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HOW MICHAEL DELL IS TRANSFORMING THE “WORLD’S LARGEST START UP”
Two
words boom across the hall in an audio-visual clip at the Dell World event
in Austin a few days ago—‘what if’.
What If…
Challenges us to look at things differently…
It inspires us to rethink convention…..
Tips the first domino in a chain reaction that
turns dreamers into entrepreneurs…
The two simple words were responsible for igniting
a powerful idea in Michael Dell’s mind. A private equity pro planted the
thought of taking the eponymous company private in Dell’s mind, tipping the
first domino that set in motion a sequence of events culminating in Dell
Inc becoming a private company on October 29th, 2013. As the ‘what if’ film
ends, Dell walks on to the stage, and starts listing the company’s
achievements and then lets it slip …. “You might have also noticed that we
are a private company now.” The audience erupts. Having endured months of
anxiety during the ugly ownership battle with the Wall Street sharks, the
Dell executives gathered from all over the globe at Dell World hoot and
clap for their CEO. The standing ovation is large part celebration, but
it’s also part relief.
More than anybody, the man on the stage beaming
after regaining control of the company he had built, and nearly lost, knows
that it is time for a test of his leadership — yet again. In his well
documented first innings, the legendary founder had disrupted the PC
business out-thinking and out-executing heavyweights like IBM and HP with
his direct sales model starting out from a humble college dorm. Now for the
second time in life, the 48 year old entrepreneur faces a challenge,
transforming the IT major — now a $56.9 bn behemoth — into what's now the
choice destination for all major technology companies: an end-to-end
solutions provider. While Dell may have won the privatisation battle, the
boxmaker-to-solutions provider transformation war that he started five
years ago when he returned to take charge at Dell again, is still raging
on.
Though the circumstances have changed in past 28
years, the set of choices Dell faced then and now were still the same.
Either play by rules set by the very same competitors, IBM and HP among
others or change the game, like he had done before. “I am absolutely
looking at changing the game again,” Dell says emphatically. Given his
track record, it’s easy to buy his side of the story. But Dell’s big test
is a really big one. The computing landscape is shifting in myriad ways
putting leaders under pressure and Dell is not a nimble start-up anymore.
But then Michael Dell is no ordinary chief
executive. A hands-on leader, the Texan spends more than half his time
talking to clients, and one advantage of knowing your kitchen well is that
you get a realistic sense of the marketplace and workplace challenges. Dell
knows that kick-starting that level change in a megacorp, requires focus,
funds and freedom, a luxury that the scrutiny of investors and the quarterly
rhythm of Wall Street wouldn’t allow him.
Hence, the P word made perfect sense. “We can be
bold, we can build the company focused around our customers, and we can
think long term,” says Dell, who put his 16% ownership and another $750
million on the table, along with $19.4 bn from PE player Silver Lake and
other lenders to turn Dell Inc into the world’s largest private technology
company. The founder prefers to call it “world’s largest start-up” and
wants his leaders and executives to start behaving accordingly. Initiatives
like Hackathons, start-up contests, creating ventures inside businesses,
crowd sourcing new ideas that encourage ‘new thinking and failing fast’ are
being inculcated into the culture. Last year Dell filed more patents that
any other year and this year the company will upend last year’s number. “We
have to embrace risks and risks mean ‘you do not always succeed’. We are
willing to make mistakes,” says Dell. “Innovation comes by a series of
successes and failures. If you keep trying, at some point you will get it
right. Constant pressure from the Wall Street can be a distraction,” adds
James Stikeleather, Executive Strategist, Dell Services.
In the quest to rebuild a stronger company, Dell is
willing to go back to the basics that he built the company around. People
around him will vouch that if there is an obsession with the entrepreneur,
it’s his relentless customer focus. The favourite quote being, “we are a
company with big ears”. “The first topic of conversation with Michael in
his monthly meetings with direct reportees is always customer experiences,”
says Bobbi Dangerfield, Vice President Commercial Operations, Dell Inc.
Instances abound of Michael meeting customers when not only requested by
senior leaders but even mid-level and account executives.
While the makeover journey might take anywhere
between 3-5 years, an early dividend of privatisation has been the sense of
excitement across the organisation: leaders are more surefooted, and the
workforce is enthused. “Privatisation has unleashed a new kind of energy.
The whole perspective has shifted to customer first; how we can do more,
how we can innovate,” says Suresh Vaswani, President, Dell Services, one of
Michael’s top lieutenants. On ground, how have things changed for him as a
service line chief? “It means, I can take aggressive positions in services.
