Vincent Hills

TIM530
Professor Pillai

Case Analysis 1: Product Development at Dell Computer Corporation

1.What competitive forces are shaping the computer industry in 1993?

In 1993, personal computers were beginning to take hold of the computer industry.

Companies joining the space were Apple, Compaq, and IBM. Other companies even attempted

to imitate Dell such as Gateway 2000 and CompuAdd. The next big innovation in the industry

was the portable computer. At the time, portables were classified as laptops if they weighed

between 4.5 and 8 pounds. By 1993, there was a greater demand and market for these portable

machines with a market share higher than that of desktops, around 3-5%.

2. What has been the state of Dell prior to and in 1993? Its financial situation? Its customer
base?
Dell was started in 1983 by Michael Dell. He began by upgrading already existing IBM

compatible PCs, and then switching to assembling the parts and selling them under his name. In

its first month of business, Dell made $180,000. By 1985, Dell had grown to $6 million. New

markets spurred Dell’s annual sales from $890 million in 1991, to more than $2 billion a year

later.

Initially, Dell sold computers door to door to local businesses. It relied on building customer

relationships to spread the word of their business. This strategy helped cut out the middleman,

thus lowered costs. It is evident that Dell preferred the direct relationship with their customers,

however, given the market, it was not sustainable long-term.

3. What was the state of Dell’s Product Development process prior to 1993?
Because of Dell’s strategy of commoditization, their research and development budget was

smaller than most large computer firms. It went hand in hand with Michael Dell’s philosophy of

spartanism that permeated the entire organization. Additionally, prior to 1993, Dell’s

development was an informal process, run by autonomous teams that often centered around

experienced developers. Although this led to the delivery of several successful products, the

results weren’t consistent or predictable. Their project teams often didn’t agree with a potential

product’s vision.

4. Why has Dell’s senior management introduced the new 18-month development process?
What problems are they trying to solve with the new process? How will the new process
address these problems?
Due to Dell’s inconsistency in development early on, some experienced managers began

advocating for a more structured approach. They began to organize product development around

“core teams” of development professionals from several different functions. Every three months,

phase reviews took place where development work was to be reviewed. This new process was

installed to increase team cohesiveness, as well as to create better products. The new process will

hold more project team members accountable, because inherent to the process is the goal of a

shared vision.

5. The first challenge to the new process takes place in Dell’s Latitude project. What should
Holliday decide with respect to the battery – NiHi , Lithium Ion, or defer commitment by
nine months?
Holiday should decide to use Lithium-Ion batteries. Although Lithium Ion has more financial

risk compared to NiHi and deferment, Dell had already lost considerable trust amongst its
customers in terms of portable computer quality. Lithium Ion would be a large differentiator,

potentially attracting customers. Dell’s market position during the Latitude project was fourth

among the large computer manufacturers. Lithium Ion was poised to change the market of

portable computers. Consequently, the better long-term decision in regard to the Latitude project,

is to utilize the new Lithium-Ion technology.