Summary:

  • Dell has remained focused on its core market, and as a result growth has stalled for 5 years.
  • Cisco has aggressively developed entirely new markets, and it has grown 60% the last 5 years.
  • To keep growing, and maintain your business value, you must CONSTANTLY keep developing new markets

Dell helped create the PC revolution.  It’s simplification of the PC business into a limited set of technologies, no R&D, then putting its energy into lowering costs by focusing on supply chain made PCs very, very cheap.  it was an idea never before attempted, and this Success Formula allowed Dell to become a household name around the world.

Unfortunately, the demand for PCs has flattened.  And competitors have learned how to match (maybe beat?) Dell’s “core capabilities.”  When markets shift, a company has to develop new markets, or risk hitting a growth stall.

Dell revenue 2005-2010
Source:  Silicon Alley Insider

And that’s happened to Dell.  Revenues have not continued to grow, Dell has remained focused on its “core markets” and “core capabilities” but without growth in those “core” areas the company has been severely hampered.  Revenues are still 72% in “core” but there’s little reason to own the stock because company revenues are at best flat (despite volatility) the last 5 years.  Dell is going nowhere – except following the problems at Microsoft.  Since it’s now so late to mobile phones, any sort of tablet, or other markets with growth its unlikely Dell will be able to profitably develop any new businesses to replace the deteriorating PC market.  Dell is stuck in the Swamp, so busy fighting alligators and mosquitoes that it’s no longer growing.  It’s stuck in a low-no growth “core” market.

To remain a healthy business you have to constantly enter new markets.

Cisco revenue by division
Source:  Silicon Alley Insider

You may want to think of Cisco as a router, or router and switch company. That was certainly the company’s early Success Formula.  But unlike Dell, Cisco has invested heavily in other businesses.  Now Cisco revenue is 60% bigger than it was five years ago, while its percent of revenue in routers and switches has actually declined! By aggressively moving into new markets for “advanced technology” and services Cisco has improved its overall revenue, and kept the company very healthy.  It has growth precisely because it moved away from its “core” to develop new markets, new products, new solutions and new revenues.  Cisco keeps maneuvering itself back into the Rapids of growth before the current slows, and thus it avoids the growth stall eating up Dell’s value.

It is so easy to be lured into focusing on your “core”. Especially if you listen to your existing big customers.  But markets shift, and you inevitably must move into new markets.  And market shifts don’t care what your market share or your industry view.  It’s up to all leaders to stay ahead of shifts by constantly developing scenarios for new markets, studying competitors for new insights, disrupting the old Success Formula Lock-ins and setting up White Space teams to develop new revenues and keep the business growing!