j Case with questions Michael Dell

Born in 1965, Michael Dell is one of the richest men in the world with a fortune in excess of
$17 billion. He started Dell Computers in 1984 with just $620. Today the company is worth
billions and employs some 76 500 people, globally.
His entrepreneurial career started early. At the age of 12 he made $1200 by selling his
stamp collection. At the age of 14 he devised a marketing scheme to sell newspapers which
earned him over $11 000. From the age of 15 his interest in calculators and then computers
started to grow. He started buying microchips and other bits of computer hardware in order
to build systems because he realised that he could buy, say, a disk drive for $500 which
would sell in the shops for $1800. In 1983 he began a pre-med degree at the University of
Texas but dropped out fairly quickly to set up his own business selling computers direct to
end-users.
From the start Michael Dell knew the critical success factor for his business. He used an
expert to build prototype computers whilst he concentrated on nding cheap components
so he could keep prices low. The rm grew at an incredible pace, notching up sales of $3.7
million in the rst nine months. The company went on to pioneer direct marketing in the
industry and integrated supply chain management, linking customers orders and suppliers through the internet both strategies helping to keep those prices low. At all times

P. Burns, Entrepreneurship and Small Business, 3rd edn Palgrave Macmillan, 2011

the focus on a low-cost/low-price marketing strategy has been maintained. The business
model has been consistent and followed relentlessly:
> Sell directly to consumers;
> Keep prices low and quality high;
> Offer solid technological support to customers.
We built the company around a systematic process: give customers the high-quality
computers they want at a competitive price as quickly as possible, backed by great
service.
A custom-built Dell computer is shipped within 36 hours of being ordered through the
companys website or by phone. The company maintains an extremely low inventory of
computer parts, sufcient at any time to meet only a few days of orders. This strategy not
only reduces costs but also the need for warehouse space as well as ensuring only the
most up-to-date parts are in stock. The companys steady growth rate has been achieved
by expanding its customer base in the USA and overseas selling not just to individual
consumers but also to large and small companies, educational institutions, and government agencies. The company has also expanded its product portfolio to include network
servers, storage systems, handheld computers, HDTVs, cameras, printers, MP3 players
and printers all built by other manufacturers.
We were moving in the right direction with our emphasis on liquidity, protability
and growth. But we were also challenged by a cultural issue. We had created an
atmosphere in which we focused on growth We had to shift to focus away from an
external orientation to one that strengthened our company internally.
For us growing up meant guring out a way to combine our signature informal, entrepreneurial style and want-to attitude with the can-do capabilities that would allow
us to develop as a company. It meant incorporating into our everyday structures the
valuable lessons wed begun to learn using P&Ls [prot and loss accounts]. It meant
focusing our employees to think in terms of shareholder value. It meant respecting
the three golden rules at Dell:
1. Disdain inventory.
2. Always listen to the customer.
3. Never sell indirect.
Dells mission is to be the most successful computer company in the world at delivering the best computer experience in markets we serve. In doing so, Dell sets out to meet
customer expectations of:
> Highest quality;
> Leading technology;
> Competitive pricing;
> Individual and company accountability;
> Best-in-class service and support;
> Flexible customization capability;
> Superior corporate citizenship;
> Financial stability.
Dell calls its corporate philosophy the Soul of Dell. It sees its core elements as:
> Customers We believe in creating loyal customers by providing a superior experience at a greater value. We are committed to direct relationships, providing the best
products and services based on standards-based technology, and outperforming the
competition with value and a superior customer experience.

