Creation Of Dell

Dorm room Stories

Michael Dell first built and sold personal computers from his dorm room at the
University of Texas in 1984 at the age of 19. He founded Dell Computer
Corporation, dba PC's Limited, in 1984 while a student at the University of
Texas at Austin. Operating from Michael Dell's off-campus dormitory room
at Dobie Center, the startup aimed to sell IBM PC-compatible computers built
from stock components. Michael Dell started trading in the belief that by
selling personal computer systems directly to customers, PC's Limited could
better understand customers' needs and provide the most effective computing
solutions to meet those needs. Michael Dell dropped out of school in order to
focus full-time on his fledgling business, after getting about $1,000 in
expansion-capital from his family. Four years later, shares of Dell stock were
sold for $8.50, and the IPO raised $30 million.

The Company

In 1985, the company produced the first computer of its own design,
the Turbo PC, which sold for $795. Dell appeared in PC's Limited
advertisements in national magazines, asking readers to "give us a chance to
show you what [its products] can do". Selling directly to consumers custom-
assembled computers according to a selection of options, the
company grossed more than $73 million in its first year of operation. In 1986,
Michael Dell brought in Lee Walker, a 51-year-old venture capitalist, as
president and chief operating officer, to serve as mentor and to implement
Dell's ideas for growing the company.

In 1993, to complement its own direct sales channel, Dell planned to sell PCs
at big-box retail outlets such as Wal-Mart, which would have brought in an
additional $125 million in annual revenue. Bain consultant Kevin
Rollins persuaded Michael Dell to pull out of these deals, believing they would
be money losers in the long run. Margins at retail were thin at best and Dell
left the reseller channel in 1994. Rollins would soon join Dell full-time and
eventually become the company President and CEO.

-Innovations by Dell
Dell is uniquely positioned to impact industry trends
Dell leads enabling standards and technologies through industry groups and
strategic partners. We partner, rather than compete, with top industry
technology suppliers and original development manufacturers. These
partnerships give us a uniquely broad perspective on the computing
landscape.
Dell innovates across devices, ecosystem and services to design solutions
specifically for the way people workfrom award-winning thin clients, tablets
and laptops to powerful workstations and rugged devices.
Delivering the Best Possible Customer Experience
Dell's climb to market leadership is the result of a persistent focus on
delivering the best possible customer experience by directly selling computing
products and services online and through catalogs.

Customer Value Creation

"We put a great deal of emphasis on understanding what drove customer
satisfaction, whether it was response times on the telephone, quality of
products, valuable features, or the ease of experience in using the product.
Engaging the entire company from manufacturing to engineering to sales to
support staff in the process of understanding customer requirements
became a constant focus of management, energy, training, and employee
education," writes Michael Dell.

Focus On the Best Solution, not the Best Technology

"We know what we are and what we're not. We are a really superb product
integrator. We're a tremendously good sales-and-logistics company. We're not
the developer of innovative technology," says Mort Topfer who helped revive
Dell's fortunes in 1990s.
As Fortune wrote: A Dell mantra is that today's technology is tomorrow's
commodity. Dell waits until the cost of that technology falls low enough for it
to be stuffed into computers at state-of-the-art factories and then sold direct
at a cheap price, which allows the company to drive for share.

Teaching Innovative Thinking

"It is really dangerous if everyone in a company starts thinking the same
way", writes Michael Dell1, Chairman and CEO of the Dell Computer
Corporation. "The danger comes when you fall into the trap of approaching
problems too similarly. You can encourage your people to think about your
business, your industry, your customers innovatively. Ask a different question
or word the same question in a different way. By approaching a problem, a
response or an opportunity from a different perspective, you create an
opportunity for new understanding and new learning. By questioning all the
aspects of our business, we continuously inject improvement and innovation
into our culture. How can we teach people to be more innovative? Ask them to
approach a problem in a holistic sense."

