Dell, An Innovative Change

Dell, An Innovative Change

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Dell, An Innovative Change
History of Dell
Michael Dell, who is the founder of Dell Computers, began his venture towards revolutionizing the computer industry in 1980. In 1980, Dell purchased his first computer; an Apple II, and took it apart to understand how it was designed and made (Dell & Fredman, 1999, p. xi). In 1981, IBM introduced the Personal Computer (PC) and Dell saw this as a business opportunity. Dell switched from the Apple computer to the IBM PC and began to learn all of the possible components. Michael Dell’s hobby was to disassemble computers, rebuild them with improved components, and sell them directly to the user according to the biography by Mr. Dell in Smart Computing (2007). “Traditionally, in the computer industry, manufacturing companies built computers, which were distributed to resellers and dealers who sold them to businesses and individual consumers” (Dell & Fredman, 1999, p. 11). Dell noticed that IBM also sold their computers to through the distribution method, and in 1984, Mr. Dell made his business venture official. The original name for Michael Dell’s company was registered in the state of Texas as “PC’s Limited.” The organization transformed and renamed the company to Dell Computer Corporation in 1988.

In the beginning, the PC’s Limited company was purchasing stripped-down computers, upgrading them and then selling them for a profit (Dell & Fredman, 1999, p. 14). Dell & Fredman (1999) indicated “People were becoming more interested and more knowledgeable about computers” (p. 14). The consumers expected upgraded versions of the IBM personal computer, but IBM had not yet produced an upgrade. Michael Dell decided to create his own personal computer with the vision of enhancing PC Limited’s business. When Dell began to build its own computers, it was the perfect opportunity and timing because there was minimal competition in upgrading computer systems. A new upgrade, computer chips, simplified the PC design because the new design only required a few chip sets and some skilled engineers (Dell & Fredman, 1999, p. 14). By implementing new technology through ASIC (Application Specific Integrated Circuit) chips, this chip helped ease the company’s entry into the PC world. After designing their first major PC, known as the Turbo PC, Dell became the second largest PC manufacturer in the U.S. with Compaq as the leader. The new enhancements proved Dell to be a strong contender in the PC market and Compaq was prompted to imitate Dell by entering the custom computer business (Saunders, 2000).

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Dell Computers manufactured more PC’s than Compaq in 1990; which put Dell Computers as the number one manufacturer.

Dell attempted to be like its competitors and tried to sell their products through warehouse clubs and magazines, but was unsuccessful. After Dell Computers refocused on direct-to-consumer sales, it became the largest PC manufacturer. Dell Computers’ concept then was focused on extreme growth, but the concept was evolving into the order of “liquidity, profitability, and growth”, which prevented the company from failure (Dell & Fredman, 1999, p. 49). This new concept provided Dell with the opportunity to analyze every business segment and to develop a profit and loss statement for each section (Dell & Fredman, 1999, p. 49). For a while, Dell Computers approached business as a company who jumped at every new opportunity, which resulted in growth; however, the organization eventually had to select only the opportunities that would make the most of their strengths. Dell Computers had to rethink its strategies and focus on the infrastructure versus the market opportunity, such as building systems and processes (Dell & Fredman, 1999, p. 58). Dell stated the change to the infrastructure was a significant adjustment; however, the change enhanced the products previously created and helped them reach their full potential instead of creating more new things (Dell & Fredman, 1999, p. 58). Rebecca Saunders (2000), author of the book entitled Be Direct! Business the Dell Way, she states there are two kinds of entrepreneurs: those who continuously jump from venture to venture hoping to land a goldmine, and those who develop a company based on an idea, develop and constantly improve the idea, and adapt to changes without losing the strategic focus. Dell is an example of the latter type of entrepreneur. After Dell’s changes in 1993, Michael Dell was named “Turnaround CEO of the Year” in 1993 by Upside magazine (Saunders, 2000). Michael Dell stated “the real key to success comes from within; knowing their strengths and being open to experimentation” (Dell & Fredman, 1999, p. 227). Experimentation comes through the ever-changing computer industry in which Dell Computers’ people, customers and suppliers are willing to embrace such changes.

Changes at Dell
Before emerging as the worlds leading computer systems organization, Dell attempted numerous production and sales approaches over the years in an effort to gain a larger market share and to increase profits. Dell has faced changes in leadership, losses of profits, and massive layoffs; yet, it has maintained a solid lead in the IT field compared to many of its competitors. Of the numerous changes that have taken place within Dell over its lifetime, most view the two most monumental changes that have produced the most positive effects were making their sales force a ‘customer-driven’ culture and by choosing to move away from distribution sales and electing a ‘direct-to-customer’ sales approach. Michael Dell implemented both the direct-to-customer sales method and the customer-driven culture shortly after the creation of PC’s Unlimited.

