Dell has recently announced that it will be paying dividends
to its shareholders from its cash positive business, Dell is one of the few
businesses around that continues to maintain a positive cash flow despite the
downturns in just about every market.
Dell is a highly successful model for any business; it
started very small and has grown to become a $60+ billion turnover company off
the back of its computer sales. The business however is now moving into other
areas such as business servers due to increased competition from very cheap
Chinese products as they refuse to sell products without profit. But it is not
just competition that is creating change within the company; they have seen
their customers’ demands changing and have sought to change their company in
line with what the market demands, moving away from their traditional PC and
laptop sales.
But how did they get where they are today? A recent tweet
from Michael Dell should provide inspiration for many budding entrepreneurs; 10 Jun 2012 ”I started Dell 28 yrs ago with $1000. Revenues in
1984 were $6 million. Last year $62.1 billion. Impossible is nothing.” How did
a company that started with such modest funding become one of the biggest
players in the market?
They did it by ignoring how the rest of the industry
provided products and instead followed ideas that were tried and tested within
the automotive industry. They implemented Just in Time principles for their
assembly operations and assembled PCs and Laptops to order. Unlike their competitors
who had finished products boxed waiting on shelves to become obsolete to be
later sold at a discount; Dell provided a build to order service which was more
efficient than their competitors’ production models.
Without the need for storage of large quantities of finished
stocks, just in time deliveries of components, reduced obsolescence costs, and
many other benefits, Dell has been able to ensure a profitable operation even
in troubled economic times.
But times change; Dell can see that its position as the
dominant supplier of PCs and Laptops is under threat from underpriced imports
and does not want to get involved in an unprofitable price war which could
damage its long term future. Instead they have been looking at what the market
wants and how technology has been changing to define and build a new future for
themselves. For some years they have been purchasing companies that they view
are key to their continued growth and success within their industry and are
transforming the company.
So Dell are still keeping very much to lean principles by
identifying what their customers really want, not just continuing to throw PCs
at us, after all it is the provision of the service that we require and the
mode of delivery is rapidly changing. We have all moved from using cumbersome
desktops to laptops and are now using tablets for many of our computing needs.
If they continue to efficiently build PCs and Laptops they will just be the
best player in a dwindling market. They have realized unlike some of their competitors
that the consumers to use an analogy want “holes” and not “drills”.
They are focusing very much on providing services to the
business market rather than the individual consumer; they have already stated
that they will not be going into competition with other manufacturers to
produce smartphones and other gadgets preferring to aim very much at the higher
end of the market. They will be trying to capitalize on the launch of windows 8
with compatible devices that will integrate with existing business networks.
Dell is not going to completely abandon its manufacturing
roots in the face of tough competition, it still sees an open market for high
end tablets in the business market where many businesses fear trying to
integrate the apple products into their almost exclusively windows
environments.
So Dell is very much trying to evolve their business
continually within the needs of its marketplace, if they continued to just get
better and better at building desktop PCs and Laptops they would just end up
being the best player in a dwindling market. After all, how many cart
manufacturers were left after the automobile was invented, or how many
manufacturers of video tape and vinyl records are there since the advent of the
DVD? The world changes and if you cannot anticipate that change then your
business will eventually die or be relegated to a small niche.
If you are trying to grow your business then you have to
keep looking at the market and ensuring that you are not focusing on the
product that you provide; instead you must be looking at the problem or need
that your service provides a solution for. You need to continually evolve and
change that solution with respect to technology and consumer expectations, if
you don’t then your company will be eventually doomed to failure.
Dell continues to grow and continues to be a cash rich
company unlike many of its competitors despite the current problems with the
economy. You should look at your business model today and ask yourself what
happens if the world changes tomorrow because it will.
