Power Sheet - January 7, 2015

One of the great business leadership challenges of recent years is playing out before us now, widely unappreciated for what it is. That’s a bold claim but easily justified. I’m talking about the challenge facing Apple CEO Tim Cook. He’s unique among business leaders, one of the few leaders in any field to have made both of our first two rankings of the World’s Greatest Leaders; in 2014 he was No. 1. In addition, Apple is the world’s most valuable company. More than four years after taking over from Steve Jobs, Cook is widely hailed as a man who has done the impossible, following the legendary co-founder and leading Apple to far greater success.

So what’s the challenge? For the answer, please check out Shawn Tully’s eye-opening new article, “Why Apple’s Investors Are Questioning its Future.” Shawn, a master of financial analysis, shows how Cook has set a standard of financial performance that is so high, it may be impossible to meet in the future. That’s a nice problem to have, you may say – but it’s still a problem.

Specifically, investors are lowering their estimate of Apple’s value. Last May they thought the company was worth $740 billion. Today they think it’s worth $568 billion. The reason is that they believe Apple has become an iPhone company; without that incredible hit product, Apple’s revenues wouldn’t have increased at all last year, and the iPhone now accounts for 66% of Apple’s total sales. Investors worry, reasonably, that Apple will never find another iPhone. The developed economies are pretty well saturated with smartphones by now, and while Apple has been doing great in China, you have to wonder if the government will ever let a non-Chinese company dominate their country with such a critically important technology.

So Cook faces a mammoth challenge: finding ways to make the world’s most valuable company even more valuable when it’s already so big that conventional growth strategies—extending product lines, moving into new territories—would barely move the needle. That’s why we shouldn’t be surprised by reports (unconfirmed) that Apple is getting into the autonomous car business, for example, and may buy Tesla. The car business is at least big enough to provide noticeable growth for Apple.

Like most things at Apple, the Cook leadership drama is happening almost entirely behind the scenes. But that fact shouldn’t discourage us from trying to observe as much of it as we can. Cook’s first job as CEO is to increase the value of Apple. Whether he succeeds or fails, his attempt to do it is business strategy and leadership on an epic scale.

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What We're Reading Today

China market shuts down in 29 minutes

For the second time this week, circuit breakers shut down China's exchange after the market fell 7% in the first half-hour of trading this morning. The tumble was caused by the decision to lower the yuan's reference rate, which signaled that China's leaders may weaken the currency to spur growth. The Chinese government has been criticized for using breakers, which are triggered after a 5% move in the market and, analysts say, are increasing selling pressure. CNN

Yahoo to cut 10% or more of its workforce

Marissa Mayer and her company are preparing to make the cuts as early as this month. The media business, European operations, and platforms-technology group are expected to face the biggest brunt of the layoffs. The report comes as Mayer faces a challenge from Starboard's Jeff Smith, who yesterday called for replacing Mayer and speeding up the shedding of Yahoo's Internet business. Business Insider

GM unveils Tesla competitor

At the Consumer Electronics Show, General Motors CEO Mary Barra showed off the new all-electric Chevrolet Bolt EV. It will go into production later this year. With a price tag of $30,000, it will be a direct competitor with Tesla's Model 3, which will also be designed and priced for the middle-market consumer. Quartz

Report: VW expects to buyback 115,000 U.S. vehicles

Citing unnamed sources, a German newspaper also says the company will either have to refund the purchase price for the cars or offer new cars at steep discounts. Matthias Müller's company also believes it will need a major adjustment to affected vehicles, which will increase costs. VW brand chief Herbert Diess says he's confident the company will reach a deal with the U.S. to bring 500,000 vehicles into compliance. Reuters

Building a Better Leader

New CEOs hired outside the company...

...can drive up stock prices if they present their strategy within 100 days. The effect isn't as great for leaders hired from within. Phys.org

The gig economy is larger than we realized

Nearly 45 million adults, or 22% of the U.S., have offered goods or services to pick up work. Fortune

Companies see benefits in blind hiring

Instead of reviewing resumes, companies are asking candidates to complete projects. Of course, it means candidates have to be willing to work for free. WSJ

Legal Battles

Chipotle hit with subpoena over norovirus case

As sales of the fast casual restaurant declined 14.6% in the fourth quarter, Chipotle announced that the the U.S. Attorney’s Office for the Central District of California and the FDA are investigating an August norovirus outbreak at a Simi Valley, Calif. restaurant. The subpoena asked for a series of documents from the company, but Chipotle doesn't know if it will lead to fines at this point. USA Today

TransCanada sues Obama Administration

The suit claims that the Obama administration's decision to block the Keystone Pipeline was "arbitrary and unjustified." Russ Girling's company made the unusual move by filing with the North American Free Trade Agreement. President Barack Obama blocked the $8 billion project, which would have connected Canada's oil sands to the Gulf Coast, due to pollution concerns. TransCanada is asking for $15 billion in restitution. NYT

A Bank of America group under investigation

A small group that focused on reducing tax withdrawals on client returns is under investigation by U.S. and European regulators. The group faced scrutiny for many years due to the nature of conducting trades to avoid taxes. But Brian Moynihan's company has essentially disbanded the group, which found ways to cut client tax hits on dividends from 30% to nearly zero. Regulators have yet to explain what they're investigating. WSJ

Up or Out

CEO Marc Bolland will retire in April from UK clothing retailer Marks & Spencer Group, following a poor holiday season. No successor has been named. Fortune