P. Burns, Entrepreneurship and Small Business, 3rd edn Palgrave Macmillan, 2011

> The Dell team We believe our continued success lies in teamwork and the opportunity each team member has to learn, develop and grow. We are committed to being a
meritocracy, and to developing, retaining and attracting the best people, reective of
our worldwide market place.
> Direct relationships We believe in being direct in all we do. We are committed to behaving ethically: responding to customer needs in a timely and reasonable manner;
fostering open communications and building effective relationships with customers,
partners, suppliers and each other; and operating without inefcient hierarchy and
bureaucracy.
> Global citizenship We believe in participating responsibly in the global market place.
We are committed to understanding and respecting laws, values and cultures wherever we do business; protably growing in all markets; promoting a healthy business
climate globally; and contributing positively in every community we call home, both
personally and organizationally.
> Winning We have a passion for winning in everything we do. We are committed to
operational excellence, superior customer experience, leading in the global markets
we serve, being known as a great place to work, and providing superior shareholder
value over time.
Michael Dell has always been keen on developing
relationships with customers, employees and suppliers. This underpins his direct selling strategy and
his integrated supply chain network. Dell has been a
pioneer of e-business. What makes Dell special today
is its fully integrated value chain B2B2C. Suppliers,
including many small rms, have real-time access
to information about customer orders and deliveries
via the companys extranet. They organise supplies of
Courtesy of Dell Inc.
hard drives, motherboards, modems and so on, on a
just-in-time basis so as to keep the production line
moving smoothly. From the parts being delivered to the orders being shipped out takes
just a few hours. Inventories are minimised and, what is more, the cash is received from
the customer before Dell pays its suppliers. Dell have created a three-way information
partnership between itself and its customers and suppliers by treating them as collaborators who together nd ways of improving efciency.
The best way I know to establish and maintain a healthy, competitive culture is to
partner with your people through shared objectives and common strategies Dell
is very much a relationship orientated company how we communicate and partner
with our employees and customers. But our commitment doesnt stop there. Our
willingness and ability to partner to achieve our common goals is perhaps seen in its
purest form in how we forge strong alliances with our suppliers.
Michael Dell has moved from being an entrepreneur, wheeling and dealing in cheap
components, then innovating in direct marketing techniques, to being a visionary leader,
understanding where his competitive advantage lies and then putting into place the systems and processes to keep his company two steps ahead of the competition. However, it
has not always been like this. Michaels managerial experience was extremely limited. In
the early days he was said to be most comfortable with the companys engineers. Although
those who worked with him closely described him as likable, he was so shy that some
employees thought he was aloof because he never talked to them. It was probably Lee
Walker, a mature venture capitalist brought in during the companys organisation-building
years, who gave Michael the insight into management and leadership that he needed and

P. Burns, Entrepreneurship and Small Business, 3rd edn Palgrave Macmillan, 2011

The right people in the right jobs are instrumental to a companys success If you
assume that people can grow at the same rate as your company and still maintain
the sharp focus that is critical to success you will be sadly disappointed. When a
business is growing quickly, many jobs grow laterally in responsibility, becoming too
big and complex for even the most ambitious, hard-working person to handle without sacricing personal career development or becoming burned out The ability to
nd and hire the right people can make or break your business. It is as plain as that.
No matter where you are in the life cycle of your business, bringing in great talent
should always be a top priority.
He is an accomplished speaker and his quiet, reective manner now gives him an air of
maturity. However, this probably disguises the competitive personality who has taken risks
to make his business grow.
Communicating is one of the most important tools in recovering from mistakes.
When you tell someone, be it a designer, a customer, or the CEO of the company,
Look, weve got a problem. Heres how were going to x it, you diffuse the fear of
the unknown and focus on the solution.
In 2004 Michael Dell stepped aside as CEO of Dell while retaining his position as
Chairman of the Board, Kevin Rollins became the new CEO. But under Kevin Rollins the
company struggled revenue targets were missed, the share price suffered and Dell lost
its coveted number one position in the PC market to Hewlett-Packard. In 2007 the board
decided it wanted Michael Dell back as CEO.
According to Director magazine (April 2009) Kevin Rollins had kept an emotional distance from staff and Michael Dells team building track record made him ideal to glue
the company back together again. However, it reported that John Enck, managing vicepresident of research analysts Gartner, thought Michael Dell had changed his management
style to become more inclusive: Ive seen a big difference in the two reigns The leadership of Dell isnt as autocratic as it used to be. When Michael was originally CEO he was
the decision-maker. Coming back, he created a leadership board and did a very good job of
delegating decisions and responsibility to his executive team. That will theoretically allow
Dell to be more nimble. Director magazine also reported that Michael Dell did not agree:
That question assumes that during the entire 20-year period I only used one approach,
which would be wrong. I constantly adjust my approach and way of doing things based on
all the inputs and opportunities that I see.
Michael has reverted to his tried and tested strategies: cutting
costs, improving customer service (which had slipped very noticeably), introducing new products and investing in innovation. By 2009
he had made ten acquisitions, cut more than 10 000 jobs, outsourced
40 per cent of production and entered the smart phone market in
China. Product inspiration now also comes from a Dell community
website www.ideastorm.com that allows customers to identify
and vote on new lines, while also rating current ones. The goal is
to diversify beyond the mature PC market, which still accounts for
more than half of revenues, into new markets such as computer
storage and services. At the same time Dell is trying to enter new
market sectors for example by the purchase of Perot Systems in
2009 which enabled it to enter the health care sector.
Courtesy of Dell Inc.
Will Michael Dell pull his company around? Time will tell.
1 Up-to-date information on Dell can be found on their website: www.dell.com

QUESTIONS
1 What characteristics of an entrepreneur and a leader does Michael Dell exhibit?
2 Why has Dell been successful, at least until Michael Dell stepped down as CEO?
3 What do you think about Michael Dells nal comments on varying his management style?

P. Burns, Entrepreneurship and Small Business, 3rd edn Palgrave Macmillan, 2011