Dell chose to take a more ‘customer-driven’ approach to innovation in lieu of traditional distribution approach, such as when computers were being created in Michael Dell’s dorm room. On the company’s website, Dell states that the problem with a traditional approach to innovation is that it tends to produce proprietary technologies and that, that particular approach produces products that are hard migrate from as a customer (“Dell™,” 2007). Dell’s innovation begins with customers (“Dell™,” 2007). Information needed for product innovation, such as what products consumers want, need and why; the prices customers are willing to pay; and, what new product should be developed, are all gathered directly from the consumers. Gathering this information from the customers is extremely important because they will be the actual end user and paying money for the products. Through many different trials and programs, Dell chose to use a ‘customer-driven’ culture. Dell’s website (2007) continues to say that Dell “gathers requirements directly through tens of thousands of customer interactions daily, organized events, and customer panels”. These gathered requirements and suggestions drive Dell’s technology initiatives, innovations, and product directions (“Dell™,” 2007).

Dell’s model that illustrates how consumer information travels along the communication channels and is eventually implemented by Dell begins with customer input, leading to open innovation/effective research and development and ending with the customer and the Dell benefit (“Dell™,” 2007). As mentioned, the model begins with customer input, which is used for effective R&D (design, develop, and deliver) and open innovation (leading, influencing, and partnering), benefiting both customers and Dell. The customer input is retrieved through the thousands of phone calls to and from Dell, during organized events, and through customer panels. The research and development department then uses the customer input and develops product innovations and creations based upon information gathered. These innovations save the consumers money and they allow new and exciting products to be offered to the customers. As illustrated by the model, both the customer and Dell benefit from all events.

The second and perhaps most monumental decision to positively affect Dell was the choice to elect a ‘direct-to-customer’ sales approach. BusinessWeek (Park, 2004) reports that in 1984, Michael Dell chose to sell PCs directly to consumers very shortly after starting the company from his dorm room, bypassing retail stores and system integrators and offering limited customer support but dramatically lower prices. Olga Kharif (2005), another author for BusinessWeek Online, indicated that the “direct, low-cost sales model has worked perfectly” (Kharif, 2005). Dell’s low-cost sales model has allowed Dell to earn high margins while selling computer equipment for less than its rivals. As a result, Dell held a 17.9 % market share of the world PC market in 2005 and has grown much faster than its competitors Hewlett-Packard and IBM (“Dell™,” 2007). The current direct-to-customer model began with phone orders, temporary kiosks located in retail centers, orders using the internet, www.dell.com, and has expanded to many different options for customers to order Dell’s products (“Dell™,” 2007). An added benefit to Dell’s direct-to-customer approach is the immense cost reduction which results from individuals placing orders for computer products through the internet website. When customers order over the phone, the administrative costs of phone orders is reduced because fewer employees are required to work the phone lines at the call center since more orders are placed online. When purchasing products online, the administrative costs incurred by labor for the call centers are eliminated. Selling products online has proved to be successful even today.

Dell Today
If you were to pick one word to describe Dell today the word would have to be Innovative. If we look at what Dell does to keep their products effective they focus on “Effective R & D” (“Dell™,” 2007). They strive to use this focus on innovation to “…allow Dell to influence industry technology and product direction” (“Dell™,” 2007). Using this focus is a “Key to Dell’s innovation strategy.” and this strategy is the “…ability to drive industry standards that directly address customer challenges (“Dell™,” 2007). To better understand the how Dell achieves the standards we need to look at the company as a whole. The company focuses on its management structure to better serve its employees and its customers. Dell utilizes a structure know as the Dell Unified Manageability Architecture (“Dell™,” 2007). This structure is “based on existing and emerging standards established by global standards bodies such as the Distributed Management Task Force (DMTF) and the Storage Networking Industry Association (SNIA) (“Dell™,” 2007). The management architecture is divided into six layers: four of the six layers are platform, logical mapping, aggregation, and access with the other two being resource management and orchestration (“Dell™,” 2007). This architecture helps the “IT industry standardize terminology, isolate functionality and interfaces, and address the various aspects of systems management in a consistent manner (“Dell™,” 2007). This approach is important to help guide the companies almost 80,000 employees worldwide (“Dell™,” 2007). Dell as a company sells more computer systems globally then any other company and this achievement has earned them the spot of number 25 on Forbes list of Fortune 500 companies (“Dell™,” 2007). Dell states that the results of their achievements in market leadership is the result of persistent focus on delivering the best possible customer experience by directly selling standards-based computing products and services (“Dell™,” 2007). It is very well known what good ideas can bring you. For Michael Dell his idea brought him great success. Dell is a leader both in innovation and market strategy it is this leadership, which has helped them achieve success during their changes.

Works Cited

Dell, Inc. (2007). Dellä. Retrieved February 16, 2007 from http://www.dell.com.

Dell, Michael and Fredman, Catherine. (1999). Direct from Dell: Strategies that Revolutionized an Industry. New York, NY: HarperCollins.

Kharif, Olga. (2005). Dell: Time For a New Model? Retrieved February 11, 2007 from
http://www.businessweek.com.

Park, Andrew. (2004). Thinking Out of the Box. Retrieved February 13, 2007 from
http://businessweek.com.

Saunders, Rebecca. (2000). Be Direct! Business the Dell Way. Michigan: Capstone Publishing,
Inc.

Smart Computing. (2007). Michael S. Dell. Retrieved February 28, 2007 from www.smartcomputing.com.
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