Problem Solving Strategies: 4 Levels

Turning Problems into Opportunities
Make the Most of Incidental Interactions
"Dell is the kind of company where everyone rolls up sleeves and get
personally involved in the details of our business every day," says Michael
Dell, the Founder of Dell Computers. "This is, in fact, how we got to be
successful: As managers, it's not enough to sit around theorizing and
reviewing what those who report to us do. We frequently meet with customers
and attend working-level meetings about products, procurement, and
technology, to tap into real source of our company's experience and
brainpower.
"Why bother? It's a way to get close to our people, for certain. But that's not
all. Our day-to-day involvement in the business helps us establish and allows
us to maintain one of the Dell's critical competitive advantages: speed. In this
case, "staying involved in the details" allows for rapid decision making
because we know what's going on.

Getting Feedback from Customers and Suppliers

"Turn your customers into teachers," advises Michael Dell, the Founder of Dell
Computers.
Dell start their innovation process with asking their customers, "What would
you really want this thing to do? Is there a different way to accomplish that?"
Then they meet with their suppliers and ask, "Can we do this in a different
way?" Then they try to come up with a totally different approach that exceeds
the original objectives.

Winning Customers
To continually bring information from the outside world into Dell, with an eye
toward staying as competitive as they can, Michael Dell uses a variety of
innovative approaches. He says, "I also enjoy roaming around outside the
company to see what people think of us. On the Web, nobody knows I'm a
CEO. I'll hang out in chatrooms where actual users commonly chat about Dell
and our competitors. I listen to their conversations as they discuss their
purchases and their likes and dislikes. It's a tremendous learning opportunity.

Distribution and supply chain innovation

The meteoric rise of Dell Computers was largely due to innovations in supply
chain and manufacturing, but also due to the implementation of a novel
distribution strategy. By carefully analyzing and making strategic changes in
the personal computer value chain, and by seizing on emerging market
trends, Dell Inc. grew to dominate the PC market in less time than it takes
many companies to launch their first product.
No more middleman: Dell started out as a direct seller, first using a mail-order
system, and then taking advantage of the Internet to develop an online sales
platform. Well before use of the Internet went mainstream, Dell had begun
integrating online order status updates and technical support into their
customer-facing operations. By 1997, Dells Internet sales had reached an
average of $4 million per day. While most other PCs were sold preconfigured
and pre-assembled in retail stores, Dell offered superior customer choice in
system configuration at a deeply discounted price, due to the cost-savings
associated with cutting out the retail middleman. This move away from the
traditional distribution model for PC sales played a large role in Dells
formidable early growth. Additionally, an important side-benefit of the
Internet-based direct sales model was that it generated a wealth of market
data the company used to efficiently forecast demand trends and carry out
effective segmentation strategies. This data drove the companys product
development efforts and allowed Dell to profit from information on the value
drivers in each of its key customer segments.
Virtual integration: On the manufacturing side, the company pursued an
aggressive strategy of virtual integration. Dell required a highly reliable
supply of top-quality PC components, but management did not want to
integrate backward to become its own parts manufacturer. Instead, the
company sought to develop long-term relationships with select, name-brand
PC component manufacturers. Dell also required its key suppliers to establish
inventory hubs near its own assembly plants. This allowed the company to
communicate with supplier inventory hubs in real time for the delivery of a
precise number of required components on short notice. This just-in-time,
low-inventory strategy reduced the time it took for Dell to bring new PC
models to market and resulted in significant cost advantages over the
traditional stored-inventory method. Innovation on the assembly floor: In
1997, Dell reorganized its assembly processes. Rather than having long
assembly lines with each worker repeatedly performing a single task, Dell
instituted manufacturing cells. These cells grouped workers together
around a workstation where they assembled entire PCs according to customer
specifications. Cell manufacturing doubled the companys manufacturing
productivity per square foot of assembly space, and reduced assembly times
by 75%.
Dell combined operational and process innovation with a revolutionary
distribution model to generate tremendous cost-savings and unprecedented
customer value in the PC market.
The following are some key lessons from the story of Dells incredible rise:
1. Disintermediation (cutting out the middleman): Deleting a player in the
distribution chain is a risky move, but can result in a substantial reduction in
operating costs and dramatically improved margins. Some companies that
have surged ahead after they eliminated an element in the traditional industry
distribution chain include:
2. Enhancing customer value: Forgoing the retail route allowed Dell to
simultaneously improve margins while offering consumers a better price on
their PCs. This move also gave customers a chance to configure PCs according
to their specific computing needs. The dramatic improvement in customer
value that resulted from Dells unique distribution strategy propelled the
company to a leading market position.
3. Process and operations innovation: Michael Dell recognized that the way
things had always been done wasnt the best or most efficient way to run
things at his company. There are countless examples where someone took a
new look at a company process and realized that there was a much better way
to get things done. It is always worth re-examining process-based work to see
if a change could improve efficiency. This is equally true whether youre a
company of five or 500.
4. Let data do the driving: Harnessing the easily accessible sales and
customer feedback data that resulted from online sales allowed Dell to stay
ahead of the demand curve in the rapidly evolving PC market. Similarly, sales
and feedback data were helpful in discovering new ways to enhance customer
value in each of Dells key customer segments. Whether your company is
large or small, it is essential to keep tabs on metrics that could reveal
emerging trends, changing attitudes, and other important opportunities for
your company.Major Capabilities
PC Business Strong
Since going private, Dell has unleashed a blizzard of PCs from new Inspiron
two-in-one models to all-in-one PCs earlier this month. In May, Dell announced
new series 5000 laptops and new Chromebook 11 models. Dell's focus on the
PC has paid off.
According to research firm IDC, Dell PC shipments increased more than 9
percent in the first quarter of 2014, representing its third consecutive quarter
of positive year-on-year growth. Dell ranks behind Lenovo and Hewlett-
Packard in terms of worldwide PC market share with 13.3 percent of the
market. Lenovo ranks No. 1 with 17.7 percent market share and HP has 17.1.
In North America, Dell ranks as the No. 2 PC maker when it comes to
shipments with 24.5 percent of the market behind Hewlett-Packard with 25.6
percent. Lenovo ranks third in the U.S. market with 10.8 percent market share.
Revamped Partner Program
In an effort to seed channel growth, last December Dell revamped its channel
program, turning over 200,000 previously direct accounts to the channel. The
changes went into effect this past February and included Dell Direct
incentives, such as a 20 percent "compensation accelerator" for the direct
reps to generate new enterprise business with Dell channel partners in areas
of business Dell has targeted for growth.
In a recent interview with CRN, Cheryl Cook (pictured), vice president, Global
Channel Alliances, said, "The teaming, collaborating and territory-mapping
work continues. Meanwhile, we continue to be very aggressive and active in
driving deal registrations. That to me is really the best gauge illustrating our
success." As an indicator of that success, Cook said first-quarter rebates paid
out to partners were up 40 percent year-on-year.

