It is almost impossible to open a newspaper or turn on the TV without reading or hearing about another record-setting mega-merger. In just the past few months, some of the largest financial institutions in the U. S. have merged, or at least are planning to if the Justice Department doesn't block them. Not long before that several of the largest public accounting firms were doing the same. Aerospace companies, and automotive parts and pharmaceuticals producers have been consolidating for the past few years. Movie theater chains are combining like crazy, and then building multi-screen complexes of unprecedented size. Before that it was advertising agencies. Office products superstores went from a dozen or more chains to just three large ones in less than five years. The question is, how does this make them better -- and how does it serve customers better? Is this spate of getting bigger via merger or consolidation good, or not? There are several answers depending on your perspective. If you are fighting other countries in a consortium (like Boeing is), you need the size. If you are a shareholder, you will probably like the merger mania. It offers opportunities for economies of scale, fewer employees, greater productivity, and increased stock prices for all. If you are a customer, you may like these one-stop shopping monsters, but your choices are reduced, and so is competition (which is why the Justice Department is getting wary). If you are an employee, you have a good chance of being a casualty as duplicate functions are eliminated during the consolidation and integration of the merged businesses. As an outside, interested observer, I think this trend has corporations headed toward trouble. It is too simple a solution, and has been only temporarily successful in the past. There is a benefit to consolidation in certain stages of companies' life cycles -- it increases leverage and clout, and if done correctly builds on the mutual strengths of the combined entities. However, I have never seen a very large company that can become or stay as agile, as customer responsive, and as free of bureaucratic politics as a small one. Bigger corporations can only survive and thrive long term if they can find ways to act (and become) an aggregation of smaller pieces that are responsive, flexible, and adaptable to changes in the environment. A few will. Most won't. As the extinction of the dinosaurs demonstrates, adapting to a changing environment is more vital to long-term survival than sheer size. Policy manuals, hierarchy, and bureaucracy will grow faster than sales, and after the first (or second) wave of consolidation/downsizing savings, earnings will plateau. Sales growth will mirror the slow growth of population, not innovation. Only if the leaders of these enormous combined organizations understand this problem can they face it and solve it. GE is doing it as well as anyone. In the past, size and bulk didn't work so well for U.S. Steel, IBM, GM, or Sears. They were severely damaged by competition from Nucor, Dell, Compaq, Microsoft, Toyota, Honda, Wal-Mart and Home Depot -- all of which are now getting very large in their own right. Time will tell, and the customers and market will be the judge and jury. For the verdict, check back in five to 10 years. But, don't be too surprised if some new, smaller, nimbler, more customer-responsive and faster-growing upstarts are giving the behemoths serious trouble. It has happened before, and it will happen again.