Tuesday, January 09, 2007

Rise and Stall of the Dell Marketing Machine

In the words of any self-respecting leader from an autocratic company culture fashioned in the glory days of the mass-market, "it's either my way, or it's the highway." That's the kind of bean-counter bravado that Wall Street conceived, nurtured and ultimately rewarded. Now those same market analysts that cheered-on that mindset are questioning it today. Why the change of heart?

Perhaps one good case study in the tech sector is the rise and stall of the Dell marketing machine. In February of 2006, Business Week published an editorial entitled "It's Dell vs. the Dell Way." Nearly one year later, a current assessment sheds light on a growing dilemma for the mass-market oriented American enterprise.

People that get very angry at Dell, for unresolved customer care and technical support issues, tend not to understand the company's core business model, or the company's longstanding culture that's sometimes called "The Dell Way." The company has always prided itself on extracting cost elements from every single step in the process of designing, building and selling computer systems.

Doing What They Do Best
When the Dell methodology could no longer sustain continued market growth, of course, they looked for ways to do what they do best -- cut costs. Granted, there's nothing in this observation that is profound. However, few people who now criticize Dell -- sometimes based upon their own personal customer experience -- seem to comprehend just how difficult it must be for the company to live up to their customer's renewed expectations.

Think about this disconnect -- perhaps a gapping chasm -- that separates the non-technical mainstream consumer needs from Dell's inherent ability to satisfy those increasingly multifaceted demands.

Once again, Dell has long been known for its strict financial and operational discipline -- therefore the view of their customer-base from the corporate headquarters in Round Rock, Texas looks like a series of perpetually tweaked spreadsheets shared in a never-ending flow of business performance review meetings.

From a world-view that's founded upon metrics, key performance indicators, and transaction-oriented analytics it must be daunting to be tasked as a front-line 'customer advocate' at Dell. Who are their role models, as they peer up into the corporate hierarchy, and what is their weighted value within the operational decision making process that guides the company?

The Story Beyond the KPIs
For all those probing Wall Street analysts that ask Mr. Rollins and his leadership team to "put a little more color on this quarters numbers," I have a word of advice. Try asking a meaningful question about the longer term prospects of Dell -- and other American companies where growth has stalled -- for you will likely learn more about what really ails their business.

Be honest. If 'good enough' doesn't sound like a viable business model for today's hyper-competitive global networked economy, then offer some constructive criticism. Don't take cheap shots at the business culture that you helped to create -- clearly any Motley Fool with a blog can do that.

In 2007, Dell doesn't need another round of ridicule from external devil's advocates; they do need someone to boldly stand behind their few and beleaguered internal customer advocates.

The Dell Way must be recast into 'the way of the customer,' if the company is to evolve beyond their mass-market legacy, their transient mass-customization, and ultimately discover today's landscape of micro-markets containing customers with logical clusters of differing -- and yes, demanding -- requirements.

Today, Business Week published an editorial entitled "Jobs vs. Dell in Dueling Keynotes" which sheds light on the differences between Apple and Dell, relative to loyal customer engagement. Michael Dell's keynote at CES included a brief reference to the launch of a new microsite called StudioDell.

IMHO, the StudioDell initiative should have been the keystone of Dell's presentation. Moreover, the site's "Learn about new technology" focal point should be redirected towards how their customers apply Dell products to benefit their personal interests and lifestyle. Put simply, engaging Dell loyalists.

Dell's supportive customers don't directly appear on the company's balance sheet, regardless, they could become Dell's most valuable untapped corporate asset.

Disclosure: I am a stakeholder -- I own Dell notebook computers, a pocket PC and a multifunction printer, but no Dell stock.


RichardatDELL said...

Hi David,

Your analysis and commentary are most thoughtful and insightful. Apologies for the length of this reply, but you’ve covered a lot of ground worth discussing.

Clearly, the past 22 years have demonstrated the success of Dell’s direct model. It is highly efficient, but it also transformed an industry by delivering unprecedented customer value and making technology more available around the world.

For all the hand-wringing that goes on today, it’s worth remembering Dell deliver products and services to over 90% of the Fortune 500, we are in touch with over 3 million customers every day; we made a few billion dollars last year; we also hired thousands of additional people; and we’re poised for strong gains in some of the world’s largest emerging growth markets.

As Michael often mentions, growth over the long haul isn’t always linear for any company. However, every time we hit a soft spot, we have learned and become a stronger business because of it. During the past 22 years, Dell’s direct model became synonymous with a global supply chain that is the envy of many; drove the ability to deliver superior returns on capital and strong cash flow; as well as the value of direct customer relationships and built-to-order products.