Dell Makes Big Data Play with First Acquisition as Private Company
In March, Dell made its first acquisition as a private company when it bought
StatSoft, a data analytics firm that specializes in a wide range of data mining,
predictive analytics and data visualization services. Dell said it acquired
StatSoft in a push to beef up its big data offerings and win a bigger piece of
the analytics market that it said is worth $232 billion through 2016. Dell said it
was a much-needed acquisition to sure up its analytics software stack.
StatSoft fits into Dell's database management, optimization and integration
applications business, the company said.
"For Dell partners, StatSoft offers an opportunity to answer information life-
cycle questions," said John Whittaker, director of marketing for Dell
Information Management division. "Data analysis has been the missing link.
Spotlight on Security
Dell has made a calculated effort to ramp up its security offensive since going
private with over a half dozen related solutions rolled out since December to
help companies protect against vulnerabilities in the enterprise. In April Dell
beefed up its connected security portfolio, making important updates to its
existing Advanced Threat Services portfolio as well as adding a number of
mobile security products such as Secure Mobile Access. The idea, Dell said,
was to help mobile work forces bolster their defenses and attempt to tie Dell's
mobile security solutions to its end-to-end security portfolio. Other Dell
security news has included an update to its KACE K1000 Systems
Management Appliance designed to securely manage the "Internet of Things,"
which includes devices, sensors and objects. It also updated its SonicWALL
with more mobile-centric features for device authentication and policy-
enforced SSL VPN.
A Downsized Dell
Call it what you want -- be it right-sizing, layoffs, office shutdowns or voluntary
early retirement -- Dell has been grappling with reducing costs.
In December, Dell notified a portion of its global work force of 110,000
employees about the "voluntary separation program." Dell spokesman David
Frink said at the time it was an attempt to "improve Dell's cost structure and
free up capital to make the investments in growth areas that matter to our
customers the most." In February, The Register reported Dell was looking to
lay off 15,000 employees as part of the restructuring. In May, Dell announced
it shut down a call center in Mhali, India. While Dell did not specify the number
of jobs impacted, reported estimates put the number somewhere around
1,000 employees. Earlier this month, Australian Financial Review said that Dell
was laying off an undisclosed number of Australian-based employees.
Customer Wins
When it comes to brass tacks, customer wins is what counts. And for Dell, it
has put more than a few notches in its belt when it comes to winning
important, new business. For starters, one of its biggest public wins has been
a $22 billion IT service and solutions contract with the United States
Department of Homeland Security and the United States General Services
Administration.
Other more recent wins include a deal with dating site eHarmony to deliver
Dell SharePlex software to help the matchmaking site more quickly sift
through its Compatibility Matching System. Other client PC wins include a
number of contracts to provide Chromebooks to Texas schools and supplying
Dell PowerEdge servers to Berkeley, Calif.-based Tippett Studios, which used
the Dell hardware to create special effects movies including "Ted," and, most
recently, the upcoming "Jurassic World" sequel to "Jurassic Park."
Channel Growth
Dell embarked on its transformation years ago when it announced it would
embrace the channel to extend its sales reach through partners. It upped its
ante when it announced it would turn 200,000 accounts over to the channel
for joint management with its direct team.
Dell says it's a strategy that has attracted 18,000 new partners to its ranks of
165,000. Dell boasts other partner gains that include 87,000 new and current
deal registrations by partners, an increase of 22 percent more than last
quarter. Dell also said channel sales grew faster than direct sales last quarter.
To Research And Development
Dell upped its research and development spending from 1.6 percent of
revenue to 2.1 percent, according to the company. Dell also announced a new
5- to 10-year internal research push centered around a new division that
would pursue Dell homegrown innovations. Dell has also said it will invest
$300 million in Dell Ventures, which will focus on IT innovations around
storage, cloud computing, big data, data center, security and mobility.
Strategies employed by Dell

