Dell

Fortune hails Dell, the firm known for commodifying PCs, as one of the world’s ‘most admired companies.’ Dell ranks tenth on Fortune’s list of most innovative companies and 34th on the 500.

Dell’s early story is intricately linked to its founder, Michael Dell. Born into an upper-middle-class family, young Michael Dell was interested in technology and business. He was curious, one of his most important qualities, and he “took apart” computers in his free time, trying to figure out how they worked.

Despite his parents’ affluence, Michael was keen to get into business however possible. At age 12, he got a job washing dishes at a Chinese restaurant, investing his earnings into stocks or gold.

Michael sold newspaper subscriptions in high school, leveraging his budding data skills and entrepreneurialism to reach new customers. By 16, he earned $61,000 in commission (in today’s dollars) and purchased another computer to take apart and boost his knowledge.

He studied pre-med in college, aligning with his father’s, an orthodontist, wishes. But he wasn’t happy in this path, and ever entrepreneurial Michael invested the money he’d made in stocks and commission into his computer business in 1984, merging his two interests.

Michael Dell purchased IBM PCs at cost, added additional memory and disk drives, and sold them 10% below the retail price. That year, with an initial self-investment of $1,000, he registered his business, PC’s Limited, with the State.

Michael constantly asked, “‘Well, how could you improve it?’ ‘How could you make it do more things?’” His mind toward innovation and efficiency defined the company’s early history and garnered him a large customer base on campus.

While Michael promised his parents he’d focus on medicine, by 1985, Michael’s business was bringing in $232,000 annually in today’s dollars. They urged him to stop, but Michael had tasted success and knew there was a market for what he could offer.

Going against his parents' wishes, Michael dropped out of college during his freshman year and opened up an office space near campus. That year, he designed the Turbo PC, which became very successful.

The firm initially sold computers by phone, first focusing on customer experience and efficiency, which characterized Michael’s early success. Dell (then PC’s Limited) offered risk-free returns and a toll-free technical support service—the first of its kind.

Dell’s early marketing strategy wasn’t new but aligned well with their target audience. The firm “started with little tiny ads in computer magazines that appealed to business people.” In 1988, at just 23 years old, Michael changed the firm’s name to Dell Computer Corporation and took the firm public.

By 1991, Dell was doing $676 million in business. Dell computers were “twice as fast. [Their competitor’s computer] was $3,995 and ours was $1,995,” causing customers to flock to the firm, eager to capitalize on their low prices. Low costs yielded Michael much of his dorm room business, and he continued scouring the operations and supply process, keen to remain faithful to the firm’s original USP.

Michael’s curiosity led him and his firm to new opportunities, one of which was selling computers online. Like Oracle, Dell isn’t reactive or responsive but predictive: Understanding the increasing presence of e-commerce, Dell became among the first firms to sell computers online in 1996.

This move defined the firm’s innovative reputation—other companies noted Dell’s $18 million in online sales per day and followed suit.

It wasn’t all smooth sailing for Dell: Michael stepped down as CEO in 2004, causing a downward spiral in the firm’s presence and stock price. The 2007 financial crisis weakened the business, and Dell laid off hundreds of employees in response.

After a few years of turmoil, Michael returned to being CEO and began a long reinvention process called Dell 2.0. Instead of jumping onto the smartphone craze, acquisition to expand services became Dell’s game.

Michael says, “[Smartphones] don't do everything that needs to be done. Three-D printing, virtual-reality computing, and robotics are all controlled by PCs.”

Michael returned to what spurred his decisions in the 1980s—efficiency. To achieve efficiency again, he implemented lean production processes and cut thousands of employees and executives.

The move was ultimately successful, and today, with “productivity grounded in the PC,” Dell does 88 billion (2023) in revenue, with most of its business coming from its Client Solutions Group ($49 billion).

While the firm is currently experiencing a revenue downturn (~13% YOY), Dell anticipates its AI sector growing significantly based on 40% growth in orders throughout 2023.

To maintain its B2B clients, Dell focuses on effective communication and client relationships. Dell’s marketing is heavily data-driven, focusing on D2C, customization, and investing in brand identity.

Here’s what we can learn from Dell about curiosity, failure, and lean operations.

