Dell Computers Dell Computer\'s Turnaround: Can it

Dell Computers

Dell

Dell Computer's turnaround: Can it work?

At one point in its history, Dell Computers was considered to be a paragon of mold-breaking business innovation because of the radical way in which it challenged the accepted model of the computer industry. Rather than focusing on product innovation, Dell chose instead to primarily focus upon direct-to-consumer sales (both B2B and B2C). Dell "rose to fame in the 1990s and early 2000s by letting big companies and everyday people completely customize their PCs and build them to order, at cheap prices. During that era, PCs were seen as mostly a collection of commodities shoved into a box. Everything was a PC and it all ran Windows" (Van Camp 2012). Less than 1.5% of the Dell budget was spent on R&D (Van Camp 2012). By custom-building its computers Dell could keep inventories low and increase its profits. But in 2009, Dell's net worth was calculated at $30 billion "less than a third of its rivals' market values" (Edwards 2009). According to the Businessweek case study entitled "Dell's extreme makeover," the reason for Dell's fall from grace lies in the fact that the company has shown far less diversification than competitors. Rather than innovating and improving its signature products it has been playing 'catch up' to organizations like Apple. And people are simply buying fewer PC today, although making PCs is what Dell does best.

This attempt to turn around Dell Computers is far more challenging than merely tweaking a few unprofitable aspects of the business. "The old Dell succeeded because of its mastery of logistics and the supply chain, allowing it to sell computers directly to customers at prices no rival could match" (Edwards 2009). However, this business model is no longer feasible or profitable for the organization, given the current contraction of the PC market. A profitable, competitive Dell means an entirely new Dell. Observed one technology reporter in March of 2012: "a quick visit to Dell's Web site and you may feel like you've been transported back in time. Though virtually every PC maker has long begun selling smartphones and tablets, the only items you'll find on Dell.com are desktops, laptops, and supplies. That's it" (Van Camp 2012).

When Michael Dell reassumed the helm of the failing Dell in 2007, he first 'cleaned house' and brought in new talent, including a new product designer. Dell slowed down the pace of its store expansion and release of new products to improve the quality of its offerings. Dell's lack of focus on research and development and its conservative business culture that eschewed diversification and change was targeted as the source of its sluggish growth. "Dell knew he wanted to change the company's management culture, to get executives to jump on new business opportunities and take more risks, but he wasn't sure how to go about it" (Edwards 2009).

Dell reorganized its structure to focus on customers rather than products. He segmented the organization into four groups: "consumers, corporations, small and midsize businesses, and governments and educational buyers" (Edwards 2009). Given the organization began as a customer service-focused enterprise, this reform might seem to make sense, versus segmenting the company into different products as is typical of most technology firms. But the reformed structure has not translated into better products outside of the PC market. Regarding Dell's Venue Pro and Streak tablets "one look at them and you can probably tell that these were not hit devices. There is little that's horribly wrong with either, but like many of Dell's non-PC efforts, they featured puzzling hardware decisions, weren't branded well, lacked proper promotion, and their market timing was not ideal" (Van Camp 2012).

Additionally, Dell's ability to market its product and foster consumer trust received a severe blow when it was revealed that "from 2003 to 2005, Dell sold computers with faulty capacitors that allegedly caused most motherboards on two Dell OptiPlex models to break, rendering the computers useless" (Goldman 2010). This became the subject of a much-publicized lawsuit against Dell. Dell was also forced to reach a settlement it is with the Securities and Exchange Commission due to evidence of accounting fraud, which further damaged the company's reputation as an honest and credible organization (Goldman 2010).