Strategy 1 : Create a fast paced, close knit organization culture

with the attitude of a challenger

Main Idea :-
Organizations that are fast paced and do have a flexible structure have a competitive
advantage. To create that
i) Create a simple common goal which is easily understood by all

Loyalty and Passion for the organization is created when the employees believe that
they are a part of something great. For example, to convince John Sculley to join
Apple from Pepsi, Steve Jobs said this to him, Do you want to sell sugar water for
the rest of your life, or do you want to come with me and change the world?

Making people use their innovation and imagination can create the difference in
making a company successful.

Dells common goal is of a belief that the direct sales model for selling computers is
better. This is a strategy of

Responsibility to one another

Appreciation of data and facts
Accountability
Creating value for customers and shareholders

ii) Hiring ahead of your objectives

 Instead of recruiting employees to complete a particular job, invite them to grow with
the company. Hire people based on their potential and ability to grow and not just on
their previous track record.

iii) Everyone should be involved in seeking new talent

Talent should be not sought after just by the HR folks. It should be by all the
employees including the CEO

iv) Company growth should complement personal employee growth

Instead of expansion of peoples responsibilities, successful people should be
rewarded with the narrowing, i.e. original job should have grown such that it should
be able to employ 2 people. Dell focuses on narrowing responsibility so successful
employees can focus on specific areas of the business.

v) Have managers that are immersed and personally involved.

The best management teams are intimately involved in the details of the day-to-day
operations of the company. They meet with customers and with working-level
employees constantly rather than segregating themselves away from the front lines.

Strategy 2 : Build a company where employees have a strong

sense of ownership

Owners -- as opposed to employees -- have three traits:

1. A sense of responsibility for the welfare of the business.

2. Accountability for the actual results achieved.
3. A share of the fruits of success.

To build a company where everyone acts like an owner:

i) Make learning new skills a necessity rather than an option.

With the speed change is occurring in todays business world, failing to learn more
will not just place you at a disadvantage -- it will threaten your ability to survive.

ii) Encourage innovative thinking, using non-obvious solutions.

The last thing you want is for everyone to think the same way. Rather, people should
be actively encouraged to look at things differently -- from an original perspective.
Thats the only way to make innovation and improvement happen.

iii) Allow smart experimentation -- with a tolerance for failure.

