Direct Lessons: How Dell Plan Took Its Shape- "Direct from Dell".
Lee:
Just saw this in IBD,pretty cool especially certain comments by Dell,you'll know which when you see it.
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(Courtesy:IBD)
Date: 2/3/99
Author: Nick Turner
(First of two parts )
In his new book, ''Direct From Dell: Strategies That Revolutionized an Industry,'' direct computer seller Michael Dell mainly boasts of his success.
But he also admits that his Dell Computer Corp. had some missteps along the way.
In 1989, the PC maker designed products under the code name ''Olympic.'' They were designed to serve as PCs, workstations and servers. The machines were technological overkill, and they eventually were scrapped.
Dell also had a foray into retail selling in the early 1990s. The effort proved unprofitable.
In this two-part interview, Michael Dell spoke about his company's evolution and the lessons he learned.
IBD:
How many changes, such as the retail experiment, did Dell's business model undergo before you arrived at what you have now?
Dell:
Fortunately, the failed experiments never became that large a percentage of our business. Even though we were tempted and did venture off into some areas that didn't prove very attractive for us, the core direct-business model was so powerful that it kept chugging along and did very well for us.
But the company keeps evolving. It's obviously a very different business than it was five years ago or 10 years ago. The scope and the complexity continue to increase. Look at the product breadth. For example, today we're No. 2 in the server business. Five years ago, that was only a dream. The storage business is another new business for us. We're selling server and storage systems for hundreds of thousands of dollars each. We now have a factory in China and business all over the world.
IBD:
Not all of your product announcements have been successful. The Olympic project comes to mind. How have you determined your product mix?
Dell:
We started out as a desktop (PC) company, then grew into selling notebooks, servers, storage and workstations. And we also sell lots of stuff that goes along with a PC: the software, the peripherals, the printers and all sorts of other things. The breadth of products that we sell has evolved quite a bit.
A lot of the pop gurus look at Dell and say, ''Oh, Dell's a marketing company.'' Yeah, well, we're a marketing company that spends $300 million a year in R&D and files several hundred patents. There is a misunderstanding about what Dell does. The value comes as much from the integration of product and delivery and customer response as it does from the whole direct-business model. In other words, there are plenty of companies trying to sell products to customers without stores. Not all of them have the manufacturing and design. It creates a different economic condition for us than for a retailer who decides to get out of the business of having stores.
IBD:
You describe the Olympic project, however, as overly ambitious in its use of technology.
Dell:
The biggest lesson we had there was that big-bang product developments often don't work. When you combine 87 inventions all into one massive product, you run the risk that if any one of them goes wrong, the whole product line is in jeopardy. We learned that incremental improvements stacked together in a gradual fashion were much more achievable. We also, in the Olympic project, veered away from listening intently to our customers as we had in the past and do today.
The happy side of the story is that you can make the argument that if we hadn't done the Olympic project, we might not have built all the technical talent that we needed to do all the things that we did after Olympic. There's an interesting rhythm to all our mistakes.
IBD:
How about your role at the company? In the book, you talk about ''segmenting'' the chief executive position.
Dell:
Yes. I've segmented my own job. We have what we call the office of the chairman with myself, (Vice Chairman) Mort Topfer and (Vice Chairman) Kevin Rollins. The three of us share responsibility.
IBD:
How did you determine what your leadership position was going to be as the company got bigger?
Dell:
For a long time, we've focused on bringing very talented management to the company, including our board of directors. We saw so much opportunity, and it was clear that we couldn't do it all ourselves. So we've been very aggressive about dividing responsibilities.
I believe pretty strongly that you shouldn't limit a company by one person's ego or by the abilities of any one person. A company's success should be limited by its strategy and its ability to execute. If you continue to add talent and organize a business correctly, you should be able to be quite successful -if you have the right strategy and the right opportunities. I've been very aggressive in sharing responsibilities with others, and it's actually been quite easy, because there's much too much to be done. I'm more focused on getting it done than who did it or who got the credit.
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