Michael Dell

In 1984, Michael Dell, then a college student, started selling personal from his
dorm room. He didn’t have the resources to make computer components, so he
let others do that, choosing instead to concentrate on selling the computers. And,
unlike the major computer producers, he didn’t sell to dealers. Instead, he sold
directly to PC buyers, eliminating some intermediaries, which allowed for lower
cost and faster delivery. Although direct selling of PCs is fairly commonplace now,
in those days it was a major departure from the norm.

What did dell do that was so different from the big guys? To start, he bought
components’ from suppliers instead of making them. That gave him tremendous
leverage. He had little inventory, no R&D expenditures, and relatively fewer
employees. And the risks of this approach were spread among suppliers. Suppliers
were willing to do this because Dell worked closely with them, and kept them
informed. And because he was in direct contact with his customers, he gained
tremendous insight into their expectations and needs, which he communicated to
his suppliers.

Having little inventory gave Dell several advantages over his competitors. Aside
from the lower costs of inventory, when new, faster computer chips became
available, there was little inventory to work off, so he was able to offer the newer
models much sooner than competitors with larger inventories. Also, when the
prices of various components dropped, as they frequently did, he was able to take
advantage of the lower prices, which kept his average costs lower than
competitors.

Today the company is worth billions, and so is Michael Dell.