When Michael Dell was a senior in high school, he sold so many newspapers, he was able to pay cash when he bought a BMW. Since then, Dell, 34, has sold so many computers, he could own nearly every BMW ever produced.
Dell has amassed a fortune of $13 billion, making him richer than Bill Gates at the same age and catapulting him to No. 4 on the Forbes 400 list of wealthiest Americans. He earned it by dropping out of college after one year to found Dell Computer Corp.
In 1983, while a freshman at the University of Texas, Austin, Dell started selling personal computers out of his dorm room. (When his family came to visit, he hid the computers in his roommate's bathtub so his parents wouldn't think he was neglecting his studies.) Early success led him to put school on hold to concentrate full time on his burgeoning business. Two years later, 250 people were working for him; now he employs 23,000. It took just eight years for Dell to become the youngest-ever CEO of a Fortune 500 company.
Dell is famous for building computers to order, shipping them quickly (an average of four to five days as opposed to 25 days for some other manufacturers) and providing superior technical support. But it's not just customers who sing Dell's praises. Early investors raise their margarita glasses to Dell from the assorted tropical islands they can now afford to visit as often as they choose: The price of Dell's stock climbed by 63,000 percent between 1989 and 1998. Revenue was $16.8 billion for the 12-month period ending November 1, 1998, with $24 billion projected for this year. The company has maintained gross margins of more than 22 percent because it doesn't have the drag of expensive inventory that many other computer makers do.
Despite increasing competition, plummeting average PC prices and global business turmoil, Dell remains the world's fastest-growing major computer company and the largest manufacturer selling directly to end users. Unit sales in 1998 were 60 percent higher than 1997 figures, confirming its status as, in the words of The Christian Science Monitor, "the poster child of America's stunning New Economy."
Dell Computer began selling online nearly three years ago, and its Web site (www.dell.com) is now racking up $10 million each day in sales. By the end of 2000, Dell hopes to do half its business online. When asked about the efforts of companies like Gateway and Compaq to cut into his market niche, Dell says the competition is far behind in refining the necessary skills and that the real challenge for his firm is to keep a strong infrastructure to support sales.
Now the computer industry's longest-serving CEO has decided to write a book, Direct From Dell: Strategies That Revolutionized an Industry (HarperBusiness). We figured he might have a thing or two to tell us, not only about computers but about business and personal success in general. We spoke with him in January, just before his book was to be published, to get his take on technology, business at the turn of the millennium, and just what makes him tick. Here, he shares his insights:
Michael Dell on staying on top: "The essential thing [for an entrepreneur] is to identify where and when you need help. You also have to change your role as your company grows, prioritizing what you have to do vs. having others execute [tasks] at the detail level.
"If you have a good strategy with sound economics, the real challenge is to get people excited about what you're doing. A lot of businesses get off track because they don't communicate an excitement about being part of a winning team that can achieve big goals. If a company can't motivate its people and it doesn't have a clear compass, it will drift."
Dell on service: "The new frontier in our industry is service, which is a much greater differentiator when price has been equalized. In our industry, there's been a pretty huge gap between what customers want in service and what they can get, so they've come to expect mediocre service. We may be the best in this area, but we can still improve quite a bit--in the quality of the product, the availability of parts, service and delivery time."
Dell on innovation: "We make a point of having a diverse work force so our teams have members with different angles on problems and ask different types of questions. Diversity breeds innovation.
"We also encourage risk-taking that results in new information. You have to go off and do things that don't work and in the process learn something. We also set ludicrous targets, and these have propelled everyone to really stretch. Everyone is committed."
Dell on the Net: "Every business should have a Web site, but keeping it up to date and making it better to use than the phone is a challenge. What I see coming is increased use of recorded and live video as bandwidth increases. But to get people to look at your Web site at all, you need to promote it in every aspect of your communications, from business cards and the boxes your products are shipped in to advertising. Your whole business should be built around having a Web site because that's where your best customers--and your toughest competition--will be.
"You can also enhance partnerships with suppliers and track inventory using the Net. And employees should be encouraged to monitor the industry for competition, opportunities, news and best practices."
Dell on going global: "A lot of people don't realize how lucky they are to live in the United States, but they do think it's the center of the universe, and it's not. There are massive markets outside the United States, and as a business grows, the economies of scale and the learning that comes from being involved in a global business can't be overlooked, whether from a customer or a supply standpoint."
Dell on regrets: "I wish I had known more about finance [when I started my business]. I think if I had anticipated the growth we would experience, I would have been much more aggressive about bringing on talent."
Dell on Y2K: "I'm not moving to a farm and storing bottled water, but I am concerned about the infrastructure, the government-run services like the air and rail transportation systems. But we'll get through it."
Dell on balance: "I understand the limits of my effectiveness in terms of how many hours I work. I keep my work life and family life in healthy balance."
Scott S. Smith writes about business issues for a variety of publications, including Investor's Business Daily.
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