Dell Memo

This is nothing less than Michael Dell trying to reinvent his company. It is as if he were launching another startup. Making the Titanic do a 180 degree turn is not easy. And there will be plenty to watch.

If you are going to ditch the idea of direct selling, and if you are going to no longer try to keep inventory low, then that is Dell 2.0.

Dell is now going to be more like the other PC companies. That perhaps should have been coming, because other companies have become more like Dell and have brought the prices down substantially.



There is this synergistic competition going on. PC companies are busy eating into each others' turfs. But the new move is still for Dell to prove.

The real news might be the mention of the four BRIC countries, Brazil, Russia, India, China, and the mention of the phrase "next billion." Those countries have much less in terms of internet penetration, and so ordering computers online is not exactly a concept. And if you are going to stock up stores with your machines, it is not exactly build to sell. The direct way has been to take the order and then build. Now you build and then go sell.

Michael Dell is a legendary entrepreneur. The CEO Rollins before him could not have made a move like this one. This is too unorthodox. He would have felt like he were undoing Dell. Can you imagine a Microsoft that is about to ditch Windows? In the late 90s, some Microsoft engineers actually did suggest to Gates that the browser instead of the operating system should be made the gateway to the computing experience. Gates suggested those engineers quit Microsoft and go join the Peace Corps.

Michael Dell's memorandum to Dell staff:

To: Dell Employees Worldwide

From: Michael & the Executive Leadership Team

Dell Confidential -- For Internal Use Only

One Dell, One Focus -- Simplifying IT for Our Customers

We met as a complete Executive Leadership Team for most of last week to discuss Dell's future. We left the week with a great deal of confidence about our plans for the next generation of Dell customers. Throughout our history we have worked as a team -- as One Dell -- and we have made quality PCs affordable. Now Dell plans to make information technology affordable for millions of customers around the world. We will do this by simplifying IT where others perpetuate complexity and innovating beyond hardware into solutions. This is one of the most exciting periods in our history but it requires all of us to stand together as One Dell to make profound changes and take well thought-out risks.

Here are some of the steps we will take to get there:

• Fix our Core Business to be competitive. The Direct Model has been a revolution, but is not a religion. We will continue to improve our business model, and go beyond it, to give our customers what they need. We will simplify our organization to make it easier to hear customers and respond to them. We've already streamlined our executive leadership structure. We need to streamline our management structure to speed decisions and remove bureaucracy. We're making improvements in pricing, product development and fulfillment, and customer experience. We reorganized the product group to more effectively listen to our customers and develop end-to-end customer solutions. We are now revisiting our entire design process to improve our speed-to-market and focus on what customers truly value. Our new Global Operations organization, led by Mike Cannon, is working to take our supply chain and manufacturing to the next level of efficiency and quality. This group is also partnering with the regions and the product group to pursue new manufacturing and distribution models to address the unique needs of our customers in all markets. More broadly, we plan to eliminate overlaps in our organization and activities to enable us to deliver even more value to our customers. We also need to improve sales productivity. These won't be merely exercises in cost-cutting. We will re-invest those resources in the customer solutions that will build Dell for the future.

• Re-ignite Growth in our Core Business to reach more customers. We are taking some concrete steps to get growth back into our core business. We released the EC280 in March for first-time computer users in China. We will open a new factory in Brazil in May and a new factory in India in July to be closer to those huge customer bases. In June, we'll launch our new Inspiron models with personalized color options and improved mobile broadband. We will launch products and services for small and medium business customers later this summer. And our new Dell Data Center Solutions Division is addressing the unique needs of hyper-scale data centers for customers whose business relies on enterprise computing solutions. We plan to take our improved cost structure to acquire new customers and sell existing customers more products and services. We are accelerating down the path to be a truly global company giving customers around the world the best products, the easiest solutions and most choices.

• Build For the Long term to provide more customer solutions. Ron Garriques' Global Consumer team is re-inventing how we address the evolving needs of our consumers around the world and the unique needs of the next billion consumers in the large and emerging markets of Brazil, Russia, India and China (BRIC). With strong share position in markets such as Japan, the U.K. and Canada, now we are going to make a mark in the rest of the world. Ron and team are also tackling how Dell's consumer business should evolve in the long term in mature markets. Stay tuned for more here.

