Concept Summary of Direct From DELL Strategies That Revolutionized an Industry By Michael Dell

Scott Smith

High Technology Marketing

Timeline
1980 1983 Purchased first computer and takes it apart Wanted to beat IBM, Sells upgraded PCs out of UT Dorm Room 1984 Registers Dell Computer Corporation DBA PCs Limited Sells Direct to end users 1986 12 mhz 285 based system. 30 day money back guarantee 1987 International subsidiary in UK 1988 Initial IPO $30 million 1989 Accumulates excess inventory 1990 First to sell through retail CompUSA, Best Buy, WalMart 1991 Converts entire line to 486 high technology priority 1993 $2 Billion in sales
Scott Smith High Technology Marketing

Timeline
1994 1996 1998 Launches Latitude Notebook Setting new records on battery life. Introduces PowerEdge servers for small and medium server markets Solidifies internet market. $12 million per day from customers. Sets up supplier network.

Scott Smith

High Technology Marketing

Dells Entrepreneurial Spirit

Dells Stamps: Eliminate the Middleman

Look for a Commercial Opportunity The power of catalog advertising Newspaper Subscriptions Identify Segments of High Demand and High Revenue: People who just moved or just married Generate the Lists and Target them Turn Fascination to Hobby and to Business

Scott Smith

High Technology Marketing

Dell Computer
Goal: Build a Better Computer than IBM

Driving Passion: How can we make the process

of buying a computer better? Sell Direct Eliminate Reseller Markup Pass Savings to the Customer

For Dell, the timing was right: the beginning of a new consumer industry: Continued high growth and limited supply

Scott Smith

High Technology Marketing

Strategic Questions

Where are we today?

What do we think it will become?

Where do we want it to go? What opportunities can take us there?

How can we take advantage of them?

Then make a wish list...

Scott Smith

High Technology Marketing

Customer Lessons Learned

Form a direct model that specializes on

market segments or customer types. Know EXACTLY what the customer wants and then provide it. Price is not a sustainable competitive advantage. Sustain loyalty through customers and employees Response Time Quality Products Valuable Features Make the Experiencing of Products EASY
Scott Smith

High Technology Marketing

Key Actions
30 Day Guarantee (Industrys First)

Performance Leader (Competitive

Reviews) Award Winner for Quality, Support, Service Best Value Awards, Highest Performance Awards

Scott Smith

High Technology Marketing

Market Lessons Learned

You must target large Gradual improvements

companies to grow Provide the Best Support Engage in Global Expansion Features must compel the customer to buy Inventory flow speed is the key to survival Identify problems early and then fix them Involve your customers early in development

reduce risk and allow you to take advantage of technology It is hard to notice how fast or slow you are growing Read the market and then try to understand what it means Understand the economies of each segment: Product, Use, Geography, Customer, etc. Measure everything to build improvement. Facts are your friend.

Scott Smith

High Technology Marketing

Analysis is Key
There is no system that does not produce enough data to diagnose its own inefficiencies. Define Your Goals: Market Penetration, Growth Rate,

Profitability, Sales Force Productivity, Service Level Performance Analyze Goal Progress by Product, Customer, Geographic Area Compare Sales with Total Market Sales, Examine Share, Growth and then understand what is driving us, how to do more, and where next?

Eliminate Resellers Eliminate Channel Inefficiencies Speed the manufacturing process Add Velocity less time in channel steps Squeeze investment and inventory out of the channel: 1993 $ 2.9B sales, $220m Inventory 1998 $12.3B Sales, $230M Inventory

Scott Smith

High Technology Marketing

Dell Market Structure Changes Over Time

Scott Smith

High Technology Marketing

Managerial Lessons Learned

Hire people for potential to grow and develop: Self

Reliant, Results Oriented, Driven to Lead. Recruit for succession (Train them to replace you) Stress Achieving Goals. Accountability for Results 360 degree reviews. Responsibility to one another Do Not Hoard Power Implement through Dual Reporting: By Function, Market, Product Make successes a win for the entire company through communications
High Technology Marketing

Scott Smith

Key Recruiting Issues

Can they think in economic terms?

What is their definition of success?

How do they relate to people? Do they understand the strategy of the

business they are involved in? Do they understand our business?

Scott Smith

High Technology Marketing

Talking to Employees
What are customers telling you?

How do you think the companys products

are doing? What are our biggest challenges? What are the biggest threats to our success? How can the company support you better? Keys: Mobilize people around a common goal, hire ahead of the game, cultivate a commitment to personal growth, get them involved.
High Technology Marketing

Scott Smith

Train Employees to be Owners

Look at goals, make them clear to everyone.

Study the obvious for non-obvious solutions

Ask customers how they would have it solved. Make failures with learning acceptable Constantly question even good stuff. No cover up. Treat employees as owners.

Scott Smith

High Technology Marketing

Dell Market Coups

12 Mhz 80286 Computer

doubles IBMs 6 Mhz speed. Analysis: Technology enthusiast market wanted speed most of all. Laptops:Lithium Ion doubles battery life Analysis: Laptop owners want long life batteries. Dell Tied up whole channel by contracting SONY to manufacture. Dell Introduced, chartered plane for reporters and analysts, gave them a laptop and flew to Los Angles 4 1/2 yours later, they still had power. Great PR

Low and Medium Size Server

Market Analysis 1: Servers have higher margins Analysis 2: Competitors were treating servers as a cash cow for feeding the PC market. Dell entered market at about 20% lower price and told customers even if you dont buy from Dell, ask your vendor to match Dells price. Server Dropped 17 percent in one year and reduced the size of the cash cow for competitors.

Scott Smith

High Technology Marketing

Enter the Web

Increases Speed to Market

Speeds Information Flow

Enables Superior Customer Service. Provides a High Quality Product

Gives Customers Direct Access to Custom

Made Systems for High Performance Provides the Latest Technology relevant to that customer.

Scott Smith

High Technology Marketing

Enter the Web

Dell Premier Pages:

Technical Support Diagnostic databases On-Line Ordering Special Pricing Key: Shrink time and required resources to meet customer needs.

Scott Smith

High Technology Marketing

Market Strategy

It is better to be first at the risk of being wrong than it is

to be 100% perfect two years too late. If customer demand changes, ask WHY? Challenge them to understand why? (understand the underlying economics from the standpoint of capital, supply chain, technology, market trends). Dont perfume the pig: Dont make something appear better than it is. If you accept status quo as good enough, you are managing in the rear view mirror. If we have a problem we have to fix it. We know if we dont, someone else will. Elevate a win to company wide accomplishment

Scott Smith

High Technology Marketing