Dell Inc. (NASDAQ: DELL) is one of the Top 20 Innovators of The Innovation Index. Dell has seen its market cap go down by about 20% in the last thirteen months, in large part due to average quarterly and annual top-line revenue growth, reduced profits, and losing the number one position as the world’s top supplier of new computers to Hewlett-Packard (HP) (NYSE: HPQ). Michael Dell, the founder, founding CEO and chairman of Dell Inc., took over the CEO roll of Dell again. Dell made Dell the number one computer company in the world. Now, Dell has perhaps the toughest act of his career: Turnaround Dell, beat HP, and make Dell the number one computer company in the world – again!
How can Dell turnaround Dell?
Dell has to go back to basics. What made Dell the number one computer company in the first place? Computers. Dell computers, laptops and servers were considered the best in the industry. And Dell became the household name when it came to buying computers. Dell was the perceived high quality brand. Dell must focus on the core business: Computers. Rather than creating average computers and discounting the computers to gain market share, Dell needs to design a new line of computers that appeal to the masses, business, government and IT.
For example, why can’t Dell design a computer only for school students? A specific computer made for the students in K-12 market, and college students? Not just a computer marketed to the schools – rather a computer that is designed with the need of students in mind from the inside out. This must include educational software, computer design that integrates needs of students (for instance, a scientific calculator on the keyboard), and online services that students are most likely to use. Dell = education computers for students.
Dell has to appeal to the teenager market. Teenagers are the high growth market, and they have money to spend – albeit they spend it on cool music and toys such as iPod. Dell must create a computer that appeals to the teenagers. Dell has to make Dell computers cool again. Dell should take a page out of Apple’s cool design and function. Dell = cool computers for teenagers.
Dell should also think about the market of women shoppers. There are many professional women buying computers, single households led by women who are looking to buy computers for themselves and kids, women in schools and colleges, and women in non-profits and government. What can Dell do to appeal to this largely ignored market? Can Dell create specialized computers that appeal to the needs of women at large? What would that line of computers look like? Dell = appealing computers for women.
When I go online to buy Dell computer, I can only buy one computer at a time or more than one computer of the same type on my own. Why is this so? What if I am looking to buy a laptop for me, a computer for my child, and a computer for my wife? Does Dell provide such a home bundle that I can readily choose. How about a Dell Home Bundle? Dell Home Bundle can include combinations of computers and laptops pre-packaged for various needs of the home, including home networks, wireless, entertainment center, etc. All I have to do is go online at Dell.com and choose Home Bundle. And I am provided various options all at once. Dell = Home Bundle.
Dell must make the business computers and servers the best in the business. Even a small business owner is looking for the very best at a reasonable price. Dell quality must become the standard in the industry. Dell performance must be second to none. Dell service should be topnotch. Dell must equate to the best investment there is when it comes to buying computers for business. First, Dell must make their computers the best there is in terms of quality, performance, service and price; second, Dell must market their computers to the business as the best there is and create this indelible brand perception; finally, Dell must provide a replacement program for old computers at businesses. Dell = Best Business computers.
How can Dell beat HP?
Dell became the number one computer company in the world with the Dell Direct business model. Consumers and small businesses went to Dell.com and easily configured the computer that they were looking for, and purchased it online. Dell promptly made this computer, and shipped it to you within a week. Larger businesses are also able to configure and buy their computers online; they also have the option of a dedicated account manager. The beauty of Dell Direct model was that there were no middle men – no margins, no distribution to worry about, and cutting-edge products. The Dell Direct model made sense during the Internet boom years and when the model was new and not easily imitable by Dell rivals such as HP. However, Direct model cannot be the *only* business model for buying computers.
If HP can sell computers online and also through retail channels, why can’t Dell do the same? Dell has to go retail – not just as an extension of the Dell Direct model, but as a completely new business. Consumers and businesses of today are researching and shopping online, researching online and buying retail, researching retail and buying online, researching retail and buying retail. Dell predominantly provides only one choice. Dell must find ways to open up the retail channel, and create computers specifically for the retail market. Dell can also provide kiosks at retail stores so that customers can simply configure computers at the retailers, and take immediate delivery at the store, buy a computer readily available at the retailer, or have it shipped to their homes or business. When Dell offers customers ready options where they can buy computers both online as well as in retail stores with the same ease as buying online, Dell would begin to grow the overall computer business and retake the lead from HP. This could easily take a year or two before Dell establishes itself as the premier Direct and retail computer brand.
How can Dell become the number one computer company in the world?
Customers outside the U.S. are used to buying computers through distributors, resellers, local companies who assemble computers, retail stores and through a lot of hand holding. The last point is very important: hand holding. Customers need advice on what is the best computer that meets their needs, and want to try out that computer in a store before they purchase it. There is even some negotiation involved. Customers need some help setting it up at their homes or business. The key insight: only a small segment of customers buy computers direct outside the U.S. The majority of the market does not buy direct. If this is the case, Dell must reinvent itself if it were to become a truly global player. Dell cannot sell only through Direct model outside the U.S. at least to emerging countries such as India, China, Russia, and Brazil. Dell should rather leverage the Dell brand and sell through the normal channels that the customers of these countries are acquainted with. HP’s market share grew in large part due to the worldwide shipments outside the U.S. HP has established retail, reseller and distribution channels worldwide. Dell must quickly do the same. And once the Dell brand is established in the country, Dell can then begin to introduce the Direct model. But Dell cannot, must not lead with the Direct model.
Michael Dell is a visionary, innovator and a creative leader, focused on execution and results. He made Dell the number one computer company in the world. Dell is on a mission to turnaround Dell, beat HP and make Dell the number one computer company in the world – again! If I were a betting man, I would definitely bet on Dell. If Dell is indeed successful in making Dell the number one computer company in the world again, Dell will forever be enshrined in the Hall of Fame of Visionary leaders of both 20th and 21st centuries.
The Innovation Index
Sunday, February 04, 2007
How can Dell turnaround Dell, beat HP and become the number one computer company?
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