We are also embarking on a bold, long term initiative to radically simplify IT for our commercial customers. Simply put, the philosophy comes down to a set of core beliefs:

• Information Technology shouldn't be as complex as it is.

• You should spend less on maintaining I/T and more on innovation.

• Every IT project should not require an army of consultants.

• Computing should have minimal environmental impact.

• Superior information drives efficiency in your IT environment.

We are already taking steps to fulfill this vision, but we have a long way to go. For those of us who have worked for a while in this industry, we know our competitors drive complexity and needless cost into customers' environments. These so-called "service divisions" create a never-ending cycle of activity with unclear return on investment. We intend to break this cycle. We will build different kinds of services and offer key technologies that will help customers escape this complexity trap and unlock the true potential of technology. And, as we re-invent Dell to deliver on this promise for our customers, we will rely on Mark Jarvis, our new chief marketing officer, to ensure we properly position our new systems and solutions capabilities in the global marketplace.

We won't hesitate to use our company's assets to build or buy the capabilities and technologies we need to deliver on our initiatives. Our transformation will take time to accomplish. We need your help to identify how we can become more efficient and effective for our customers across all areas of our business. We want you to take action with your team and bring your ideas forward. On June 20, we'll launch the internal version of IdeaStorm called "Inside IdeaStorm" for employees so that you can tell us where you think we have opportunities to improve as a company and how we can streamline our work to eliminate low value activities. We will listen and we will respond.

This is a defining moment in our history and in our relationships with our customers. Just as we re-invented the way consumers and organizations buy hardware, we are going to re-invent the way the world gets access to IT. We are excited about what we will achieve for our customers as we make information technology more affordable for them and what that will enable them to do.

The future looks great for Dell and we are up to the challenges that we'll face on our journey -- challenges that will test, teach and ultimately strengthen us as a company and as a team -- as One Dell.

Thank you for transforming Dell with the customer in mind every day. Be sure to let us know your thoughts on this on One Dell Way.

In The News

Dell Losing Its Religion, But The Devil Is In The Details iT News The last time Dell entered the retail space, it was a move made out of "panic" that bombed because the company strayed from its core strength: so explained Dell in his book, Direct From Dell, which he wrote eight years ago as a guide to good business strategy. ....... Dell's three Golden Rules, "Never sell indirect." (The other two Dell Golden Rules are "disdain inventory" and "always listen to the customer.") ..... To make its way into the retail channel or commercial reseller channel this time, the company may need to re-think its second golden rule of disdaining inventory. As of last 3 November, Dell reported that it had five days of inventory. ...... To make a go of an indirect sales strategy, Dell may need to ensure that its pipeline has enough PCs, notebooks, peripherals and parts in stock so channel partners can keep their customers happy. To build that inventory may take an investment so large it could eat into the company's already-declining profits. ..... the difference between Dell and other companies is that while all companies make mistakes, Dell never makes the same mistake twice
HP on the rise Austin American-Statesman (subscription)
Hewlett-Packard comes back fighting Financial Times (subscription)
Strictly PC – the new king of IT Times Online Hewlett-Packard – the archetypal Silicon Valley company that recently overtook IBM to become the world’s biggest-selling technology company. ..... HP employs more than 150,000 people in 179 countries, and last year generated $94 billion (£47 billion) from selling computers, printers, cameras, consul-tancy, IT services and much else besides. ....... One of the central themes of Tough Choices is HP’s “dysfunc-tional” board, and the infighting among directors that went on for years before Fiorina’s sacking in February 2005......... HP – famously founded in a Palo Alto garage ...... the board was made up of people who were individually very good. As a group they struggled ....... HP has more than doubled in value, its shares rising from about $20 to $42. ...... HP almost doubled its operating profits last year, to $6.6 billion. ...... the $30-billion-a-year PC business. ..... Dell has stumbled, exposing the limitations of its direct-selling model ........ continuing fall in computer prices, which causes more damage to the manufacturers of cheaper, unbranded PCs. ...... HP invests about $4 billion in research and development. An old joke has it that most of the group’s investment in innovation is in creating expensive new printer cartridges ........ the continuing increase in the number of documents and photos people are printing, increasingly from the internet. ...... Hurd has spent more than $5 billion on acquisitions, the biggest of which was last year’s $4.5 billion purchase of Mercury Interactive, a company that sells quality-assurance and monitoring software. ....... The company estimates its technology is used by 1 billion people and claims it is addressing markets worth a total of $1,100 billion. ...... He tends to talk in broad generalisations. “We’ve got to develop innovative products,” he said at one point, “products that are well-designed and strongly featured, and get them to market with speed at the right price.”

