Apple hit a major milestone last week, becoming the first US company to achieve a trillion-dollar market cap. Immediately after, you saw skeptics coming out saying this was a sign the stock was overextended. And while Apple’s market value could decline from current levels, it has been employing a number of key Exponential Organizations (ExO) management principles that could propel it to a two or even three trillion-dollar market cap over the long term.
Apple has been underestimated almost from its very inception.
In the words of former Apple exec, Jean-Louis Gassee, “Apple must be a psychotoxic company, attracting and then unhinging the fragile minds of journalists, bloggers, and analysts. The contingent of bloviators sound like a gaggle of eunuchs circling the king’s bed, stomping their feet and bawling in high-pitched voices: ‘You’re doing it wrong!’ Unconcerned, the monarch continues, enlarging the scope of his dominion.
Gassee goes on to point out that: “Microsoft’s P/E is a solid 48 and Alphabet’s hovers around 50…but Apple’s is a meager 17. Caricaturing just a bit: “Apple still trades like a steel mill going out of business.” In more sober words, investor actions say Microsoft’s or Alphabet’s future earnings per share are safer than Apple’s, hence the premium they’re willing to pay. With a P/E of 50, Apple’s Market Cap would approach $3T…”
I would also argue that the real reason behind Apple’s success has little to do with what Wall Street thinks. Their success lies in the fact that they have been employing ExO principles for years to guide and keep them on the path of success. On our Exponential Quotient diagnostic tool, they score in the top five of the Fortune 100.
And THESE “secrets,” once deployed within your organization, can also put your company on a fast path to growth, too. Here is what Apple does:
Most other tech companies focus on software and hardware solutions alone.
But Apple not only focuses on those same solutions but binds them to information within an overall design aesthetic that brings everything together under a single discipline that creates value unique to them.
In other words, in recent years, Apple has been a true ExO. They innovate at the edges of the organization and then fold those innovations into a core platform (iTunes).
But Apple’s core innovation is actually organizational. They form small, extremely disruptive teams, place them at the edge of the company, keep them completely stealth and direct them to disrupt ANOTHER industry. When they think an industry is ripe for disruption, they attack with force.
They have already done this with music, cell phones, tablets, payments, retail and e-commerce, watches, and soon autonomous cars. Only time will tell what is next. No market or industry is safe once Apple sets its sights on it.
A key hallmark of Exponential Organizations is that their products and services are information based. Add hardware and a design aesthetic, as Apple has done, that stays flexible, can adapt and change to a rapidly changing business environment like it is made of water, and where management stays true to those principles, then you have a company with almost unlimited upside.
Apple is the just one of the first ExO companies that we have been tracking. In the coming months, barring some major negative macroeconomic event, we could see Google, Alphabet, Microsoft and Amazon joining Apple in this exclusive “Trillion-dollar Club,” as they too have been operating in recent years like ExO companies.
As Brian Norgard, the Chief Product Officer at Tinder, recently tweeted, “The first trillion is the hardest.”
And if Apple management sticks to ExO principles, the second, and possibly even the third, trillion in market cap could come faster than anyone currently expects.
The lesson of Apple though is that anyone can apply these same ExO principles to their organization.
It just takes the will and the discipline to carry it out.