VI3
So some of your coordination with customers is made possible through technology, but there's still a good measure of old-fashioned, face-to-face human contact?
Yes, that's right. The idea is to use technology to free people up to solve more complicated problems. For example, a customer like MCI can access our internal support tools on-line in the same way our own technical-support teams do, saving time and money on both sides. They simply go to www.dell.com, enter some information about their system, and they have immediate access to the same information that we use at Dell to help customers. These tools are used by internal help-desk groups at large companies as well as by individuals.
We've developed customized intranet sites called Premier Pages for well over 200 of our largest global customers. These exist securely within the customers' firewalls, and they give them direct access to purchasing and technical information about the specific configurations they buy from us. One of our customers, for example, allows it 50,000 employees to view and select products on-line. They use the Premier Page as an interactive catalog of all the configurations the company authorizes; employees can then price and order the PC they want. They are happy to have some choice, and Dell and the customer are both happy to eliminate the paperwork and sales time normally associated with corporate purchasing. That frees our salespeople to play a more consultative role.
We also have developed tools to help customers set up their own customized versions of dell.com. There are about 7,000 of these to date.
How else do you stay close to your customers?
In a direct business like ours, you have, by definition, a relationship with customers. But beyond the mechanisms we have for sales and support, we have set u; a number of forums to ensure the free flow of information with the customer on a constant basis. Our Platinum Councils, for example, are regional meetings--in Asia-Pacific, Japan, the United States, and Europe of our largest customers. They meet every six to nine months, in the larger regions, there's one for the information executives-- the CIO types--and then there's one for the technical types.
In these meetings, our senior technologists share their views on where the technology is heading and lay our road maps of product plans over the next two years. There are also breakout sessions and working groups in which our engineering teams focus on specific product areas and talk about how to solve problems that may not necessarily have anything to do with the commercial relationship with Dell. For example, Is leasing better than buying? or How do you manage the transition to Windows NT? or How you manage a field force of notebook computers?
People in businesses as dissimilar as Unilever and ICI can learn from each other because, amazingly, they have very similar problems when it comes to Pcs. And we send not only our top technologists and engineers but also the real engineers, the people who usually don't get out to talk to customers because they're too busy developing products. All of our senior executives from around the company participate, spending time with the customer, listening to how we're doing. The ratio is about one Dell person to one customer. At our last session, we had about 100 customers.
The councils are another way we're able to play more of an advisory role, trying to help our customers understand what the flow of new technology really means, how it will translate into specific products. We try to help the customer anticipate what's happening and be ready. And that helps us, as well, with our own demand forecasting, So we're helping each other in important ways. We hire a lot of people from other companies in the industry, and they tell us that these meeting are unique.
Do you spend a significant amount of your time at these meetings?
I spend three days at each of them. They're great events. In the normal course of our business, I have lots of opportunity to talk to customers one on one, but there is something more powerful about this kind of forum. customers tend to speak more openly when they're with their peers and they know we're there and we're listening.
At every Platinum council, we review what they told us last time and what we did about it. We keep an ongoing record of the issues. Let me give you a concrete example: A few years ago, the engineers responsible for our desktops were operating on the theory that customers really wanted performance from these products--the faster the better. But what the customers actually said at the Platinum Councils was, "Yeah, performance, that's okay. But what I really want is a stable product that doesn't change. Because if I'm trying to run a bank or an airline, I don't care if it's 2% faster or 3% slower. What really matters is stability." So our engineers thought one thing, the customers thought another thing. It took the direct feedback from the Platinum Councils to spotlight this failure to communicate. We responded by building product with intergenerational consistency over many years. The same feedback has helped shape the creation of our brands. For both our desktop and notebook businesses, we created different brands designed to deliver greater stability to corporate customers, as opposed to the fast technology changes that consumers demand.
As I think back to some of those council meetings, things that would seem fairly small at the time have often turned out three or four years later to become the basis for billions of dollars of revenue--notebooks with longer-life batteries, for example, or loading customers' software for them in our plants.
[Insert: Using Information to Speed Execution, by Kevin Rollins (appended)]
[Graphic: The Evolution of a Faster Business Model
The dominant model in the personal computer industry --a value chain with arms-length transactions from one layer to the next:
suppliers
manufacturer
distribution dhannels
customers
==>
((Note: in above graphic, arrows are drawn between each box, pointing from right to left))
Dell's direct model eliminates the time and cost of thir party distribution:
suppliers
manufacturer
customers
==>
((Note: in this graphic arrows are drawn between each box, pointing from right to left))
Virtual Integration works even faster by blurring the traditional boundaries and roles the the value chain.
suppliers
manufacturer
customers
((Note: in this graphic, there are no arrows drawn between each box))
End of Graphic]
As your customer strategy has evolved, has the Dell brand changed as well?
A big piece of our brand is being the most efficient and effective way for customers to buy Intel or Microsoft technologies. But beyond that, we're evolving into a technology selector, or navigator. We often talk to customers about "relevant technology." Intel and Microsoft tend to launch into a massive variety of things, some of which are speculative and aimed at exploring new technologies. We think it's our job to help our customers sort out the technology relevant to today's needs from the bleeding edge.
How does that strategy affect your own R&D function? What role does R&D play in your company?
At Dell, we believe the customer is in control, and our job is to take all the technology that's out there and apply it in a useful way to meet the customer's needs. We're not trying to invent new architecture ourselves, but we'll spend a quarter of a billion dollars this year and employ some 1,500 people to improve the whole user experience--that means delivering the latest relevant technology, making it easy to use, and keeping costs down. And in addition to selecting appropriate technology, our R&D group focuses on process and quality improvements in manufacturing.
Before industry standards came into play, the proprietary computing environment bred a kind of technical arrogance that, fortunately won't fly anymore. Once standards were established, the customer started to define what was going to be successful, and it didn't matter what you invented of how good it was or how fast it was. Increasingly, what matters is what the customers want and whether it works with all their other stuff.
That means we have to stay on top of our customers' needs, and we have to monitor and understand the innovations in the material science world--everything from semiconductors to polymers to liquid crystal displays. You need to track anything having to do with the flow of electrons, and you need to keep asking how these marvelous developments might be useful to customers. The customer doesn't come to you and say, "Boy, I really like lithium ion batteries. I can't wait to get my hands on some lithium ion." the customer says, "I want a notebook computer that lasts the whole day. I don't want it to run out when I'm on the plane."
I was about to leave a meeting at Sony in Tokyo in January of 1993 when someone ran up to me and said, "Oh, Mr. Dell, please wait one minute. I'm from Sony's power technology company. We have a new power-system technology we want to explain to you." And I remember thinking, Is this guy going to try to sell me a power plant? He starts showing me chart after chart about the performance of lithium ion batteries. This is wonderful, I tell him. And if it's true, we're going to put this in every notebook computer we make.
We then sent a team over to check it out, and a year and a half later we were the first computer company to have a notebook that lasted five-and-a-half, six hours. We tested it with American Airlines, handing out the notebooks to passengers at the start of flights from New York to Los Angeles. By the end, the notebooks were still running. |