Dell, HP, Apple

Dell has been a pioneer. I have appreciated its singular focus over decades to bring the price down for the consumer. Dell reminds me of Walmart.

HP places major emphasis on innovation, and hence Carly Fiorina's famous criticism of Dell being a "one trick wonder." HP reminds me of NASA.



Apple is a high class act. Steve Jobs is the guy you go to to get your BMW. Apple sells cool.

All three are PC companies ill suited for a paradigm shift. You can't eat your own belly.

PC

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Michael Dell
Hewlett-Packard
Apple Computer
History of Apple Computer
Toshiba
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List of Intel microprocessors
Intel Corporation
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Google
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IBM
Oracle Corporation
Sun Microsystems
Sam Walton
Quixtar

In The News

Rupert Murdoch Speaks His Mind BusinessWeek "I just want to live forever" .... "I enjoy myself too much." ..... The prospect of supporting New York Mayor Michael Bloomberg for President is "really tempting," said Murdoch, who noted that such a campaign would cost Bloomberg "a billion dollars, which apparently doesn't worry him." ..... When asked about his relationship with Senator Hillary Clinton (D–N.Y.), Murdoch replied that, along with the questioner, he didn't understand it. ..... Murdoch's sensibility and wit were honed at newspaper tabloids, and they surfaced in some sly onstage jabs. Recalling a fund-raiser he held for Senator Clinton, he said "she was very impressive in the way she handled issues, and sidestepped them." ...... a Fox Business Channel would launch this fall .... Pressed on the point of political bias, he casually lashed out at the Times. It's "outrageously biased," he said. "Just read Page One every day." He compared it to his less objective, more visceral New York Post, which he said designed its Page One to sell papers. ...... Murdoch, now married to the Chinese-American former News Corp. executive Wendi Deng, also made it clear his ardor had cooled for the media business in China. India "is a working democracy, with rule of law. We find it is most exciting" among developing countries for media. ..... "China is immense, [but its government] is not opening it up yet."
Google Steps Into Microsoft's Office the search leader has offered a test version of an online office productivity software suite, called Google Apps for Your Domain, that lets companies offload e-mail systems to Google while keeping their own e-mail addresses. Soon, it's expected to add word-processing and spreadsheet services to the suite, which includes an online calendar, chat service, and Web page builder. In coming weeks, Google Apps will turn into a real business as Google begins charging corporations a subscription fee amounting to a few dollars per person per month. ..... Microsoft's stated aim to extend its Office franchise to the Web—suggests that before long these two titans of tech will be battling over many of the same corporate customers. .... a dawning era in corporate computing: software delivered as a service over the Internet, so it's accessible anywhere there is a Web browser handy. This time consumers are leading the way as they flock to Web-based applications such as e-mail, chat, and phone services like eBay Inc.'s (EBAY ) Skype Technologies ..... As traditional corporate software has grown complex and expensive to maintain, Web services are getting more capable and reliable every year. "For the first time, consumer-grade applications are good enough that they can be used by enterprises" .... Arizona State University plans to switch most of its 65,000 students to Gmail, Google Calendar, and a customized "start page" this month. ..... Corporate users, accustomed to feature-rich applications from the likes of Microsoft and IBM (IBM ), are more demanding than consumers. ..... Google got a taste last October when it switched over most of its own employees, who mainly had used Microsoft Outlook e-mail and Oracle Corp.'s (ORCL ) calendar program, to Gmail and Google Calendar. Some features on the old systems that Googlers considered crucial—such as a way to schedule all those company-paid massages—weren't available on the new system. In all, employees shot back more than 1,000 requests for new features in the first two weeks after the changeover. ........ Office Live, which offers Web-based e-mail, calendar, and other services in packages ranging from free to $39.95 a month for a single business. Some 250,000 small businesses use it, compared with tens of thousands using Google Apps ...... Zimbra Inc. boasts more than 6 million e-mail boxes at 1,300 paying customers.
Rivals Say HP Is Using Hardball Tactics Cheaper store-brand inkjet printer cartridges have come on strong recently and now make up about a quarter of the market for replacement cartridges in the U.S. ..... those replacement cartridges typically sell for 10% to 15% less than HP's ...... "The speculation is that [Staples] reached a deal with HP and got increased margin and soft money for marketing"
