Book review essay: Direct from Dell - Strategies that Revolutionized an Industry

Book review essay: Direct from Dell Strategies that Revolutionized an Industry Dell, a 1984 start-up that grew into great heights within a short span of less than 15 years, has immense hard work of both the founders and employees. Like many other companies, even Dell has faced many challenges and had made ways to beat them. 1. M. Dell grew up with an entrepreneurial spirit ‘ He realized that the computer stores at that time, were buying PCs from IBM, and had been charging a lot of money and gave little or no service. This is when he started assembling computers on his own, and started selling them at a cheaper price and provided better service. 2. Direct Model, v1.0 ‘ the entire business was about listening to the customer, responding to them, and delivering what they wanted. The direct model was based on direct selling. 3. Highest levels of service + products needed ‘ Their top priority was maintaining loyalty among customers and employees, which was achieved by bringing out the highest levels of service and high-performance products. 4. Disdaining inventory ‘ Improving the speed of the inventory flow 5. Order of business at Dell ‘ The new order of business at Dell based on ‘ Liquidity ‘ Profitability ‘ Growth 6. Clear metrics ‘ Once clear metrics and measurements was established, it was easy to see what businesses were performers. 7. Three Golden Rules at Dell ‘ 1) maintain a light inventory, 2) Listening to the customer, and 3) Always sell direct. 8. Phase review process for product development ‘It created a common language and the organization came to agreement on how product development and launching should take place. 9. Segmentation ‘ One can quickly grow smaller companies, but it’s an uphill task to sustain a high rate of growth in a larger corporation. Segmentation enabled dell to scale up its business rapidly. 10. Direct Model, v1.1 ‘ In Version 1.1, they reduced inventory inefficiencies. 11. Reward success by narrowing responsibility ‘This allowed them to keep their people happy and thriving and maintaining a high growth rate. 12. Information sharing ‘ they shared the best ideas throughout their various businesses. 13. Think like you the owner (ROIC) ‘they explained specifically how everyone could contribute: by cycle time reduction, by elimination of scrap, by increasing sales, by forecasting accurately and precisely, by scaling operations, by increasing inventory, collecting accounts receivables effectively, and doing things right in the first attempt. Dell practiced rewarding its employees using ROIC matrix. 14. Complexity kills ‘ their thumb rule was to have as few partners as possible. 15. Supplier management ‘ they set quantitative measures for success so the suppliers knew what they expected and they provide regular progress reports to the suppliers. 16. Inventory velocity revisited ‘Speed to market was important for two reasons. One was that it created competitive value that could be shared between buyer and supplier. The other was that when it came to delivering the latest product they had to be quick. 17. Using the Internet ‘By using the Internet they tried to maintain a continuous flow of materials from their suppliers to their factories, on an average their employees spent less time placing orders and more time building products adding value. The other advantage the Internet gave them was immediate and quick transmission of product quality data. Their suppliers could see the information in real-time. OB CONCEPTS AND THEIR BENEFITS IN DELL 1. Creativity: ‘ Willingness to look at the things differently ‘ Dell was first to experiment with ‘Direct marketing’ even when critics cited it to be a failure methodology 2. McClelland’s Theory of Needs: ‘ Need for Achievement (nAch): Points to support i. Motivated by his passion to do business ii. Converted Hobby(Philately) into initial venture ‘ Need for power: i. They wanted to emerge as a global leaders ii. Penetrate into other markets apart from US [Entered European market, Asian, etc] ‘ Need for Affiliation: i. Michael Dell made ways for friendly customer relations. ii. Dell had great regard for the employees and their concerns. Made frequent enquires to build a good working environment. 3. MBTI Personality: ESTJ ‘ Extrovert: He has been closely associated with the outside world right from the childhood, speaking to experts, salesmen, customers, etc. ‘ Sensing: More focus on details. Hired people to do data analysis while in Newspaper subscription business and implemented the same in the Dell. ‘ Thinking: Implemented competitive strategies (Speed to market, Customer service, Producing high quality, Providing latest relevant technology). ‘ Judging: i. More categorized and organized. ii. Predicted changes in the market much before they are to occur and took decisions accordingly that are fruitful. iii. Entered Consumer retails and exited it soon realising that the model cannot meet financial objective. (Corrective action) And restricted European operations. 4. Job Satisfaction: ‘ Storming Stage: Few managers who could not resist the organisational changes (eg. Use of facts) felt painful and left the organization. (Elimination of Theory X Employees). ‘ Recruiting Process: Michel Dell and his company made it a decision to hire persons with expertise and who had sense of adventure and love challenges. Thus favouring ‘Theory Y Personalities’ with following characteristics: i. How employees think about economic terms? ii. How they want to define success as? iii. How people value and relate them with others? iv. Ability of employees’ understanding on the strategy of the business they are involved in? v. Ability of employees’ understanding on business activities ‘ Employee Engagement: i. Theory Y employees welcomed the use of facts and shown their willingness to adapt to the organizational changes. ii. Change in decision making from emotion based decisions to factual data based decisions. 5. Management by Objectives: (Goal Setting Theory) Dell even at their initial stages were more cautious about setting goals and accomplishing them. Inference is that, Dell gave more priority to the above goal rather than mere growth. 6. Utilitarianism: Seeking the greatest good for the greatest number ‘ And reducing their inventories and overhear expenses. (Disdain Inventory) ‘ Knowing exactly what the customer wants and then provide it. (Always listen to Customer and never sell indirect) ‘ Thus operating at maximum Efficiency by not producing products until they know it is sold. 7. Social Learning Theory: ‘ Through Observations: i. Price is not a sustainable competitive advantage. ii. Understand the economies of each segment: Product, Use, Geography, Customer, etc. iii. Observations from Employee Interactions through following questionnaire: ‘ What are customers telling you? ‘ How do you think the company’s products are doing? ‘ What are our biggest challenges? ‘ What are the biggest threats to our success? ‘ How can the company support you better? ‘ Through own Experience: i. Introducing of Dell’s 30-days Guarantee: After realizing the customer’s insecurity and low levels satisfaction in online purchases, Dell for the first time in the industry introduced this scheme to promote online business-business methodology. ii. Targeting large companies for business to grow wider and faster. Thus making global expansion plans (outside US). 8. Contrast Effect (Perception): When Dell displayed their 12 Mhz high sped Machine in the Comdex show, they earned a good reputation for the product what they have manufactured. Taking products early to market and then capturing customers. 9. Job Enrichment: Train employees to act and think like owners. 10. Operant Based Learning – Make failures with learning acceptable. Dell also learned few things in a hard way. The following words spoke by Michael Dell from the book states this: 11. Selective Perception: Dell initially being more opportunistic tried entering into every sector of the market. This prevented them to make the best decisions and slowed down its growth rate. Then Dell differentiated the tasks: what to do and what not to? And accordingly assign or define goals. This way it has leant selective perception. ‘ CONCLUSION The book is a very good read, and the business principles highlighted above are truly excellent. The very core thing that drives the business is the fact that everything revolves around the customer. Listening to customer feedback, acting on it promptly and adding value to the customer are among the top priority for Dell. Dell has a good organisational practice in place always striving to attract and retain talents, thus making it the best place to work at. This perhaps has helped dell to achieve great heights and proceed beyond the set objectives.