Simple management advice for tough times

Outside the Box

I get to see and meet a lot of interesting people in my job – and the other day I saw someone who got me thinking. His name is Michael Dell, the one who started a computer company at the age of 19 and grew it into the $35 billion-plus Dell Computer Corp.

He was in Vancouver recently to give a luncheon speech to the Vancouver Board of Trade. And of all the things he said in speaking to the packed house, the thing that stuck in my mind was his comment about the current state of the industry and how he was reacting to it.

Dell said that while he recognized that we were in tough economic times, the fact that times are tough didn’t really change what he had to do: listen to customers and deliver products that offer great value. It sounds like a hokey and simplistic solution to a complex situation. But it seems to be working for Dell (both the company and its youthful founder).

In the quarter ending Jan. 31, the company boasted its best-ever quarterly product shipments, revenue and operating profit. Quarterly revenue was $9.7 billion, up 21 per cent from last year. Company earnings were 23 cents per share, an increase of 35 per cent. Full-year net earnings were $2.12 billion, on record revenue of $35.4 billion.

And I could go on. But the point is that Dell is making good money and growing its business at a time that all is supposed to be doom and gloom. In his speech, Dell talked about having built his original business on the simple proposition that both consumers and businesses shouldn’t have to pay thousands of dollars each for computers that really consisted of about $600 worth of parts per system.

He figured, correctly as it turned out, that if you cut out the overhead of a delivery channel and a number of other costs along the way, that you could still make a decent margin and deliver systems that people would be happy with. Dell also later figured out that if you did this directly via the Web and supported it with fast delivery times and good service, you would have much closer links with your customers and could count on repeat business.

What has always amazed me, however, is that no-one else systems to have been able to take this “secret sauce” and build a computer hardware company that is anything like as successful as Dell. God knows Compaq tried, but it seems that the company was never able to completely give up the dealer-based roots from which it grew and ended up trying to be all things to all people, which is never a good situation.

Of course, Michael Dell has an answer to this. He suggests that you can never build a really successful company by imitating the strategy of an existing one. In order to be make it big, you need to start with your own ideas and insights – and then build from that base.

And that apparently has a lot to do with why Dell has never really concerned itself with doing big “strategic” acquisitions. It certainly didn’t seem to work for Compaq, which swallowed Tandem and Digital before finally being gobbled up itself by Hewlett-Packard. And the jury is still out on whether or not that was a really smart move.

The other thing that Dell talked about which piqued my interest was his discussion about the growth in Dell’s services business. While Dell is known for selling keenly priced systems direct, it is less well-known for its outsourcing, consultancy and financial services businesses. Yet all of those exist and appear to be thriving.

This success seems to be built on the premise that “success breeds success.” It would have been hard to imagine large corporate customers trusting strategic consulting and outsourcing to Dell 10 years ago, but with its massive market share and longer-term success, it appears that companies of all shapes and sizes are now willing to trust it.

So what I took away from all this was the idea that success can come from starting small, doing one thing really well, and then using that success to serially do other things well until you have a “snowball’ effect of all those good things rolling into something that really has momentum. Oh, and he did mention all those other classic things about having the right team, listening to customers and being willing to make mistakes and learn from them.

I noticed that he said “being willing” to make mistakes, rather than just making them. For most of us, the making mistakes part is easy. Being willing to make them – and learn from them – is a little harder. But I guess that’s a goal worth shooting for.

Wheelwright is a freelance journalist, author and broadcaster. He most recently served as editorial director of StockHouse Media Corp.