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Michael Dell Direct from Dell Buy this title or join our Management Literature Club and have a chance to GET IT FREE! |
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Business Nugget by Robert Morris The title Direct from Dell (published by HarperBusiness) is especially appropriate: The content comes direct from “the horse’s mouth”, Michael Dell, who explains that the original core strategy of Dell Computer (in 1984) remains the same today. That is, direct contact with customers. In fact, direct sales has always been Michael Dell’s own strategy, be it selling stamps (at age 12) to selling newspaper subscriptions (at age 16) to selling upgraded PCs and add-on components to fellow students at the University of Texas (at age 18). DIRECT. Eliminate intermediaries. Eliminate waste. According to Dell, his competitive strategies are “speed to market; superior customer services; a fierce commitment to producing consistently high quality, custom-made computer systems that provide the highest performance and the latest relevant technology to our customers; and an early exploitation of the Internet.” Chances are, if you asked all of Dell Computer’s employees what their company’s competitive strategies are, most (if not all) would give the same response. Set aside the company’s extraordinary growth and profitability en route to becoming the second largest manufacturer and marketer of computers in the world. Set aside Michael Dell’s personal net worth, how much his house in Austin cost to build, etc. Focus instead on how Michael Dell’s mind works as he reflects back upon the last 20 years; focus instead on how so many others (whom Dell identifies with obvious appreciation and gratitude) worked so hard and so well with him during that time. There are so many invaluable lessons to be learned. For example, lessons which help to answer apparently simple questions such as these: Who are we as a company? What do we do best? How can we do better? What kinds of people do we want to work with? (Not just talents and skills but also character and personality) Who is our customer? What are our customer’s needs? To which of these should we respond? Will those needs change? If so, then what do we do? How? At age 12, he followed the KISS (Keep It Simple, Stupid) Principle as he collected others’ stamps on consignment and used his bargaining power to sell them for a higher price. At age 16, he used the same principle to identify those most likely to purchase a subscription to The Houston Post (newlyweds and those who were moving into a new home), enlisted the assistance of schoolmates to obtain the names and addresses of prime prospects from public sources, and then mailed a customized letter to them. Thousands of subscriptions were sold that year. He earned $18,000. Who buys what I sell? Why? What is the best way to identify them? What is the best way to contact them? (Certainly not door-to-door) How can they help me to reach others who are also prospects? Obviously, $18-thousand is substantially less than $18-billion but what is most important is the fact that essentially the same strategies achieved both totals. About this time, Dell became fascinated with computers, at first a hobby but soon a business opportunity. He traces an extraordinary journey from 1980 when he purchased an Apple II (and promptly took it apart to see how it was designed and made) until 1998 when Dell Computer tops $12-million in sales per day over the Internet. During Dell Computer’s first six years, several important decisions were made. (Once the first 286-based PC had been built, “We were on our way.”) In the autumn of l986, a 131-point “wish list” was formulated at a meeting during which key realizations occurred: “The first: To really grow our business, we would have to target large companies. The second: To land large companies, would have to offer the absolute best support in the industry. That was how we came up with the idea to provide the industry’s first on-site service for personal computers -- and rather than fool around too much with logistics, we just started providing it.” Not all decisions were sound. One of the worst involved creating a substantial inventory of (soon obsolete) memory chips in anticipation of sales that never materialized. “What we didn’t realize was that bleeding-edge technology was the last thing we needed.” Later, Dell Computer experimented with indirect sales through retail channels...and thereby weakened one of Dell Computer’s most important positioning differentiations. Since then, Dell Computer has followed three “golden rules” of its own: Disdain Inventory, Always Listen to the Customer, and Never Sell Indirect. Instead of “growth, growth, growth” as a motto, in light of bad decisions, “the new order of business” at Dell Computer would be “liquidity, profitability, and growth -- in that order.” In Part II, Michael Dell provides a detailed explanation of HOW to:
For whom will a careful reading of Direct from Dell be most valuable? First, school and college students who are criticized because they are “impatient, curious, and fascinated with the idea of eliminating unnecessary steps” as they strive to achieve personal growth and financial success. Dell would probably tell these students that the opportunities they have today are greater in number and potentiality than those that existed when he was their age. “Sometimes it’s better not to ask -- or to listen -- when people tell you something can’t be done. I didn’t ask for permission or approval. I just went ahead and did it.” Direct from Dell would be an excellent graduation gift. Also, senior-level executives of organizations which currently need (perhaps desperately need) to get back to “basics.” Dell would probably suggest to these executives that they create a focus group comprised of their “best and brightest” employees in combination with their most demanding customers. (It would be a good idea to give to each participant a copy of Direct from Dell to create an appropriate frame-of-reference.) Pose questions such as “What do we do best? Where can we achieve significant improvement? What will it take for us to achieve and then sustain dominance in our competitive marketplace?” LISTEN and LEARN. In order for Dell Computer to remain wholly committed to the strategies which Michael Dell explains in detail, it must continue to re-invent itself each year (indeed each day) in a competitive world in which change is the only constant. Order Direct from Dell here. Find the full list of Robert Morris's Business Nuggets featured by Eastbook.com here.
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