Lessons

Be relentlessly curious. As founder Michael Dell says, “Each day that you’re moving toward your dreams without compromising who you are, you’re winning.” Dell is deeply entrenched in curiosity, a trait it gleans from its founder. Throughout his life, Michael embraced curiosity, finding inspiration in books and old computers. Curiosity led him to start his own business, and led him to drop out of school against his parents' wishes. As a firm, curiosity inspires Dell to exploit underdeveloped avenues, like selling computers online. But this isn’t what sets Dell and its founder apart from the rest: It’s risk. Curiosity is inherently risky, especially considering the potential time and resources wasted if an idea becomes intangible or unprofitable. Dell has taken various risks over its lifetime, and some of these resulted in failures and difficult times. For Dell, this isn’t bad: Michael Dell says, “The best leaders assess and identify their mistakes quickly and work to transform those faults into an opportunity to improve their people, products and services.” Strong leaders have a propensity for failure, understanding its integral role in general growth—this is bred from curiosity, an important trait for every startup founder and a hallmark of Dell’s culture.

Failure uncovers mistakes. Dell has made many mistakes over its tenure, one of which was its reliance on a direct-to-consumer model. However, I think the company’s relationship with R&D is the most prominent example of how Dell copes with mistakes. For years, Dell relied on supply chain efficiency to sell established technology at lower-than-average costs; the company wasn’t known for innovation and spent relatively little on R&D compared to its competitors. As a result, many analysts in the mid-2000s disparaged Dell for this practice. This and emerging technologies resulted in broader consumer shifts and emphasis on companies like Apple, which were constantly innovating. While Dell’s horizontal organizational model had worked well for the firm and yielded low operating margins, the firm could no longer make inroads into more lucrative technology segments. The firm’s failure was clarified in its stock prices, aggravated by low sales, so Dell reconfigured. Today, the firm invests in R&D to stay competitive with industry giants like Apple and IBM. this is just an example, but learning from failure is among the most important lessons to learn from Dell’s history. While the firm hasn’t gone entirely unscathed by organizational shortcomings and mistakes, Dell corrects each time, using each as a learning opportunity. More importantly, Dell doesn’t overcorrect following failure. While most firms tend to shift radically, Dell remains resolute, understanding the importance of focus combined with accountability and strategic pivots.

Use lean operations to navigate economic turmoil. When Michael Dell returned to the firm, he quickly noted economic unrest on the horizon. While Dell wasn’t unfazed by the economic downturn in 2007, Michael implemented a lean business model, which the firm used to navigate general tumult. As part of implementing this model, which he called Dell 2.0, he let go of many vice presidents and senior managers, calling the reconfigured model “bureaucracy.” Michael Dell heavily shifted the firm’s operations model: Previously, it used a ‘configure to order’ model for its PCs but adopted a less customizable manufacturing plan to cope with the resources lost with their previous methodology. Turmoil unveils organizational mistakes, particularly in overhiring and operations. For Dell, a lean business model became the glaring solution to resource overuse. Furthermore, the model made Dell significantly more agile, a quality the firm often highlights in its marketing collateral. Agility allows Dell to navigate times of unrest better and shift with market changes, both of which are highly important in the context of B2B sales.  

A strong leader with a clear vision yields success. Michael Dell is the epitome of a strong leader. After he left his role as CEO in 2004, Dell faced a significant shift in its customer base, causing lagging PC prices. The few years that followed were tumultuous for the firm, and its stock price reflected this. The firm went through a few restructurings, trying to regain its footing, but still, poor sales continued until Michael Dell returned in 2007. Michael Dell is a highly competent leader with a singular focus for his firm. In other words, Michael Dell is Dell: As the firm’s founder, he has the clearest understanding of his firm’s inner workings, with a strong knowledge of what it takes to succeed. Strong leaders are relentlessly humble and optimistic, building trust within an organization and yielding high returns on an employee level. He’s also encouraging, further building trust between employees and with him as the firm’s leader. Furthermore, he has drive and vision, each a crucial component of strong leadership. He carefully outlines success indicators and trusts in his vision enough to yield calculated wins. Today, Michael Dell remains heavily involved in his business, providing a solid vision for the future of Dell.