GM: Learning the Ropes in Russia They created GM-Avtovaz, a $340 million joint venture based near the main Avtovaz factory in Togliatti. The thinking was that partnership with Avtovaz would give GM an inside track on penetrating the Russian market and help GM keep costs down by sourcing cheap components from Avtovaz. In turn, Avtovaz expected that GM would help provide management know-how, technology, and access to export markets. ...... Russian consumers proved to be just as discerning as Westerners when it comes to insisting on the latest technology. ..... tensions between the two partners erupted into open conflict in early 2006, when Rosoboronexport, Russia's state-owned arms-export agency, took over Avtovaz and brought in new managers. Avtovaz suddenly stopped supplying engines and other components to the venture, accusing GM of underpaying for parts. ...... Ford (F), now the best-selling foreign car brand in Russia .... The betting is that GM will do better on its own, rather than entangled with a Russian partner.
Davos Ponders a U.S.-Iran War a confab devoted to the peaceful advances of globalization. .... an agenda devoted to the broad topics of peaceful reform was quickly overshadowed by the idea that the Bush Administration would start a war against the mullah-dominated regime of Tehran .... a U.S.-Iran conflict would set the clock back for the whole area. "Can we afford another war?" asked Mubarak. "Of course not. All the genies would come out of the bottle." ...... the huge illiteracy rate in the region—some 70 million lack basic reading and writing skills. Such a deficit he suggested, was responsible for the radicalization of certain elements in the region, especially in Iraq—many Iraqis lacked the tools to form a rounded, accurate worldview. ..... moderates in the Arab world often were mistaken by Americans as being moderate out of sympathy with the U.S. Not true: "We're moderates for the sake of our country .... That world right now is deeply worried about another American war in its midst.
What To Expect At Davos 23 different risks, such as global warming, terrorism, oil price shocks, a hard landing for China, and so on. ..... 2,400 people—half business, half other stakeholders in the global society, including 25 heads of state ..... everywhere in society and business, the power is moving from the center to the periphery. Vertical command-and-control structures are being eroded and replaced by communities and different platforms. We are moving into the Web 2.0 world, and this has tremendous implications on the national level and on business models. .... If we don't discuss and solve the conflict between Israel and Palestine, the world will look very different in 10 years.
Selling Globalization at Davos while the thousands of luminaries gathered in this alpine bubble share a common belief in the benefits of globalization, they are also aware that it enjoys far less support among ordinary citizens. ...... rising signs of anti-globalization—ranging from the potential failure of the Doha round of trade talks to concerns that countries may erect trade barriers to protect jobs and markets. ...... How to convince a wary public that the risks of globalization are outweighed by the economic benefits .... "We have to stop using abstract concepts such as GDP growth and explain globalization instead in terms such as job creation, prices, and taxes," Davis said. Most people, he explained, don't realize that the same forces pulling jobs offshore also drive down prices for the goods they buy at the local superstore. ...... acknowledge the arguments of globalization opponents and take concrete steps to address their legitimate concerns ..... a national health-care system. .... retraining programs for displaced workers. .... globalization means customizing its products for different markets, putting staff on the ground all over the world, and investing deeply in local communities. ...... Unilever, for instance, is famous for selling products such as shampoo and laundry soap in tiny packets that cost people of limited means only pennies. "This is business, not philanthropy, and we make lots of money from it," Cescau said. At the same time, the company supports programs such as Project Shakti, which teaches poor women in rural India about nutrition and hygiene. ........ one reason globalization isn't more appealing is that it demands more work and greater risk-taking from everybody—including people in emerging economies .... local providers who previously enjoyed a cozy local market may suddenly face increased competition—or even ruin—from a deep-pocketed multinational that moves into the market. ...... globalization has victims on all sides ...... globalization also has beneficiaries on all sides ..... corporate social responsibility .... it has to be built into each corporation's fundamental strategy. "You can't have a healthy company without a healthy community." ...... Properly executed, globalization also creates huge opportunity. "Having a global market to serve is an incentive to innovate more," noted Columbia University professor and economist Joseph Stiglitz. ...... the learning that takes place when people from around the world work together. ..... India's famous "frugal engineering" culture ...... In today's car industry, knowing how to design a cheap car is an invaluable skill
