Perspective: What ails Dell?

The downfall of Dell begins with the pursuit of excellence.

Back in 2004, a group of us from CNET News.com visited the Round Rock, Texas, headquarters of the PC giant. At the time, a few customers were grumbling about Dell's customer service, but otherwise the company looked unstoppable.

The company was also bulking up its executive ranks, and a weird number came from consulting firms: Bain & Co., McKinsey & Co., etc.

I asked one person about it (a McKinsey alum) who agreed: There were a lot of them. Dell prided itself on measurable results, after all, and where better to recruit than the firms that pioneered management by numbers?

Since then, it's been downhill. Customer complaints have increased, Hewlett-Packard has mounted a comeback, and Dell actually grew slower than the market in one quarter, an extremely rare occurrence.

Dell also bought Alienware, breaking with its 22-year policy of eschewing acquisitions. Will a guerrilla outfit hawking antiauthoritarianism still woo kids now that's it's a subsidiary of a Fortune 100 company? Time will tell. This week, Dell announced that it will open two new retail stores, following the lead of Samsung, Sony, Gateway and Apple Computer.

We live in a world where some of the brightest minds out of Harvard are trying to discern the tastes and needs of 15-year-old metal heads from Salt City, Mo. Something doesn't add up here.

Personally, I see at least a slight connection. Management consultants are often brilliant and energetic individuals. They have degrees from universities that most of us only have ding letters from. But when they flock together, they tend to weigh a company down.

Why? Too much management expertise tends to make companies insular. It's what happens when everyone you know graduated from Wharton too. Those people checking out your products at Target--the harried mom, the Shoe Pavilion clerk on break, the middle-aged man being seduced by the smell of churros wafting from the snack bar--just start to seem grubby after awhile.

Unfortunately, to succeed in the tech market, you really need to suck up to your customers. (Oh, hey, let's just call it customer-facing engagement activities so we're all on the same page). Sony got creamed when it came out with an invasive DRM scheme.

This explains why the successful community sites are not the juggernauts started, funded and staffed by Silicon Valley celebrities, but the ones like MySpace created by individuals winging it on gut feeling.

We live in a world where some of the brightest minds out of Harvard are trying to discern the tastes and needs of 15-year-old metal-heads from Salt City, Mo. Something doesn't add up here.

Biography
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas. He has worked as an attorney, travel writer and sidewalk hawker for a time share resort, among other occupations.

More Perspectives

[fred dunn]

Multi-Layered Beaurocracy...Tall Walls to Scale...

This article drives home a very good point in pointing out that Dell not unlike many others have become isolated from their customer base.<br />That's not to say that the tech reps don't know what you want or need. It also doesn't indicate that the Dell engineers don't know what the customers want and need, Marketing, etc.<br />What happens when the management gets "Fat" is that the ideas only make it to the assistant of the "Executive in charge of..." and no further. These assistants (otherwise known as Queen Bees) only want to satisfy their boss and they know that the boss has a tendency to shoot the messenger so if the Queen Bee doesn't like your idea then the communication never gets through, God forbid they're able to personnaly speak with one of these God-Like Execs.<br />Another phenomena occurs as a result, apathy. Once this sets in at a company then everybody is self stifled knowing that they have been there done that before and all it got them was a dirty look and a mind your own business.<br />Three words can sum up Dell's current problems "Fat and Content", OK it's really only two.<br />The only (and I mean the ONLY) reason Dell has chosen to incorporate AMD Opteron processors into their server line is to calm down Wall Street Analysts who where killing their stock value.<br />Don't think that the Dell engineers and Developers were not trying to get this into their product line but that meant that somebody at the top would have to disagree with an "Intel Only" mentality that IS deeply embedded at the top executive levels. So apathy killed their desire to get "beaten up" by administration or the Queen Bee once again and it never moved past the actual "Techies".<br />Dell doesn't have exclusivity to this phenom, HP went through it, IBM went through it as well as many others some made it some didn't (all the examples have so far made it). <br />Unless it is turned around while the company still has capital to burn then the "Fat and Content" phenom will slowly destroy a business and the funny thing is that the Executives won't have a clue as to why it is failing. But never mind the company failing the executives will leave the company with wealth while the workers leave with nothing.