Keep a direct focus on shifts in the market. Michael Dell says that the strongest firms stay “attuned to what's going on and understand how the environment is evolving and what you need to do to stay relevant but increase your relevance.” As a firm, Dell has learned this lesson more than a few times; in the past, the firm’s focus has wavered, which kept Dell in the dust regarding new consumer trends. For example, in the late 90s and early 2000s, Dell used a direct sales model to garner customer interest and boost consumer insight. Despite the model’s efficacy and insights, Dell faced issues in the 2000s as more consumers sought to purchase computers in electronics and retail stores. Without a robust retail presence, Dell was left in the dust. In response, Dell sought to reach customers another way: opening mall kiosks and retail stores. This is just one example; more recently, Dell has faced issues competing with smartphones and tablets but remains unwavering in their development of PCs. This is one of the most important takeaways from Dell: Keep a focus on consumer trends while working toward organizational goals. Dell doesn’t allow what’s happening in the market to change their focus; instead, they allow market shifts to inform their focus. This model breeds trust within an organization and maintains aligned resources. It also allows firms to shift if necessary while keeping their strong footing.

Speeches

• Michael Dell, Dell Technologies | Dell Technologies World 2022—CEO examines the firm’s next steps.
• Michael Dell: A.I. is about how we augment human capability & make all of humanity more successful—How Dell approaches AI.
• The Dell Success Story-Michael Dell Speech—CEO explains how the firm was founded.
• Computer pioneer Michael Dell looks to the future—The firm’s growth strategy.
• Dell Technologies CEO: Not Just a PC Company | Mad Money | CNBC—The firm’s future projections.
• Michael Dell, Founder of Dell — How to Play Nice But Win | The Tim Ferriss Show—CEO’s interview and key advice.
• Michael Dell on Calculating Risk and Focusing on What You Control—CEO discusses Dell’s risk strategy.
• Michael Dell: Growth Rate Accelerating as Private Company—CEO speaks on growing the firm.

Videos

• What Happened To Dell?---Examines the firm’s more recent practices and strategies.
• Rising Above The Rest - How Dell Started—Dell’s founding story.
• The Decline of Dell...What Happened?---Examines shifts in the firm.
• How He Built The Biggest Computer Company In The World–How Dell’s CEO built the firm and key business information.

Book Recommendations

• Direct From Dell—A look at the firm’s founder.
• Play Nice But Win: A CEO's Journey from Founder to Leader—The firm’s CEO’s key wisdom and strategy.
• Beyond the Boardroom: Insights into Michael Dell's Leadership and Innovation—Examines the CEO’s leadership strategies.
• Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell—How Dell builds customer relationships.

Further Readings

• What You Don't Know About Dell—A revealing company profile.
• Deal Of The Century: How Michael Dell Turned His Declining PC Business Into A $40 Billion Windfall—Dell’s landmark recovery strategy.
• Dell’s Great Success Story—An extensive company profile.
• Dell Learns to Listen—How Dell copes with business failures.
• Dell Inc (Nasdaq)---Points to lessons learned.
• Dell revenues slump as tablets and smartphones eat into market—How Dell copes with the smartphone craze and modern technology.
• The Birth of a Company—Dell’s company history.
• The Golden Age of Dell Computers—Breif firm history and overview.
• Michael Dell's dilemma—The firm’s competitive strategy.
• The Dell dilemma—How the firm recovers.
• Dell Focuses on Direct and Retail Business, Closes Kiosks in U.S.---Dell’s shifting business strategy.
• It's Dell vs. the Dell Way—Dell’s sales strategy.
• Suit Over Faulty Computers Highlights Dell’s Decline—How the firm copes with failure.
• Michael Dell founded his $102 billion company—once the world’s largest PC maker—as a 19-year-old in his college dorm. Here’s his secret to actually making it big—The firm’s founding story.
• The Dell dream dies—Key failures and learning moments.
• The Dice Are Rolling on Dell’s Legacy–A look at Dell’s role in the shifting tech industry.
• Dell Inc.---A biography of the firm.
• Dell to go private in landmark $24.4 billion deal—Details key moment in the firm’s history.
• Dell Closes $60 Billion Merger with EMC—Dell’s major merger.
• Dell headquarters now carbon-free—The firm’s sustainability strategy.
• How Dell conquered India—The firm’s globalization strategy.
• Market Making in the PC Industry–Examines Dell’s cultural influence.
• Dell makes grab for market share—How the firm claims market share in big tech.
• The new Dell Technologies: 6 things you need to know—Current business strategy and key profile.
• Giant of the PC Industry—How the firm’s founder built Dell’s empire.