People will only experiment if they feel safe to fail. Therefore, you need to instill the
mindset theres no such thing as a failure -- everything that doesnt pan out exactly as
expected can be converted into a learning experience, as long as you watch out for
the information contained.
 iv) Stay constantly on the lookout for ways to improve.

Make certain youre the first to criticize your own success --because others will never
be far behind. Be proud of your achievements but focus on the future.

v) Learn about problems as quickly as possible.

The hallmark of an owner is the ability to face the facts as they stand, instead of how
you wished they were. To do otherwise is to try and perfume a pig.

vi) Communicate whats happening, and whats planned.

If everyone is going to contribute meaningfully, they have to understand:

1. How the companys doing.

2. What the strategies are for future growth.
3. How they fit in to the plans for the future.

vii) Completely ban hierarchies.

The best hierarchy is non-existent. That way, people can take the most direct route to
obtain information. The better the information flow, the greater likelihood good
decisions will be made.

viii) Set a single goal everyone can rally around.

Employee incentives and compensation should be tied to just one thing: the health of
the business. To do that, you need a consistent measure everyone can understand.
Dell uses Return on Invested Capital (ROIC) as its measure of added value.
Specfically, ROIC measures how effectively shareholder value is created relative to
the cost of the capital.

The specific actions employees can take to increase ROIC:

1. Reduce cycle times

2. Eliminate scrap and waste as far as practicable.
3. Increase sales.
4. Make more accurate forecasts of future resources.
5. Collect accounts receivable more rapidly.
6. Increase the inventory turnover.

Strategy 3 : Understand what customers experience when they use

your product or service

If you listen carefully, customers will tell you how to deliver more value by solving their
problems. That includes:

i) Learning about customer experiences outside your industry

Customer experience knows no arbitrary boundaries. Therefore, you should be actively

engaged in seeking information about superlative standards of customer service your customers
have enjoyed -- irrespective of the specific industry within which it was delivered.
 ii) Developing new products from the customer perspective

Smart companies ask customers what they want and need -- and then find ways to deliver
exactly and precisely that.

iii) Knowing your customers intimately.

The three rules of the direct sales model are:

1. Know your customers.
2. Know what customers want, dislike and value most.
3. Know what you can do to help them be more effective.

iv) Becoming your customers advocate.

The best companies act as good advocates for their customers interests. These companies
provide customers not only with great value but also with information about coming products
and trends.

Good companies also use customer feedback to tailor new products in real time, applying the
feedback received almost as it occurs.

v) Hitting a balance between high-tech and high-touch

The real key to the effective flow of two-way information is to use a combination of high-tech
communication systems (like the Internet) and face-to-face (or high-touch) meetings.

Dell produces personalized support and trouble-shooting information for corporate customers,
which is specific to the systems they have purchased.

vi) Catering to a market of just one customer

Great companies segment their markets into smaller and smaller sizes until ultimately they are
focused on catering to individuals as effectively as possible.

Strategy 4 : Find new ways to add value and exceed expectations

from the customers perspective

Being close to your customer is not enough. You have to use that information intelligently to form
a partnership with them.
Instead of partnering with customers on just sales or service, find ways to respond to the broad
spectrum of needs they have. That will require that you develop efficient ways of:

i) Looking at the big picture issues.

Instead of focusing just on selling more of your product or service, look at the way
customers are actually using them. Move from the situation where you solve one
problem to a partnership where you contribute to the broader good of the entire
business enterprise.
ii) Creating savings for your bottom line -- and your customers.
 If you think strategically about your customers business, you may be fortunate
enough to come up with ways to save them money, which in turn will cut their costs
and increase profits.

iii) Becoming a valued advisor for your customer.

An advisor delivers expert advice with no strings attached. The key, lies in being
sincere -- in being willing to see things from the customers perspective rather than
through the lens of your own vested interests.

iv) Separating the facts from the hype.

Sometimes, figuring out the usefulness of the latest and greatest new thing in your
industry requires experience and savvy. Help customers separate the marketing hype
that gets sent to them from the real world issues they face day-to-day.

v) Turning customers into teachers.

Learning has to be two way to be useful. In addition to what you provide customers,
you have to be willing to learn from them.