But the marketplace changes and the needs and desires of customers change. Going forward we have refocused on the critical success ingredient that underpinned those formative years, but might not have always been front and center -- that 1:1 relationship with our customers. This brings us to your comments about our customer advocates and the “Dell Way.”

You note that “Dell's supportive customers don't directly appear on the company's balance sheet.” Let me assure you, in our mind they do. Just this week at the Consumer Electronics show Michael noted that at Dell our focus is "Gearing Up" to enable the human imagination. We are entering a time where customers are driving technology, rather than the reverse.

If you review Michael’s September interview with Fortune, http://money.cnn.com/2006/09/04/magazines/fortune/dell_intv.fortune/index.htm he said we were doing some things that were just plain wrong (primarily in our U.S. consumer business), like managing for cost instead of the great experience and long-term relationships. He notes it was a wakeup call for us.

For example, in some parts of our business we talked about “transactional” customers. Today, we talk in terms of relationships. In fact, this fiscal year we’re spending an incremental $150 million on improving the customer experience, which includes training, hiring more staff, deploying new technologies like DellConnect and overhauling business processes that get in the way of a positive experience for the customer.

While our competitors continue to talk about the need to take people and other costs out of their operations, you will see we are investing in the long term -- and that investment is focused squarely on building out the strength of the direct customer relationship.

Watch for us to continue to strengthen the products and services we deliver, as well as further differentiate ourselves in terms of delivering the technology and value people want. We call these directions Dell 2.0. http://www.dell.com/content/topics/global.aspx/corp/conversations/en/2006_09_12?c=us&l=en&s=corp

Check out Laura Bosworth’s posts at www.direct2dell.com where we talk about the challenges, all we are doing and the customer feedback we ask for to effect long-term improvements for our customers. It’s why you find us here listening and letting you know what our thoughts are. It’s why you see DellStudio and our blog. And let me assure you, our customer advocate team is neither daunted nor unrecognized by the highest levels of management.

Already, we are seeing results: a 10 point increase in customer satisfaction over the past year; the most energy-efficient servers on the market; a significant number of customers who have had their issues resolved through our proactive blogosphere outreach; the strongest and broadest product line ever; an overhaul of www.dell.com; and, our industry-leading environmental initiatives.

That said, we aren’t yet where we want to be. We still make mistakes, but we are certainly proceeding along the path that you have outlined. We see an even stronger and better Dell in the future. It’s an exciting time for all us here.

Thanks again for sharing your thoughts, suggestions and support. It means a lot to us.

David H. Deans said...

Hello Richard,

I didn't anticipate a reply from a Dell team member, but I do welcome your thoughtful response and insights.

A wise man once told me that every time my personal and professional mettle is tested, I will learn more about the true depth of my own character.

Perhaps the same can be said about corporate culture. Clearly, the Dell team -- across the board -- has recently had to deal with a high level of adversity that went beyond routine business challenges.

Dell customers felt the trickle down effect of those events as they unfolded. Regardless, most informed Dell customers understand that complex technology products sometimes fail, for a multitude of reasons. That said, each and every resolution to a product or service failure is an 'opportunity' for Dell to demonstrate its collective character.

I believe that Dell's customers, like me, have a unique kind of emotional connection with the company (and its products) that goes beyond the typical investor that has Dell shares in a stock portfolio.

We actually lay our hands down and touch our vested interest every single day.

For each and every thoughtful effort that Dell makes to enhance that emotional connection with customers, there will be a corresponding return on investment -- those dividends will also stand the tests of time.

We 'choose' to do business with Dell, and most of us are counting on you to get through this rough spot in your growth journey. Again, StudioDell is symbolic, IMHO, because it gives Dell loyalists yet another opportunity to make a stronger human connection with our virtual community of interest.

RichardatDELL said...

Glad the information provided some additional insight and demonstrates that Michael’s and Kevin’s leadership have Dell focused, laser-like, on our customers (and of course the advantages of Dell’s 1:1 direct relationship).Its always great to hear from customers and have a conversation and learn about their relationship with and perspectives about Dell.

Good point about how we demonstrate our collective character with every resolution. Its why we value the work of customer advocates but also all those who work directly with the over 3 million customers that contact Dell every day, all around the globe. And, we learn and get better with every contact. We are not perfect (who ever is?), but thats where we want to get :-)

With all we have underway and Dell’s focus on the long term, I have no doubt our business and technology leadership will deliver even more value to customers.