[JScottK]

Yup

Sad part is. When all of these MBAnuses leave with all of the <br />company's wealth; there will be a bidding war for their obvious <br />incompetence (just like Carly), while the employees get left holding <br />the bag on a used-up shell of a company.

[Jesus#2]

or...

They just make crappy PCs. Seriously. They are just ugly. For the <br />business world.. that's OK.. but consumers don't want a <br />business computer. Even Dells "pretty" line is butt ugly.. who <br />likes a 10 pound laptop with blue LEDs anyway? <br />Also.. the design is poor. Look at the first few gens of optiplex <br />desktops.. they put two usb ports in front (good).. but they had <br />them upside down and facing down. In addition, they were <br />pushed back so far in the case that most USB drives and dongles <br />would not even fit. You still had to get on your hands and knees <br />to insert a USB device... Brilliant.

[genedp]

Business Schoolers and Dell

Michael is dead on! It's amazing that a clever entrepreneur such as Dell didn't see this coming.

[HC6700]

Why I'll never buy another Dell

I bought a Dell Laptop about 3 years ago. At the time of my purchase I didn't realize that Michael Dell had already decided to show his enthusiastic post 9-11 patriotism by firing most of his American employees and giving their jobs to the country of India. <br />When I purchased my laptop, I also spent an extra $350 to buy a 3 year technical support warranty, which at that time included coverage for any problems involving Windows. It didn't, however, include support for third party software like learning how to use Roxio software or anti virus software.<br />But shortly after I bought my laptop and tech support warranty, Mr. Dell decided to change what was covered in my contract. He decided to change his definition of third party software, to include Windows. So Dell no longer would help with any Windows related problems, which probably covers about 95% of the calls to Dell. I ended up spending over $300 so Dell could help me trouble shoot hardware problems.<br />To say that Michael Dell is unethical, is an understatement. With business people like Mr. Dell, I sometimes wonder (as a Psychologist who has been practicing for 30 years) whether they even have consciences.<br />Needless to say, I'll never buy a Dell again.

[pencoyd]

Gladwell on the Talent Myth

<a class="jive-link-external" href="http://www.gladwell.com/2002/2002_07_22_a_talent.htm" target="_newWindow">http://www.gladwell.com/2002/2002_07_22_a_talent.htm</a><br />talks about the last place lots of McKinsey consultants ended <br />up...Enron.<br /><br />Deep in the heart of Texas!

[aa2006]

Dell Departments In Conflict

When I helped my parents with their Dell multimedia computer purchase recently, the experience left me incredulous. Any MBA or manager with common sense would fix this right away. (Are you there, Dellites?)<br /><br />None of the 5 people I spoke with were really listening to the whole customer story. Especially the 2 in India, who were so polite it was annoying. I certainly got zero value from those discussions. I guess moving american jobs to India where the new employees add no value to the customer relationship is one reason Dell is headed down. Labor that is cheap but adds zero value to the customer is clearly a boneheaded way to manage a business.<br /><br />The incredulity started with this doozey. Why on earth would a multimedia computer not have a default configuration that includes a 1394 Fireware i-Link port? The Dell configurator could certainly credit back $30 if a customer didn't want to import digital video onto their multimedia computer. This simple design mistake on Dell's web configurator probably cost Dell over $500 on our transaction alone.<br /><br />When we tried to get a replacement for the multimedia (sans digital video import) computer, the sales person told us that Customer Care would refund the shipping. I expressed skepticism but he assured me it would happen. When customer care subsequently refused to credit the shipping, I canceled the $2500 replacement order. I mean really! Screw you, Mr. Salesperson. It was pretty amusing that the sales manager called back later offering $125 credit to reinstate the replacement order. Too late! I got a pc from somewhere else at a better value. So much for brand equity that Dell has created over the years.