Market share leaders in many industries are now lagging their smaller peers in shareholder performance

In the 1980s and 1990s, big was beautiful. At least that’s the view that seemed to define two decades in which market share leaders across most industries exploited a virtuous circle of size and shareholder value. More recently, however, the virtuous circle does not seem to be working so well. Many market share leaders like American Airlines, Coca-Cola, Diageo, General Motors and Pfizer are not delivering superior returns to shareholders. Rather, smaller rivals like Southwest Airlines, Cadbury Schweppes, Pernod Ricard, BMW and Roche are leading their industries in value growth.

What gives? Is small now beautiful? Large now bad? More pointedly, is market share leadership no longer a desirable goal if long-term value is the ultimate prize? In our experience, the rule of being "number one or number two in revenue" in one’s markets is not the right answer for every company. The right answer comes down to what kind of scale (of which revenue is only one type) leads to competitive advantage. In this article, we put forward four success factors that enable companies to translate the right kind of scale leadership into performance – success factors that all companies can exploit to achieve top-tier value growth.