By the way, I see you and Michael also share interest in more broadband and digital media ;-). Looking forward to seeing you over at StudioDell.

Thanks again!

David said...

David, I am not sure that you are still tracking this article, but I wanted to direct your attention to a couple of comments that I made over at Buzzmachine. Jeff Jarvis posted some thoughts, Drinks With Dell, on April 3, http://www.buzzmachine.com/page/4/ after having spent some time with Dell's Blog manager. I have witnessed some very positive things taking place at Dell and I thought you might enjoy a couple of the comments that I have shared.

David H. Deans said...

Hello, David Marshall, and thank you for pointing me to your commentary on Jeff's blog. It is very insightful, and no, I haven't been following this storyline.

I agree with your assessment, and others, that Dell is listening to customers and then taking action where possible.

Understand, I wrote my column because what is happening at Dell (rise/stall) is indicative of a much greater issue -- that being the loss of organizational passion and spirit, and the onset of contempt for customers. Of course, all with good intentions, as 'professional managers' infiltrate every aspect of the company's operations.

IMHO, Dell is at a pivotal point in the company's evolution as a growth enterprise. Fixing, and realigning, their corporate culture is going to be a major undertaking.

You live in Detroit, so you don't need to look far for examples of where addressing the crisis you describe is an ongoing work in progress. Frankly, Ford Motor Company may be doomed to join the ranks of Pan American Airways, and Western Union. I sense that Ford's leadership team is weary of the never ending war between "management" and "workers."

As the balance of power continues to shift within the global networked economy, I anticipate more changes at the macro level that will make the ongoing trials and tribulations of Dell to be insignificant, by comparison.

David said...

Thanks David for checking it out! Curious; Did you read both posts? The second is long and it ends with the Big Three issue that I am watching unfold day by day. So many houses on the markethere in Detroit area, but not moving. A neighber just dropped their price by $200,000!

In your opinion, when did things at Dell begin to change? It sounds like you agree with Jim Collins insight, that when Corporations bring in the managers to handle the growth; there goes the potential for greatness?

David H. Deans said...

Yes, David, I read both of your comments on Jeff's blog. Most people on the inside credit Kevin Rollins, when he assumed the primary day-to-day leadership role, as a key turning point.

David said...

"Understand, I wrote my column because what is happening at Dell (rise/stall) is indicative of a much greater issue -- that being the loss of organizational passion and spirit, and the onset of contempt for customers. Of course, all with good intentions, as 'professional managers' infiltrate every aspect of the company's operations."

Good intentions and loss of passion can be a dangerous combination. In a sense it takes a passionate entrepreneurial spirit to grow a company, and a passionate entrepreneurial spirit to keep it! Good intentions alone will not push a company into extraordinary customer care. In fact quite the opposite can happen. In an effort to “protect” what a great leader has built, one can cease to confront the hard facts of failures and mistakes, and turn them into the foundation for continued greatness. Like Packard once said, “No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.”

I believe that Michael Dell is very sensitive to this issue and intends to restore the passion. It is not an easy task. It is so much easier to instill passion when you are building from the ground up. It is like placing a new foundation under an old house. It can be done but it is a difficult undertaking.

Am I right that you are saying that Dell needs to place ‘passionate leaders’ that understand the customer, rather than the traditional ‘professional managers’ into positions that will bring enthusiasm back into the customer care program?

My wife and I agree that the some of the most “fun” times in our lives were during our ‘young and poor’ days; raising 4 daughters, and being willing to take risks and follow dreams. As the years rolled by we found ourselves having to fight one of the subtle dangers of living the ‘American dream’; focusing on ‘not losing what we already have’

I envision unbelievable opportunities and I am betting that Michael Dell does as well! How exciting to be entrepreneurial, starting out with 80,000 employees!

David H. Deans said...

Yes, David, that's exactly what I'm saying. Agreed, Michael Dell is back as the Chief Enthusiasm Officer (CEO) once again, but he can't be expected to rally all team members by himself.

If for no other reason, to your point, there are just way too many employees now -- and so 'passion evangelists' must work on his behalf, throughout the whole organization.

Moreover, with the recent addition of Mark Jarvis (as CMO) to the executive team, Mr. Dell now has the makings of the new foundation that you described. I trust that Mr. Jarvis is willing and prepared to propose doing something truly remarkable!