Specialization or Generalization

Perhaps no piece of unsolicited business, marketing, or sales advice is more common than "specialize or die". Indeed, I wrote a whole post on specialization because of an ad I saw. Nothing seems more obvious than specialization. But, before we swallow this whole, let's examine it. The theory of specialization is that specialized services compete well against generalized services. So, when competing in the right market, specialized services will always perform better. The secret, then, is really two-fold. First, you need to have specialized services. Secondly, you need to know of, and compete in, the right specialized markets. The generalists criticism of this is that, while the specialist might win in specialized markets, there are just too few such markets. By the time you add up enough specialized markets to make the business worthwhile, you may as well be a generalist. The specialists rejoinder is that there are many more such specialized markets than you might think. Furthermore, the sales process is so much speeded-up, and the results so much better, that it easily is worth it. So, the question is... is a specialized firm necessarily small? And is a large firm necessarily generalized? Can't there be a large firm made up of specialized services? But, isn't that what every firm claims to be anyway?