By Brian Burwell & Jeremy Sicklick
Fortune, August 21 '06

You are certainly right in saying that Welch's rule of "being No. 1 or No. 2 in your market" has outlived its usefulness as a universal management goal. We recently analyzed the total shareholder returns (TSRs) and financial performance of 3,307 publicly traded companies worldwide for the ten-year period through December 2004. Market-share leaders lagged behind their smaller peers. Over the past five years the median TSR of the No. 1 and No. 2 players (in terms of revenues or assets) was less than 10% of the median TSR of nonleaders. Scale remains a powerful potential source of competitive advantage, but it is only potential.