DIRECT FROM DELL STRATEGIES THAT REVOLUTIONIZED AN INDUSTRY PDF

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Direct From Dell Strategies That Revolutionized An Industry Pdf

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So the Internet can help those companies that thrive on information, like a Dell. Even easier. But the harder question is, Where is your point of diminishing returns? What will it cost us to do all this? Dell: Exactly.

If you look at the original orientation of the industry, each computer company tried to do everything itself-its own silicon, processors, operating system, power supplies.

Digital was in the business of making power supplies up until three or four years ago.

Michael Dell

Now, you say, why do you want to design power supplies? Maybe we got this disease called Not Invented Here. This is the problem a lot of companies got into. And I can point to hundreds of unique inventions or ideas that we have driven. We had the first color notebook that was powered by batteries. We had the first machine to ship. Right now our notebook team is continuing to drive very, very hard on size, weight, wireless integration-we were the first to integrate wireless into notebooks, with integrated antennas.

TR: Do you have a central research lab?

Also, about two years ago, you started Dell Ventures, which makes strategic investments in startups and other firms. Where does that fit into this broader picture of how you assemble research? Their role is to think beyond the product road maps, which end between 18 months and two years out. They also have a technology council, where we review key promising areas and determine whether we should continue research in those, or whether we should skip them and learn something else.

And they do quite a bit of experimentation with things. Dell Ventures can also play a significant role in pioneering and testing new concepts, new technologies, new ideas. We provide solutions to our customers. So, take batteries as an example. But we know where all the batteries are made. We consume plus percent of the worldwide production of batteries that go into products like ours and have some very small number of people who understand the chemistries that go into batteries.

But, instead, we see a lot of experimentation. And when we see, for example, one company with a lot of production capabilities and another with a lot of technology, we put them together.

We just did this with a CRT [cathode-ray tube] innovation. We invested in the company, and we hooked them up with our CRT providers to get this thing designed in. Why download the cow when all you want is the milk? TR: What has you most excited about the future of computing? Owning a personal computer is now widely accessible. But the industry is really very much in its infancy.

We still have a long way to go in terms of improving our products and making them easier to use.

Direct from Dell

There will always be big, underpenetrated markets just looking for improved productivity, regardless of economic conditions. So I have lots of optimism for productivity in the future. We live in a mobile world.

They want to stay productive, and they want to keep in touch. Wireless technology lets them do that. Dell: To encourage it and allow it to happen. You have to break things down into focused units that have clear objectives, so everyone in the company is driving to innovate within their particular customer area. And we have to allow for a measure of experimentation.

A couple of years ago, one of our teams came in and said, we got this idea-just bear with us a second-we want to take a inch LCD [liquid crystal display] screen and put it in a notebook computer. Would the product be too heavy? Did our customers really want a large screen on a notebook? Long the front-runner in U.

But he also revolutionized the selling of personal computers, using a direct-business model whose fundamental tenets include taking custom orders directly from customers, thereby reducing inventory and streamlining distribution. That model rocked the world of competitors like IBM, Compaq Computer and Apple Computer and changed forever the economics of the business.

People get damned and praised for the wrong reasons sometimes. People look at Dell and they see the customer-facing aspects of the direct-business model, the one-to-one relation-ships. What is not really understood is that behind these relationships lies the entire value chain: The value created for our customers is a function of integrating all those things. Remember that the computer industry when Dell entered it had gross margins of 40 percent plus. On top of that, you had dealers with margins of 20 to 30 percent.

So the end user was paying a pretty incredible premium over the cost of goods for the product. Which means that parts are far more affordable, which means that the industry has grown a whole lot faster than it ever could have, which means that people have greater and faster access to technology. Is the PC dead? The industry tends to get fascinated with new concepts and ideas-and one of the biggest problems we see is technology in search of a problem.

Take a very contemporary example. Bill Gates has been talking about tablet computers [portable devices with, ideally, the simplicity of a Palm Pilot but the computing power of a laptop-and between the two in size].

But the idea of a tablet computer is not new. The pen computer industry was here 10 years ago, and there were trade shows and companies specifi-cally created for that. Another good example is the Internet appliance, which captured a lot of attention about a year ago. At Dell, we invest only in technology our customers want, rather than trying to guess what they might want.

Quick Facts

And we only manufacture what our customers ask us to make, when they ask us. Dell has five days of inventory, while at HP, they have 63 days of inventory. They also have something called a distribution channel.

This is when you go to CompUSA and you look on the shelf and see all the computers stacked up. Now, what that means, first of all, is a time-to-market advantage. I can get you the freshest, latest, greatest Pentium 4 and all associated operating system, et cetera, 85 days faster than HP. The other problem with a long feedback loop is the distortion in the signal.

If you tell me what you want to download and I hear it 90 days later, by the time I get the signal you want something else. This is another area where our business model has a big advantage.

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Still, PC sales have been slowing-increasing the need to find new growth areas. What was it that attracted you to servers and storage?

We also saw that our competitors, most notably at the time Compaq, were dramatically overcharging customers for those products.

Same phenomenon. Five years ago we had two percent market share in the U.

Last quarter [the fiscal quarter that ended Jan. What we see in storage, with our friends at EMC, is the same thing all over again. The industry keeps moving towards broad standards, and that creates a real dilemma for companies who try to create and lead an industry by maintaining proprietary platforms and high margins.

The unmistakable trend here is that industry or open standards are beneficial to customers. So innovation is high, and costs are low-and this is the challenge a lot of these companies have.

Our business model is in many ways the polar opposite of the proprietary computing model. What do you think is the real role of the Internet in our economy today? At the root of any economic system is the cost of transactions. You have something you want to sell, I want to download it, and what that transaction ultimately costs is tied to the cost of communicating information.

The Internet is the latest evolution of communication technology-tremendously powerful because it enhances the flow of information. In other words, you live in a small town. So the Internet can help those companies that thrive on information, like a Dell. Even easier. But the harder question is, Where is your point of diminishing returns?

What will it cost us to do all this?

If you look at the original orientation of the industry, each computer company tried to do everything itself-its own silicon, processors, operating system, power supplies. Digital was in the business of making power supplies up until three or four years ago. Now, you say, why do you want to design power supplies? Maybe we got this disease called Not Invented Here. This is the problem a lot of companies got into. Our approach is more pragmatic: And I can point to hundreds of unique inventions or ideas that we have driven.

We had the first color notebook that was powered by batteries. We had the first machine to ship. Right now our notebook team is continuing to drive very, very hard on size, weight, wireless integration-we were the first to integrate wireless into notebooks, with integrated antennas.

Do you have a central research lab? Also, about two years ago, you started Dell Ventures, which makes strategic investments in startups and other firms.

Where does that fit into this broader picture of how you assemble research? Their role is to think beyond the product road maps, which end between 18 months and two years out. They also have a technology council, where we review key promising areas and determine whether we should continue research in those, or whether we should skip them and learn something else.Right now our notebook team is continuing to drive very, very hard on size, weight, wireless integration-we were the first to integrate wireless into notebooks, with integrated antennas.

Dell: Exactly.

In an effort to correct things, Dell returned in as CEO, but the results have been mixed. So I have lots of optimism for productivity in the future.

Our business model is in many ways the polar opposite of the proprietary computing model. The value created for our customers is a function of integrating all those things.

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