itmWEB TechWeekly

July 8, 2002

Dell Business Strategy Secrets (Part 2)

As many of you may suspect, Dell Computer Corporation casts a huge shadow across the city of Austin, Texas. In my role as Vice President of Information Systems at Tokyo Electron's US headquarters, I often get the opportunity to see Dell close up, both as a local Austin IT professional, and as a Dell customer. In this column, I would like to share some insights from Michael Dell's recent book.

Rebecca Nelson-Austin Chamber of Commerce, Michael Dell, and Russ Finney
Michael Dell

At age 34, Michael Dell had already become a high tech industry legend. To commemorate Dell's 15th year in business, Michael authored a new book, Direct from Dell, which gives us a look at the straight forward approach he used to turn his dorm room business into a multi-billion dollar corporation. This book is a mixture of Dell history and Dell philosophy. Well worth the read if you have an interest in patterning a business after the now famous Dell direct model.

Michael held a book release party at the University of Texas Alumni Association building for a diverse group of Austin technology and business leaders who have been a part of Dell's success over the last 15 years. I was very to honored to have been invited. During this event, several Austin notables gave short speeches praising the impact Michael Dell has made on both the University and the community.

University of Texas President Larry Falkner spoke about Dell's influence on the University. He also poked a little fun at Michael by noting that as one of the University's most successful students, he wasn't really sure how much credit the University could take since Michael dropped out after his freshman year, and that Michael was well known for working on his new business rather than attending classes.

Finally, after letting the signed copy of the book collect dust on my shelf, I pulled out the book and read it. And then I read it again. This book is really a good read (especially if youy live in Austin) but it makes even more sense several years later as we all look at the results.

Dell's book is really two books in one. The first part is a summary of the history of Dell, from Michael's point of view. This section contains some good lessons learned from the amazing hyper growth Dell experienced as it went from PCs Limited to In this section Dell covers the crisis Dell went through when the company financially "hit the wall". At that time, former Sun Microsystems VP, Tom Meredith was serving as Dell's CFO. This crisis changed Dell's approach to many key business items including its approach to inventory management. This was also the timeframe that Dell turned around its notebook computer business.

The real treasures in this section are centered on the evolution of the Dell Direct model as well as the birth of the web site. Michael describes what he refers to as a "virtually integrated organization", one that is linked by information rather than assets. Through this strategy, he worked to bring customers and suppliers inside the business though the capabilities of evolving internet technology. The fundamental results were speed, efficiency, direct customer service, responsiveness to customer wishes, and a soaring stock price.

Dell's Core Philosophies

Part two of the book is devoted to Michael's business philosophies. A sampling of some of these key ideas include:

  • Hiring ahead of the curve - Michael outlines his belief in choosing people with the future in mind as well as a consideration of the challenges they will have to grow into.

  • Segmenting the CEO - Michael explains why he split his duties between himself, Mort Topfer, and Kevin Rollins in order to divide and conquer Dell's wide spanning responsibilities through the Office of the CEO.

  • Building a company of owners - Michael covers his passion for engendering a sense of personal investment in each employee through responsibility, accountability, and shared success.

  • Staying allergic to hierarchy - Michael outlines his distrust of overly rigid business processes as well as his encouragement of communication across all business lines and levels.

  • Mobilizing people around a single business goal - Michael highlights his use of metrics throughout the company to measure progress, to identify issues, and to tie compensation to the health of the business.

  • Developing products from the customer's viewpoint - Michael reviews Dell's approach toward creating products based on customer input and requirements instead of pushing new inventions.

  • Targeting a customer of one - Michael explains that you have to structure your business channels to tailor your focus to unique customer needs, fears, sensitivities, and questions.

  • Adding value "beyond the box" - Michael describes the importance of looking beyond just the product at the total customer experience and the service opportunities this may present.

  • Aligning complementary strengths for success - Michael gives a overview of the benefits of complementary partnering with suppliers for better efficiency, faster feedback, and more tightly aligned products.

  • Flipping the demand/supply equation - Michael covers the importance of flowing inventory at a real time speed through the use of real time information rather than using bulk manufacturing processes.

  • Playing judo with the competition - Michael reveals Dell's strategy for analyzing the profit pool of an industry and developing a strategy for capturing market share through efficiency and lower prices.