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Don't Look For Dell's Secrets Here


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Don't Look for Dell's Secrets Here

DIRECT FROM DELL

Strategies That Revolutionized an Industry

By Michael Dell with Catherine Fredman

HarperBusiness 236pp $26

Talk to executives in the computer industry, especially in PCs, and it seems as if everyone wants to be like Mike--Michael S. Dell, that is, the 34-year-old CEO of giant Dell Computer Corp. Rivals such as Compaq, IBM, and Hewlett-Packard are tripping over themselves to embrace elements of the direct-sales model that made Dell Computer into one of the past decade's biggest high-tech success stories. Not even Dell's recent sales slowdown--from a heady 56% growth rate to 38%--tarnishes Michael Dell's story. Nor can rivals expect to get a breather.

From such a titan, readers might anticipate a landmark account--one that would offer insight into his management style. Or one might expect, as Direct from Dell's dust jacket claims, that Dell will lay out "a new model for doing business in the information age." After all, the author is helped by Catherine Fredman, who worked with Intel Chairman Andrew S. Grove on his acclaimed bestseller, Only the Paranoid Survive.

Direct from Dell, however, is a disappointment. It's an easy read, and it does present some of the thinking that went into building one of the world's most successful companies. Early on, this dean of direct sales discovered that he could get closer to consumers--and learn lots about them--by cutting out the middleman. And with the direct approach, he would not need huge inventories.

But unless you've been on a steady diet of Elmore Leonard novels, you're likely to find the strategies Dell applied to "revolutionize an industry" pretty familiar. Indeed, each of them, including his decision to eliminate a step in the assembly process by having PCs and monitors shipped separately to customers from their respective factories has been widely reported. Most disappointing is that the book provides little new insight--into Dell, the computer industry, or electronic commerce.

The author recounts his personal story, by now the stuff of legend. At 12, Dell learned his lesson on avoiding the middleman: With a buddy, he decided that, instead of buying stamps through others' auctions, he would start his own auctions. He made $2,000. Later, in 1984, as a University of Texas student with $1,000 in hand, he began assembling PCs in his Austin dorm room. The business boomed, and he dropped out of school. Working hard, and with only one major misstep--for a brief period in 1993, the company hoarded too much inventory--he built Dell into the $18 billion powerhouse that it is today. By his calculation, Dell stock has risen 36,000%--that is, to 360 times its original value.

Out of this history emerges what is perhaps the most distressing element in Direct from Dell--a flood of cliches. Sample: "The ability to find and hire the right people can make or break your business. It's as plain as that." Yes, it is. Or: "If you accept the status quo as `good enough,' you're managing in a rearview mirror." This is the stuff of revolutions?

A reader keeps hoping that Dell will dish a little dirt--or offer some insight into his competitors. After all, the rivalry with Compaq is one of the most intense in the industry. But there's no Compaq dirt and no analysis of Compaq's move into direct sales. Even when Dell has an opening, as when mentioning a 1997 rally held by Apple Computer CEO Steven P. Jobs to announce his company's foray into direct sales, the author drops the ball. There's no mention of how Jobs waved before his troops a photo of Michael Dell superimposed with a bull's-eye. Instead, Dell blandly writes: "We reacted by continuing to do what we always have: focusing on the customer, not the competition." He would hardly have had to leave this high road to assess his rival's maneuvers. Apple's direct sales haven't made a headline since. Why, Michael?

Still, there are nuggets. Dell reports company sales of $12 million a day through its Web site. Dell's site is one of the few profitable ones--and has been from its beginning, in 1994. Dell was also one of the first companies to recognize that the Internet should be used not to push product at customers but to create strong ties with them. Thus, in a brilliant move, it gave individual and corporate customers the ability to price various configurations of a machine online. The lesson is valuable for today's scores of E-commerce startups.

Even some of Dell's platitudes are backed up with illuminating examples. "By spending time with your customer where they do business, you can learn more than by bringing them to where you do business," he writes. Visiting British Petroleum Co. in London, for example, Dell watched workers configure their machines with new software and networking capabilities--at considerable cost. BP asked Dell if he could do the work for them. The result was a new multimillion-dollar business involving many such customers.

Dell ends his book with a discussion of what must be on the minds of many investors: Can his company continue to expand revenues by more than 50% each quarter? Dell admits no company can do that. But he then goes on to explain how Dell can continue to grow faster than the industry: With higher-margin products such as workstations and storage products, say, or by moving into untapped markets such as China. Some of Dell's goals are probably attainable. But as the ranks of Mike wannabes continues to swell, it will be a challenge to keep defying gravity.BY IRA SAGERReturn to top


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