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Dell computers were not sold by
computer retailers; instead they were
available directly from the manufacturer.
Dell took the bold step of cutting out
retailers to undercut the competition.Dell’s simplified business model
delivered lower costs, enabling
the company to gain market share
by undercutting the prices charged
by rival computer suppliers.
The success of Dell’s model of
selling directly to consumers was
adopted by companies in other
industries. In 1996, Amazon, now
the world’s biggest online store,
began selling books online without
the need—or costs—of running
a bookstore.
However, since 2000 Dell has
lost ground to a revitalized
competition. Some companies
copied Dell’s idea to sell computers
directly to customers, while others,
such as Hewlett-Packard, were able
to nullify Dell’s price advantage by
making their production process
more efficient. The resurgence of
Apple has also dented Dell’s market
share. Apple produces a range of
products to suit different budgets,
and also allows its customers to
make some adjustments to the
computer’s specifications.
Simpler services
Companies that sell services also
work to improve efficiency by trying
to remove unnecessary steps from
their production systems. Sometimes
these changes are needed to ensure
a company’s survival. For example,
in the past, many independent food
venues offered meals produced in a
traditional, labor-intensive manner,
cooked from scratch with fresh
ingredients. Some business chains,
looking to capitalize on the growing
demand for low-cost food, adopted
a simpler approach. They began to
serve food that had been bought in
a prepared state and simply heated
in a microwave in response to a
customer order. There was no need
for trained cooks, and no time spent
preparing fresh ingredients.
Removing these steps cuts costs
and enables the establishment to
offer lower prices to consumers
without losing profit margins.
However, innovations such as
these can be cyclical. A rising
market for freshly prepared food has
led to new fast-food chains selling
meals prepared on the premises. In
the current climate, many companies
are looking to cut costs by
streamlining processes. But the
businesses most likely to survive
are those that can lower prices, but
not quality, for the consumer. ■DELIVERING THE GOODS
Michael Dell
Born in 1965 in Houston,
Texas, to an orthodontist
father and a stockbroker
mother, Michel Dell was a
natural entrepreneur. He made
his first $1,000 by dealing in
stamps at 12-years-old, and
sold newspaper subscriptions
for the now-defunct Houston
Post. Dell attended pre-medical
college in Texas in 1983,
but soon left to focus on his
computer business, which
he named PC’s Limited. Dell
opened his first international
subsidiary in the UK two years
later, and in 1998 changed
the business’s name to Dell
Computer Corporation, making
it a public company and raising
$30 million. In 1992, Dell
became the youngest-ever
CEO of a Fortune 500 business
at 27. By 2000, the company’s
direct-sales website (launched
in 1996) was generating
revenue of $18 million per day.
Dell resigned as CEO in 2004
to focus on his charitable
work, but returned in 2007,
taking the business private
in 2013.Key works1999 Direct from Dell:
Strategies That Revolutionized
an IndustrySimplicity—the art of
maximizing the amount of
work not done—is essential.
Principles behind
The Agile Manifesto (2001)