Megaplayers Vs. Micropowers

Royal Dutch Shell is one of the world's largest and most powerful corporations. Bolivia is one of the planet's poorest countries; its economy is a mere 3 percent of Shell's annual revenues. Recently, Shell CEO Jeroen van der Veer noted, somewhat meekly, that his company was resigned to accept Bolivia's decision to break the contracts it had signed.

Further, he said, it was no longer a good idea for oil companies to put up a legal fight against the nationalistic policies of countries like Bolivia. Once upon a time, giant multinational corporations did not bend to the will of tiny governments. The behemoths of industry did not just stand by as their oil, gas, or mining fields were seized under a national banner. They fought back, and not just rhetorically.

In another part of the world, a ragtag militia equipped with small arms and improvised explosive devices is denying the most powerful military in history control of the territory it swiftly conquered. This same pattern, in which small "micropowers" are successfully contesting the dominion of traditional "megaplayers," is also in evidence in a far more cerebral market: encyclopedias. The survival of the world's oldest and most respected source of information, The Encyclopaedia Britannica, is threatened by strange newcomers. One of them, Wikipedia, though just five years old, is already 12 times larger than the Britannica that sits on your bookshelf. Wikipedia is free, exists only on the Web, can be read in 229 languages, and is expanded daily by unpaid volunteers. A recent study published in Nature magazine found in a random sample of entries that, despite its far larger size, Wikipedia had 162 errors, whereas Britannica had 123.

Britannica is not, of course, the only business whose survival has been threatened by improbable new rivals. The New York Times, founded in 1851, now thinks of eight-year-old Google as one of its most serious competitors. All large companies are under pressure, and the trend is accelerating. According to professors Diego Comin and Thomas Philippon of New York University, a company in the top 20 percent of its industry in 1980 faced only a 10 percent chance of no longer being an industry leader five years later. By 1998, that risk had more than doubled. In fact, 39 of the top Fortune 100 companies in the United States were not on that list last year. A high turnover of industry leaders means a high turnover of CEOs, too. Of the world's 2,500 largest companies, 383 lost their CEOs in 2005; almost half of them were fired. According to the consulting firm Booz Allen Hamilton, the turnover last year was the highest since it began keeping track in 1995, and the number of CEOs dismissed because of poor performance quadrupled. Surprisingly, CEO turnover was highest among Japan's largest companies, once considered safe havens for mediocre performance.

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