The Transformation of Turkey Hrant Dink, the outspoken editor of Turkey's main Turkish and Armenian-language newspaper, was gunned down. ..... Tens of thousands of Turks have demonstrated to condemn the murder and demand justice. ...... the power of networks to promote change, open closed societies, and cross cultural barriers. ..... "Turkey has become very open, very fast." ..... From a single state-owned TV station, more than 300 stations have emerged. Eleven hundred radio channels crowd the airwaves. Every private school is now linked to the Internet, and the government is distributing 400,000 PCs to schoolchildren. ..... Turkish courts are now basing more of their own rulings on the corpus of judgments found in EU law books. ...... Under the present government, Turkey has opened its economy to a surprising degree. ...... Maybe globalization can help Turkey finish its transformation.Foreign direct investment has zoomed from $1 billion to $18 billion. GDP growth has averaged 7%—not quite in China's league, but close. .... Ford has invested hundreds of millions in auto plants in Turkey—and ended up with one of its most productive facilities anywhere. .... Toyota, Honda, Electrolux—multinationals are flocking to the country to benefit from workers that cost $500 a month, universities that churn out engineers, and managers who grasp the concept of quality.
Merkel Calls for Stronger U.S.-EU Ties After a rocky start, the German Chancellor has achieved international respect on the back of a solid domestic economic rebound. ...... problems ranging from trade barriers and economic imbalances to energy and climate change. ..... a call for Europe to strengthen its historic "transatlantic" relationship with the U.S. This is perhaps indicative of her growing concern over Russia's growing clout. Moscow has taken to using its oil and gas riches as a tool to punish wayward neighbors and exert greater influence over policymaking in Western Europe. ....... Merkel began by identifying what she said have been the three seminal global events of the last two decades: the fall of the Berlin Wall and subsequent reintegration of the Eastern bloc countries into the West; the technology boom, exemplified by the global Internet explosion; and the rise of China and India from "static, controlled economies to active participants on the global stage." She urged that their economic power be matched by participation in global policymaking. ....... Merkel's prescription for Europe includes continuing integration, such as an additional 25% reduction in the cost of internal trade within the bloc over the next decade. ...... reinvigorate the process of enacting a new European constitution. ..... the need to mitigate capital market risks with adequate protections. A particular source of concern is hedge funds, which the Chancellor called a "headache" in the struggle to balance risk and equity. ...... Western Europe's dependence on Russian energy supplies.
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Is Dell Too Big For Michael Dell? BusinessWeek "I think you're going to see a more streamlined organization, with a much clearer strategy." .... Dell doesn't have the innovation DNA of an Apple or even an HP ..... According to a Jan. 30 study done by Goldman Sachs (GS), Dell is losing share in business spending for PCs. (Hewlett-Packard is also losing share of spending, while Lenovo (LNVGY) and Apple are gaining.) .... "I'm not hiring a COO or a CEO," Dell says. "I'm going to be the CEO for the next several years." He adds: "We're going to fix this business."
Michael Dell In Charge, "Period" Kevin is a great friend of mine, and he did a fantastic job for the company. But that's done ..... "Having a clear, unified strategy and focus and organization is what the company needs. ..... I'm a decisive guy, and we're moving fast. .... Dell's core strengths historically will be its core strengths in the future.
BusinessWeek.com, 11/9/06, "Dell Stands By His Man"
Google's Brand New Appeal More than ever, it's got the entire advertising world in its sights. And this year, Google will come out with guns blazing. ..... now accounts for about a quarter of all online advertising ...... many advertisers are starting to use search ads for branding, like more traditional ads. .... company aims to offer a "complete sales and marketing platform for all advertisers ..... Volvo, Procter & Gamble (PG), and OfficeMax (OMX) all placed image and video ads on Google's networks.