than shareholder value and taking a more active leadership role on issues ranging from the development of poor countries to the health care and pension challenges of more developed ones.

Big companies must also learn to respond more quickly to the intensified competition and inherent uncertainty of today's global economy. No matter how good their current capabilities, they can't do so alone. According to "From push to pull: The next frontier of innovation," by John Seely Brown and John Hagel III, companies should collaborate, through a broad range of global process and innovation networks, to mobilize the tangible and intangible resources of other companies. In this respect, emerging "pull" approaches to leveraging these resources are proving essential.

Companies can of course be too big if the complexities of size inhibit the productivity of their best workers, or if overconfidence or arrogance prevents them from collaborating with others or from looking after the needs of society as a whole. Yet big companies that attend to the demands of size may face few limits on how big—and how profitable—they may ultimately become.