Michael Dell

Rule 1 - Build Byte By Byte

“I've learned from experience that a company can grow too fast,” says Dell. “You have to be careful about expanding into new businesses because if you get into too many too quickly, you won't have the experience or the infrastructure to succeed.”It is said that there are two basic types of entrepreneurs. There is the roving deal junkie, who engages in a never-ending search for new deals and markets. Then, there is the methodical optimizer, who takes one good idea and works it to death. “I’m not a deal junkie,” says Dell. It is this quality that is perhaps the secret of Dell’s success. Once he knew he had landed on a great idea, Dell stuck to it. The few times he chose to veer off course, his company suffered. Dell learned from the mistake and would never make it again. For over 20 years, Dell has made the concentration of his company on the building of quality, custom-made computers to be sold directly to customers at a lower price than his competitors. That was what he was known for and that was what he excelled at. In 1991, Dell veered off course. He decided to expand his company and try selling products through computer superstores and warehouse clubs. The experiment failed. Looking back on that experience, Dell says, “It was just a bad chapter of the company’s history…[It] was both a violation of our core business strategy and incredibly confusing to our organization.” But, Dell took what he could from that mistake. “What's interesting is that when we corrected it, there was almost a galvanizing force on the culture and on the strategy of the company,” he says. “Because it became crystal clear to everyone what the strategy was and how we're going to execute, and it was reinforced with great success and growth.”Critics point to the lack of innovation occurring within Dell. In its first twenty years, Dell Computer had been awarded just 867 patents – less than the total many of its closest competitors receive in a single year. Skeptics also claimed that Dell was simply filling a niche market, which would soon expire. But, unlike in 1991, today, Dell knows his company’s place in the industry. Dell is no longer trying to go retail and he’s not trying to compete with the likes of Microsoft. Instead, Dell is focusing his company on what it’s done best since its inception, providing customized Dell computers direct to customers. And, since it uses standardized components, it admittedly doesn’t need to spend money on research and development. “Fortunately the niche became the whole market,” says Dell. “So our focus on executing the business model after that misadventure turned out to be a powerful force for us.”Dell’s direct business model – with no inventory and no middlemen – has withstood the tests of time and critics. By narrowing his focus, building up slowly and learning from his mistakes, Dell has transformed and revolutionized the industry.

Rule 2 - Develop a Customer-Focused Philosophy

“Let’s say you decide to buy a car – red, two-door,” says Dell. “All sold out – four months to get one – but a really convincing salesperson talks you into the blue, four-door and probably the rust-proofing too. The salesperson gets a nice commission, when she actually sold you a car you didn’t want. Then, the dealer sends a signal back to the factory that blue four-doors are selling really well – build some more!” Contrary to this, Dell’s philosophy is that, “We’ll listen, and we’ll respond…It’s about the customer. It’s that simple.”From day one, Dell has built his company up on the premise that what the customer says, goes. When he first started Dell Computer at the age of 19 in his University of Texas dorm room, Dell says his concept was simple: buy parts, assemble them, and sell the finished products directly to customers. He effectively eliminated big distributors and was able to reduce the end price he could charge. “You tell us what you want – how fast you want the programs to operate, how much memory, how expandable – and we will build it for you and ship it out, usually within three days,” he says. “And if ever you have a question or a problem about your system, you call us direct. We take direct responsibility for the complete satisfaction of each and every customer.”After his company had been in business for three years, Dell created the industry’s first on-site-service program. If there was a problem with your computer, you didn’t have to return to the store to have it looked at. You simply called Dell and a serviceman would come to your house and fix it. “That was a pretty important plus because we didn’t have any stores,” Dell jokingly recalls. Dell claims that his company operates on a relatively simple concept: “The most important thing is to satisfy our customers,” he says. “The second most important is to be profitable. If we don't do the first one well, the second one won't happen.” Thus, the focus of his company remains on concrete issues, such as improving delivery time, cutting operating costs and maintaining customer service. Dell believes in the importance of adding value “beyond the box”, looking at the customer’s total experience. To this end, he often aligns his company with complementary partners for increased efficiency. Today, Dell builds computers only in response to orders that the company has actually received from users, either by phone or the Internet. Users are able to dictate the company’s supply, relieving Dell of the risk that comes along with trying to predict market demand in the extremely unpredictable computer industry. Because Dell customizes its products, the company is also able to provide unmatched levels of customer service. For instance, on October 27, 1997, after the Asian economic crisis overwhelmed Nasdaq’s online trading site, Nasdaq called Dell, which proceeded to build eight custom-made PowerEdge servers in just 36 hours. Three days later, they were up and running for Nasdaq.

