Dell Computer has had a rough go the last couple of years. They’ve had some batteries catch fire – not good for marketing. And they’ve had some SEC investigators looking through their books – not good for investors. But neither of these problems are really that unusual or monumental for a company the size of Dell. The big problem has been that the company isn’t making the money it once did, and it’s sure not growing like it once did. That has stripped the company of 40-50% of its value, or about $43 billion in market loss for investors (see chart here.)
So what’s the response? At the beginning of this month the Chairman and namesake, Michael Dell, announced he was removing the CEO and taking back the reigns (see full article here.) Should we now expect a turnaround?
Michael Dell pioneered the Success Formula that made Dell Computer famous. Simply put, Dell sold directly to customers, outsourced everything they could, used other people’s technology (no R&D), focused on the supply chain to shorten manufacturing and distribution cycles and kept prices low. And anything that wasn’t part of that Success Formula does not exist at Dell. This Success Formula produced great results, and Michael Dell locked it in with every conceivable software product, metric and decision process he could. There was/is no variation at Dell, just execution.
Unfortunately, this Success Formula was not impossible to copy. Competitors not only matched the supply chain expertise of Dell, but added onto it with product innovations, credit terms for corporate buyers, and enhanced peripheral products that expanded the total customer purchase. They matched Dell, and did the company one better. So customers migrated to these competitors. Dell didn’t suddenly lose its Midas touch. Execution hasn’t faltered. Competitors just kept getting better in this dynamic market, and execution wasn’t enough to maintain sales growth and margins.
Now the king of execution is returning. What can we expect? More of the same, of course. The implication, and stated objective, of Michael Dell’s return is to get Dell "back on track." That’s back on track to what they did a decade ago. Is that likely to turn around their fortunes, in a more competitive marketplace with yet more competitive variables?
Dell doesn’t need more Dell. They need more innovation. There are no Disruptions at Dell. And this change of leaders will not create an internal Disruption demanding change. There is no White Space at Dell. I blogged on this previously, and a PR employee responded (you can read the comment by going to that blog) that Dell is a great company. But even he could not identify any White Space in Dell. Despite my emails to him asking for any examples of White Space he could provide — any at all. Without White Space, how is Dell to develop a new Success Formula to produce results in 2009 like they had in 1999?
Michael Dell and his company was a fantastically successful pioneer. His vision helped create a Success Formula that greatly assisted putting a PC on nearly every working desk and in nearly every home, not to mention in the hands of most students, salespeople, and other mobile worker in America. But that Success Formula has already passed the point of diminishing returns. Unless Dell learns to Disrupt and implement White Space, look for the future to be more of the recent past. Results included.