Michael Dell interview Part II (Courtsey:IBD)
Oh sure here it is.
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By Investor's Business Daily Second of two parts Dell Is Molding A Direct Model For All Players
Date: 2/4/99
Author: Nick Turner
The direct-selling model is talked about these days as if it were the Holy Grail.
Once revolutionary, direct plans are everywhere in the personal computer industry. Most manufacturers still rely on some distributors and resellers, but all PC makers are talking about building closer relationships with their customers.
Michael Dell, who pioneered direct PC selling with his Dell Computer Corp., now hopes to capitalize on the furor with a new book. ''Direct From Dell: Strategies That Revolutionized an Industry'' hits stores this month.
In this second installment in a two-part interview, Michael Dell spoke with IBD about the direct philosophy.
IBD:
You say in the book's preface that it's not intended to be a memoir or a history of Dell, but a series of business lessons. How universal are the lessons of the Dell story?
Dell:
We're basically in a transition to an economy that's much more sensitive to information. Physical assets are being replaced by information assets. Certainly our company is a good example of that.
Look at our elimination of the physical dealer and the distribution channel, and the fact that we have about seven or eight days of inventory. Clearly this could not be done without a tremendous amount of information about what our customers want to buy and a very close communication with our suppliers as well. Information is flowing all over the place, and we're using it to our great benefit. So I think there are lessons that are applicable universally. You're seeing a lot of companies that are emerging and trying to adjust themselves to deal with the realities of the current technology.
IBD:
How quickly did you realize the value of the Internet, especially to a direct marketer such as Dell?
Dell:
Very early. We saw it as a great way to provide sales and support information and to sell products online. And because we were in direct contact with our customers and because our product was computing, it was a very natural extension for us. We jumped all over it, early and aggressively. One thing that might have happened if we hadn't done that is there could have been sites that emerged that had every manufacturers' products.
Manufacturers would have been forced to sell products through those sites, and we would have lost the direct contact with our customers. That would have been pretty bad. But we saw that pretty early on, and I think our results have demonstrated that we've been ahead on that. We're at $12 million a day in online sales.
IBD:
It seems as if virtually every PC maker has announced some incarnation of the direct model. Can Dell keep an edge in this environment?
Dell:
The market is clearly shifting to direct. An obvious observation is that that's probably going to benefit the market leader more than other companies. We're in the best position to capture that transition from indirect to direct. But we have to stay on our toes. This is not a business where you can relax and just keep doing what you've been doing. A lot of new products emerge. A lot of new strategies emerge. At first, they may appear to not be very important. But all of a sudden, you have a new competitor with a new type of product. We have to be pretty willing to experiment.
IBD:
Dell historically has targeted experienced PC users. If the overall industry shifts to a more direct model, will that make it easier to reach out to novice, low-end buyers - users who maybe were frightened away from this method of buying a PC before?
Dell:
A novice who's been frightened away before eventually becomes a user - one way or another, whether they buy our product or somebody else's. Once they become a computer user - and in a developed country like the United States, there are fewer and fewer people every year who've never used a computer - this plays into our hands. In fact, it's what I imagined would happen 15 years ago. Eventually you will run out of unknowledgeable users or users who've never used computers.
Certainly you have markets like China, where we're doing different things to attract the buyers. We might set up seminars in 15 or 20 cities around China. There you have more of an education challenge, just in terms of educating about the device itself - let alone direct or indirect. But in the United States or other developed countries, that doesn't seem to be a barrier.
IBD:
What about ''hybrid'' selling models, which attempt to combine the best elements of the direct and indirect models?
Dell:
We have some experience with the hybrid model, because we tried it about five years ago. We weren't able to get it to work. Maybe somebody else can, but it didn't work for us. The challenge is that you're always competing with yourself.
And you're sending a very difficult message to the indirect channel. If an indirect seller wants to go direct, they're basically going into competition with the people who sell all their products. The business of resellers is to resell. They don't make any money if they don't resell something. They don't really care what it is, they just want to resell it. It's a very black-and-white issue for them. A lot of our competitors are essentially a prisoner of their own history. |