Rule 3 - Build a Company of Owners

“It’s one thing to create a culture that works,” says Dell. “It’s another to use that culture to create a measurable strategic advantage. You need to engender a sense of personal investment in all your employees, which comes down to three things: responsibility, accountability, and shared success.” Dell attributes a large part of his success to his ability to create a team behind him that feels every bit as personally devoted in the company as he does. “Creating a culture in which every person in your organization, at every level, thinks and acts like an owner means that you need to aim to connect individual performance with your company’s most important objectives.” For Dell, that means using specific quantitative measurements of overall company progress towards the goals of creating the best possible customer experience and enhancing shareholder value and applying those to every employee’s performance. “A company composed of individual owners is less focused on hierarchy and on who has the nicest office, and more intent on achieving those goals,” says Dell. “At Dell, everyone is an owner.”Dell is not one to micro-manage. He believes in hiring talented people, giving them significant responsibilities and letting them carry them out on their own. With responsibility comes accountability, as well as a share in the company’s success. He maintains as open a dialogue as possible between management and staff in order to promote the free-flow of ideas and cooperation. Dell is distrustful of overly rigid business processes and encourages his company to remain “allergic to hierarchy.”“One of the typical battlefields in a high-tech company lies between R&D and manufacturing,” says Dell. “The R&D guys make a product and say, 'OK, this one's done.' The manufacturing guys see it and say: 'What are we supposed to do with this?' At Dell, all R&D managers and all manufacturing managers report to one person who makes sure that each side sees the other side's problems and challenges. They empathize. They work together as a team.” On his frequent visits to Dell plants around the world, Dell is known to go down to the production line to talk to his workers, or offer a question and answer session to the employees. Dell believes his main role as Chairman of the company is to create a strong team by giving people the freedom and the courage to take risks. “I learned very early to surround myself with talented people who challenge convention, offer new ideas, and relentlessly drive for improvement. And to let those people thrive,” says Dell. “Try never to be the smartest person in the room. And if you are, I suggest you invite smarter people…or find a different room.”Over the years, Dell has consistently been asked about when he would finally step down and let others run the company. “The truth is,” replies Dell, “other people have been helping run things at Dell for a long time. The greatest mistake you can make is thinking you can do it all by yourself.”

Rule 4 - Thrive On Change

Dell believes in the power of deriving strength from change. When speaking on the issue, he often makes a link between change and “the Chinese character for crisis which represents both danger and opportunity.” The success of his company has come about in large part due to Dell’s ability to not only withstand change, but also to take advantage of new opportunities.“The good thing about our model and our culture at Dell is that both are optimized for change,” says Dell. “In fact, both thrive on change.” If his company were unable to cope with the changing times, Dell knows he would have gone under long ago. “We dive headfirst into change,” he says. “Part of that is because it's all we’ve ever known, but it's also because today, it's a must…To thrive on change, you must understand how to give in to it, flow with it, and derive strength from it. There's no other way.”In 1994, Dell had already established himself as a major player in the computer industry. His company was doing well and its reputation was quickly spreading. But, Dell knew something big was about to shock the game. He knew that in little time, the Internet would soon be revolutionizing the entire industry. Instead of sitting back and trying to ignore what was coming, Dell decided to join the revolution. “The Internet is going to be mainstream and we need to be all over it,” Dell said. His company launched its website, which today represents one of the highest volume Internet commerce sites in the world. Dell.com accounts for almost 50% of the company’s overall revenue and is accessible in 18 languages throughout 42 countries. By not only being aware of the change that was going to take place but also by being willing to adapt to it and ride the wave, Dell was able to come out on top. “You have to use intuition,” he says. “Our business has so many variables that are changing so quickly. If you wait for all the right information and data, you’re too late.” Dell is willing to play it by ear and take what he sees as the necessary risks in order to make the best of the ever-changing situation in which he finds himself. “Some of these decisions you just have to go with limited information, decide what you think is right, and then make adjustments along the way,” he says. “It’s really a combination of data, intuition and monitoring the competitive landscape.”Dell has become a master at doing things ahead of the curve. He likens his ability to stay on top of change to that of the great hockey player Wayne Gretzky, “who once explained his success by saying that he didn’t skate to where the puck was, he skated to where the puck was going to be,” says Dell. “By the time our competitors have moved to where we were, we’re already somewhere else”.

Rule - 5


Think For Yourself
addthis_url = location.href;
addthis_title = document.title;
addthis_pub = 'Scunizzo';



“The first thing you should do is throw away that store-bought map and begin to draw your own,” says Dell. “It’s through curiosity and looking at opportunities in new ways that we’ve always mapped our path at Dell.”Dell didn’t invent the personal computer, he didn’t invent the Internet, and he didn’t invent the concept of selling directly to customers. But, in his words, “There’s always an opportunity to make a difference. There is always the chance to refine something, to eliminate unnecessary steps, or to look at something in a new light.” It was in thinking outside the box, thinking for himself, and believing in his new ways of doing things that Dell was able to become a success. “When Dell got started, it didn’t come with a manual on how to become number 1 in the world,” he recalls. “We had to figure that out every step of the way. And with each new product and new market, the industry ‘experts’ said we’d fail.”There were those who had come before Dell, but none who did things quite the way he did. “You can stand on the shoulders of the giants who came before and see a little further,” he says. “And sometimes there’s an opportunity to achieve a major breakthrough with a completely new idea that re-defines the subject.” There were also those who said Dell should go back to school and leave the business world to the big men. “Just a few short years ago, we announced plans to build powerful computers at the center of the Internet (‘servers’ for those of you from the engineering school),” recalls Dell. “Through the chorus of naysayers, we emerged as a world leader in servers, and we continue to gain momentum. And as always, we did it our way, with customers – not the experts – in mind.”The lesson through all of this, says Dell, is to believe in what you’re doing no matter what happens or whoever doubts you. “If you’ve got an idea that’s really powerful, you’ve just got to ignore the people who tell you it won’t work, and hire people who embrace your vision,” he says. “Just have faith in the skills and the knowledge you’ve been blessed with and go. Because regrets are born of paths never taken.”Dell is all about winning. “That’s right, winning,” he says. But, Dell isn’t talking about making the most money or earning the most market share. For Dell, winning is about using your own potential to the maximum possible. “I’m talking about believing in yourself enough to become the best accountant, engineer, or teacher you can possibly be,” he says. “I’m talking about never measuring your success based on the success of others – because you just might set the bar too low.”And, the only way to win is to follow your own instincts. “Whether it’s evolution or revolution, there’s always a better way to build a computer, or map a genome, or liberate a country, or take a basketball team to the Final Four,” says Dell. “Just work to understand the world around you. Read books. Read websites. Read other people. Circle the pitfalls and highlight the opportunities. Then build a vision of how it could all be better and work like hell to make it happen.”