The numbers are staggering. In its quarterly earnings announcement Wednesday afternoon, Apple reported profits that nearly doubled from the quarter before, surging 95 percent. Revenues soared 83 percent, fueled by sales of the iPhone, which a second carrier, Verizon Wireless, began selling in February. The only bad number in the bunch was that of iPad sales, which were lower than expected only because the company could not keep up with demand. “We sold every iPad 2 that we could make,” Apple CFO Peter Oppenheimer told investors.
The results were so astonishing that they’ve led to the sort of breathless hyperbole that in most other companies would sound like a bubble in the making. “Apple is performing better and on more dimensions than any company in business history,” New York University Stern School of Business professor Scott Galloway gushed to Bloomberg News after the announcement.
This is Apple, however, where superlative after superlative has only preceded new and better designs, more and more gotta-have-it gadgets, and greater and greater earnings growth. Betting against Apple has been a fool’s game in recent years, with the stock quadrupling over the last few years and the company continuing to surprise and delight consumers with new must-have gadgets. And with iPad sales just getting going and the partnership with a new wireless carrier for iPhone sales just months old, the runway does not look short from here.
But sooner or later—and in this case, more likely later—Apple’s growth will present the company’s leadership with one of the most classic problems in business. With the second largest market capitalization in the S&P 500, coming up with products and services big enough to register a blip off of such a grand scale becomes harder and harder.
The law of big numbers, in other words, can be brutally demanding. The irony of success in Corporate America is that the bigger you become, the bigger your successes have to be. While it’s hard to imagine now, if the company keeps growing at the same rate, more sales of iPhones, iPads and iPods won’t be enough. It will need wholly new revenue lines the size of each of those—in fact, likely several of them—just to keep up with Wall Street’s appetite for growth. Doing so will be a massive leadership challenge, pulling together disciplined innovation, technological and marketing efforts on an unprecedented scale.
As IBM’s Lou Gerstner proved, elephants can dance. Apple is no slouch itself—witness the iPhone’s extraordinary growth following what many thought would be the unbeatable success of the iPod. But the challenge for Apple’s leadership, whether that be Tim Cook, Steve Jobs (when or if he returns) or whoever might be the next CEO of Apple, will not have anything to do with being too big to fail. It will be failing to keep up with being so big.
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