Apple’s gravity defying exploit in becoming the world’s first trillion-dollar company is no small feat. It is very likely the next firms to join the trillion-dollar club will all benefit from similar strategies, elements and market forces as Apple, but they will likely make this trillion-dollar mark in less time. In addition to leveraging technology, defining new markets and capturing network effects, the trillion-dollar club will exploit one critical market force, which is the concept of compression. Or, defined more elegantly, the notion of creators and accelerators, where the latter are leaders who create industries and new markets and the former the leaders who transform them and at speed with technology at the core.
In the same way that Henry Ford created the modern automotive industry, someone like Elon Musk, notwithstanding his erratic behavior or perhaps because of it, is likely to accelerate the automotive industry. The concept of compression is shown in the fact that it took Ford more than 100 years to reach the market cap that Tesla achieved in 14. In Apple’s case this compression effect, a hyper-accelerated version of digital transformation, took 42 years to achieve this record-breaking valuation, much of it achieved in the decade since the iPhone was launched. The next likely firms to follow Apple in this feat, either Amazon, Alphabet, Google’s parent company, or Facebook, provided it can overcome its monthly active user curse, will likely break the trillion-dollar mark in much less time. With Microsoft that other 40-year old tech giant remaining in contention. Other than state-backed Saudi Aramco, no other enterprise has reached this valuation. Apple and any future trillion-dollar firm are all likely to have one thing in common, namely technology.
How do we define this new breed of category defying trillion-dollar enterprise? If a billion-dollar startup is a unicorn, is a trillion-dollar enterprise a griffin? A griffin is a winged mythological creature sporting the head, wings and talons of an eagle and the hindquarters of a lion – a veritable leader of the sky and land. What common attributes does this emerging trillion-dollar club have? For one, they enjoy a market ubiquity, wherein their products or services achieve a near utility status, often becoming a verb rather than a brand name. We “google” even when we are using other search engines. Additionally, these firms are not only technologically native, they have used technology and digital transformation, a process that remains critically elusive for traditional firms that are being left behind, to redefine every facet of the customer experience. They create ecosystems counting on around the clock connectivity and engagement with their products or services. In effect, the fact that we are engaging with enterprises fades to the background and has supplanted or augmented all manner of activities in our personal and professional lives. These firms have low barriers to entry and high barriers to exit, exacting steep switching costs on users who dare to defect. Leave Apple and lose years’ worth of your iTunes music library or countless apps you downloaded – from the trivial, like time killing games, to the potentially life-saving, like a geo-referenced panic button.
At a time when big tech is facing an investor, regulatory and user backlash, Apple’s most important ingredient has been leadership and consistent alignment to the firm’s value system – something as scarce as well managed digital transformation. Under Tim Cook’s watch, Apple has shifted from the traditional corporate social responsibility (CSR) posture of large firms, to something more akin to corporate activism on a range of potentially controversial issues, all of which could have caused economic harm to shareholders in the short run, but clearly improved the firm’s long-term economic outlook. One example was the grinding issues Apple was struggling with following reports of poor worker conditions at Foxconn, one of Apple’s critical suppliers in China. While most firms would have gone on the knee-jerk public relations media defense, Apple opted to create an annual supplier responsibility report on the operating and human rights standards in its supply chain, now in its 12th year, that turned bad news into an area of value. This type of transparency is unconventional of most publicly traded companies, but all the more so for Apple, which is a notorious information black box.
Similarly, when Apple was pitted against the FBI following the San Bernardino terrorist attack that claimed 14 lives, a locked iPhone stood in the way, for which Apple took a stance on user privacy over national security. Here too, the move was unconventional, but gave Apple’s devout user and investor base a signal for how the firm would hold fast to its value system with Tim Cook at the helm. The fact that values matter most when it is least convenient is one of the most enduring lessons in good governance. Along these lines, as many U.S. states like Indiana, Arkansas and North Carolina sought to roll back progress on gay rights and gay marriage, Tim Cook, the first openly gay CEO of a major firm, leveraged his considerable clout to rail against these positions. In a time marred by one corporate governance failure and scandal after another, Tim Cook’s Apple, while imperfect, has been a refreshing paragon of good governance and values in action. In no small measure, the firm’s breakthrough performance and market valuation can be attributed to this type of leadership, as much as it can be attributed to highly desirable products and elegant design. This much was reflected in Tim Cook’s letter to Apple’s employees marking the trillion-dollar milestone. In it, he downplays the economic result and heralds their work and commitment to the firm and its value system.
It should be no surprise then that Apple is the first firm to break the trillion-dollar valuation ceiling, especially since it is leveraging such scarce qualities and doing so in a design-minded manner. As Apple heralds a new era of trillion-dollar valuations, how much longer will it take the firms rising in Apple’s tide to make the mark? If market compression, digital transformation and network effects hold, Apple may not be alone for very long. Needless to say, the economic shift from the industrial age to the technology age has now passed a tipping point. Just as the industrial age and its robber baron’s and financial giants invariably opened the door to climate change and systemic financial risks with their carbon-hungry economic model, today’s tech titans have opened a Pandora’s box of systemic cyber threats, digital misinformation and the general stultification of the masses, which like all complex threats, will require new regulatory norms and a healthy dose of self-governance. This new breed of large systemic technology firms, of which Apple is the supremo, are as risky as they are valuable.
