Lessons from Dell
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Founder credits direct sales, aggressiveness
BY TOM WALSH
COLUMNIST
THE DETROIT FREE PRESS
October 3, 2003
freep.com
Michael Dell should not have been in Detroit on Thursday, but he was.
Dell Inc., the computer company he founded in 1984, should not exist anymore, but it does.
"The conventional wisdom and all the business books 15 years ago were about the supremacy of Japan Inc.," Dell told me in an interview Thursday. "There weren't even supposed to be computer companies in the United States today," he said, noting that his company -- the only computer maker still assembling desktop PCs in the United States -- just happens to be the world leader with sales of $38 billion and net profit of $2.4 billion in the last year.
Michael Dell, 38, No. 10 on Forbes magazine's list of the wealthiest Americans with a net worth of $13 billion, doesn't make the point about Japan to gloat. Rather, he uses it to set up his next point.
"India and China present new challenges," he said, acknowledging U.S. concerns about the migration of information technology and engineering jobs to those low-wage nations. "But just as the United States responded to the competitive challenge of Japan 15 years ago, we now must respond to India and China."
Forget the notion that companies would keep jobs in the United States out of patriotism or that federal or state governments could stem the tide of IT outsourcing by new laws or tariffs. "We're not going to protect our way to the future," Dell said. We must compete our way there.
"To have a U.S. computer company be tops in the world was unthinkable 15 years ago," he said, "but it's because we're competitive, not because we're American."
For the record, Dell cut about 5,700 jobs in 2001 in Texas, where it has two PC assembly plants, as it was expanding employment in India and overseas. But Michael Dell said the company is still growing employment in the United States, and 27,000 of the company's 41,800 jobs worldwide are in North and South America.
Playing by different rules
Dell, based in Round Rock near the Texas capital of Austin, dominates the PC market today because it changed the sales paradigm by selling directly to customers via the Internet, eliminating the retail middleman and pricing aggressively.
Now it's about to take that model into several new patches of consumer electronics turf, scaring the bejesus out of Sony, Toshiba, RCA and Panasonic. By this Christmas, Dell will launch a line of flat-screen televisions, an MP3 player and a downloadable music service, all to be sold online, just like PCs. In the last 12 months, Dell had already entered the markets for handheld computers and printers.
Michael Dell casts this expansion beyond PCs not as a great showdown with other global electronics firms but as a simple extension of addressing customers' needs.
"What's happening," he said, "is the digital home. Until now, you've had all these different electronic islands in the home, not connected -- the TV, the computer, the stereo, the phone. Now you've got digital cameras and broadband, and you want all this stuff to hook up easily with each other."
There are doubters, of course, who say television buyers will want to view the products in person and not buy over the Internet.
"We're pretty familiar with skeptics," Dell said smiling, "and we don't expect that people are going to instantly buy everything from Dell." But he does expect Dell's total sales to jump another 50 percent in the next three years to around $60 billion.
Despite all the attention to Dell's direct-to-consumer sales model, only about 15 percent of company sales are to individual consumers. The rest are to companies, schools and governments, and Dell doesn't expect that ratio to change much, even with the push into televisions and music.
"A lot of our growth is overseas, like China, where sales were up 71 percent the last quarter," he said. "And China doesn't have a well-developed individual consumer market yet."
Wooing corporate customers
Dell's trip to Detroit Wednesday and Thursday was all about the corporate customer. He attended a dinner Wednesday at Tribute restaurant in Farmington Hills for about 60 customers, including school superintendents, corporate executives and chief information offices of colleges and small businesses. After a breakfast appearance Thursday on behalf of United Way, he had an appointment with Bill Ford, chairman and CEO of Ford Motor Co.
A few minutes before that meeting, I asked Dell, married and a father of four, what kinds of vehicles are at his house back home. He quickly piped up that he owns a Ford Excursion, Ford's largest sport-utility vehicle. But he wouldn't name the brands of his other wheels.
Aw, come on, I pestered.
"Well, since Daimler and Chrysler are merged, I can say I do own vehicles from each of Detroit's three major auto companies," he said.
Presumably it's not a Neon. |
