Direct From Dell: - A Review

DIRECT FROM DELL
- A review
A presentation by Group 9
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Page 1
Dell
Page 2
About DELL
Page 3
Michael Dell
Page 4
About the Author :
 Born February 23, 1965 in Houston, Texas, Michael Dell helped
launch the personal computer revolution in the 1980s with the
creation of Dell Computer, which began in the founder's dorm room
at the University of Texas and quickly blossomed into a megawatt
computer company.
 By 1992, just eight years after Dell was founded, Michael Dell was
the youngest CEO of a Fortune 500 company.
 Dell's first 20 years proved to be one of the most successful

businesses on the planet, surprising titans as Wal-Mart and General
Electric.
Page 5
Contd…
 Dell's story is so compelling that in 1999 he published a
bestselling book about his success, Direct from Dell:
Strategies That Revolutionized the Industry.
 Apart from being a computer wizard, Michael Dell has

also done wonders in the field of philanthropy and
political contributions.
 He recently visited Gartner Symposium in Cannes,

November 10, 2010 and discussed his views regarding
the boom in IT sector and what DELL will achieve in the
next ten years.
Page 6
The Book
Page 7
About The Book
 The book’s Preface begins with the quote, said by
Michael Dell, “ I’ve Always Been Fascinated with
Eliminating Unnecessary Steps”.
 Turn Fascination to Hobby and to Business
 Through the pages Michael Dell discusses its companies
“competitive strategies”:
 Speed to market
 Superior customer service
 Custom-made computer systems
 An early exploitation of the Internet
Page 8
Contd…
 Direct from Dell is both an extraordinary business
success story and a manifesto for revolutionizing
any industry.
 The book is divided into two parts :
PART 1 :- Describes Dell’s strategies evolved as
the company grew.
PART 2 :- Emphasizes on the enhancement of
the strategies.
Page 9
Timeline
 1980 - Michael Dell purchased his first computer and takes it
apart.
 1983 - Wanted to beat IBM, Started selling upgraded PCs
and add on components.
 1984 - Registers Dell Computer Corporation
 1986 - 12 mhz 286 based system. First 30 day money back
guarantee.
 1987 - International subsidiary in UK.
 1988 - Initial IPO $30 million.
 1989 - Accumulates excess inventory.
 1990 - First to sell through retail CompUSA, Best Buy and
1st to exit also.
Page 10
Contd…
 1991 - Latest technology highest-performing intel 486
microprocessors.
 1993 - $2 Billion in sales a remarkable 127% increase.
 1994 - Launches Latitude Notebook with records-
breaking battery life.
 1996 - Introduces Power Edge servers for small and
medium server markets
 1998 - Solidifies internet market. $12 million per day
from customers. Sets up supplier network.
 1999 - Becomes number one PC company in the US,
$35 million per day.
Page 11
Normal Selling Strategy
MANUFACTURER
CUSTOMER
DISTRIBUTOR /
RETALIER
(MIDDLE MAN)
Page 12
The Direct Model
MANUFACTURER
CUSTOMER
DISTRIBUTOR /
RETALIER
(MIDDLE MAN)
Page 13
Indirect - Direct
 Indirect Model - Two sales forces, viz.,
 Sales from Manufacturer to dealer.
 Sales from dealer to customer.
 Direct model - Just one sales force, and that too, totally
focused on the customer.
 Know EXACTLY what the customer wants and then
provide it.
 The Direct Model became the backbone of the company

and the greatest tool in its growth.
 It all evolved from the basic idea of eliminating the
middleman.
Page 14
The Direct Model, Version 1.0
 Because they were always talking with both, their
prospective customers and their existing customers
 first through Phone Calls
 then through Face-To-Face
 and now through Internet
 This direct relationship enabled them to benefit from
the real-time input regarding
 product and service requirement
 products in the market
 and future products they’d like to see developed
Page 15
Contd…
 Now it made sense to build a business on what
people really wanted, rather than guess what they
might want.
 Since other companies had to estimate which were
the most popular configurations, they knew it before
hand.
 Other companies had to maintain high levels of
inventory.
 Because they didn't have the extra cost of the dealer
or the associated inventory.
 They were able to offer great value to their
customers and expand rapidly
Page 16
Advantage – The Direct Model
 The elimination of the distributor's margin makes it
possible to offer very competitive prices.
 Direct interface with the client when the order is
taken guarantees precise knowledge of his need.
 A sales force focused on direct users rather than on
distributors delivers a technical support service
which quickly established Dell's reputation in this
area.
 Production on order is the way to reduce stocks and
thus related costs.
 Analysis of information arising from contact with
clients quickly led the company to innovate in terms
of products and services.
Page 17
Changes in DELL Market
Structure
Page 18
Developing Competitive edge
 Focus on your customers , not your
competition.
 Play Judo with the competition.
 Turn Disadvantage into Profit.
 Find Your Edge in Execution.
 Set Stretch Goals.
 Built to order.
 Skate ahead of the competition.
Page 19
Take care of customer
 Give priority to service rather than to price.
 Put your partners in an integrated virtual
organization and eliminate all the unnecessary
stages in the relations of your company: this is the
"Direct Model" principle.
 Focus on your clients (who are your future) rather
than on competition (your present or your
past).Listen to them and build your organization on
the segmentation of their needs.
Page 20
Customer contd…
 Find out the strong points - and especially the weak
points - of your competitors.
 Consider changes as an opportunity and not as a
threat. Encourage them, if possible, making sure to
anticipate so as to build a competitive edge.
 Use the potential of the Internet – the Internet is
today's most effective agent of change.
Page 21
Take care of employees
 Train Employees to be Owners
 Look at goals, make them clear to everyone.
 Study the obvious for non-obvious solutions
Ask customers how they would have it solved.
 Make failures with learning acceptable
 Constantly question even good stuff. No cover up.
 Treat employees as owners.
Page 22
Contd…
 Delegation
 As a college student, he was habitual of
sleeping late and getting up late.
 But when he started his company, he had to
get up early else there would be twenty thirty
employees hanging around the door.
Page 23
4 key points about relations with
suppliers
 Create an alliance with your suppliers: its is better to
build strong relations with them and to focus on your
line of business than to try to replace them.
 Reduce the number of suppliers so you can simplify
the management of relations with them.
 Complexity kills, proximity pays: preferably choose
suppliers close to your production site.
 Demand flexibility from your suppliers and treat
them as a unit of your company by fixing objectives
for them and evaluations recorded in a specification.
Page 24
Key Points
 It is hard to notice how fast or slow you are
growing
 Eliminate all insufficiencies
 Look at goals, make them clear to everyone.
 Laptops : Lithium Ion doubles battery life
Analysis: Laptop owners want long life batteries.
Dell Tied up whole channel by contracting
SONY to manufacture. Dell Introduced,
chartered plane for reporters and analysts, gave
them a laptop and flew to Los Angles… 4 1/2
yours later, they still had power. Great PR
Page 25
Lessons learnt – The hard way
Disdaining Inventory
• Because of the growth in the initial period, their
sales were rising very quickly, and to fill this
demand, they had to buy too many parts – include
memory chips.
• And then prices plunged
• To make matters worse memory chip capacity went
from 256K to 1MB almost overnight.
• Out of this experience, they learned that improving
the speed of our inventory flow is not only a winning
strategy but a necessity.
Page 26
Lessons contd…
A Lesson of Olympic proportions
 They had devised a plan to launch a family of
products code-named “Olympic”.
 A technology with ideas for great inventions like
graphics and disk technology.
 They had gone ahead and created a product was,
for all intents and purpose, technology for
technology’s sake rather than technology for
customer’s sake
 It was miss judgment of the importance of certain
technological features.
Page 27
The Lesson
 The two valuable lessons
 No matter what your industry, try to identify

potential problems early – and fix them fast.
 Involve your customers early in the development
process. They are most valuable focus group.
Listen early and listen well.
Page 28
Lessons for a manager
 Hire people for potential to grow and develop.
 Recruit for succession (Train them to replace you)
 Stress Achieving Goals.
 Accountability for Results 360 degree reviews.
 Responsibility to one another
 Do Not Hoard Power
 Implement through Dual Reporting:
By Function, Market, Product
 Make successes a win for the entire company
through communications
Page 29
Thank You
Page 30

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DIRECT FROM DELL

 Dell's first 20 years proved to be one of the most successful

 Apart from being a computer wizard, Michael Dell has

 He recently visited Gartner Symposium in Cannes,

 The Direct Model became the backbone of the company

 No matter what your industry, try to identify

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