It means, I can make bold investments. It means, if I want to build a solid
sales engine, I can build it. ” says Vaswani, who was previously co-CEO of
Wipro.
Even though, privatisation has been a great
pick-me-up for Dell Inc, there’s a laundry list of problems that will test
its resolve. The biggest headache is a shrinking PC market. According to
IDC, PC companies sold 10% fewer PCs in 2013 than they did in the preceding
year. But Dell is betting big on PCs despite dipping profits. His logic:
PCs will now be a variety of devices not just a desktop and laptop and his
company has great scale advantage and is gaining share in the category. PCs
also give him an interface to enterprise customers who can then be sold
solutions: “As a private company we will be more aggressive in going after
customers. We think in terms of the lifecycle value. Build a customer
relationship starting with the PC or Tablet and then go to server, storage
networking, services, security, software.”
Ever since taking the corner room 5 years back,
Dell has been adding capabilities through both organic and inorganic
methods but metamorphosing into a true total enterprise solutions provider
with a robust suite of software, service, storage and server offerings will
require a herculean effort. And for that, Dell has drawn an elaborate plan
focused on four areas that customers will require from their IT vendors:
transform, connect, inform, and protect. However, there are still holes in
the company’s present offerings. A two-fold approach is being used to
create solutions. Collaborations are being set up with other leading IT
majors like Google, DropBox, Microsoft, Red Hat and Accenture to offer solutions
that also integrate Dell IP and products. And Dell has also instituted a
$300 million Strategic Innovation Venture Fund to nurture startups working
in cutting edge technologies. To take all that firepower being created at
the product end, the company has also been crafting a new channel strategy.
To better integrate direct sales teams with partners (1,43,000), Dell is
turning over 200,000 direct accounts to the channel. But despite cranking
up all parts of the company, risks remain. “Even in new businesses such as
software there is the risk of failure. Microsoft with its substantial
experience in software is struggling to keep up with agile competitors.”
says Nitin Pangarkar of Department of Strategy and Policy, National
University of Singapore.
While beefing up the capability side, the top
management team has also been rejigged to add more heft to the
transformation story. When some old-timers quit, Dell brought in some
heavy-hitters like CA CEO John Swainson to head software business, ex-HP
CEO contender Marius Haas to head enterprise, and Suresh Vaswani to lead
the services charge.
While racing to be a one-stop shop for enterprises,
a pertinent question that Dell will have to answer is, what advantage does
his company have against the likes of IBM and HP, who lead in the solutions
space, possess an established track record and also hold strong customer
relationships. Dell says: “What we are doing is innovating without this
legacy of old things to protect. We respect the companies in the enterprise
and data center. We are using open technology, we are bringing all this
together, driving cost out, making it all a lot simpler, a lot easier to
deploy. We learnt a lot from these web tech companies. We are providing the
infrastructure to Alibaba and Baidu and Youku in China and leading web
companies in the Americas and Europe. So we learnt a lot about what the
infrastructure of the future really looks like. And a lot of that is very
disruptive to the traditional data centers so those are the kind of
solutions that we are bringing forward.”
As Dell stakes out a place in the IT landscape, one
of his big bets is building a strong position in emerging markets: “That’s
where the next billion users will come from. Explaining all the
capabilities we have to all of our customers will be key. A lot of
customers would have said oh, I remember Dell, the PC box. But Dell is much
more than PCs now,” he says.
How is that translating on ground in China, Brazil,
India? Dell India CEO Alok Ohrie says: “Michael is very clear that
investments in India will now be at an increased pace. The focus will not
just be on building capabilities for delivery of services or creating
products from India but also the domestic market. India is one of the ten
focus markets for the company globally and we are creating an
infrastructure and resource pool to maximise our share.” Given the low
penetration of PCs in the country, India will also be one of the four
markets where there will be significant investments to aggressively build
end-user computing product business.
If Michael manages to turn around Dell second time
around, he could go down in history as one of the world’s greatest CEOs.
And never one to shy away from a challenge, Dell makes his intentions
crystal clear in his speech when he declares “In it to Win it”. No ‘what
if’ there.
DELL’S DISRUPTIVE DRIVE
Reorient to a new computing
landscape
Align all: End user, enterprise, software and services to offer solutions
that Transform, Connect, Inform and Protect
Chase aggressive growth in emerging markets
Shore up software with acquisitions
Invest in startups to build an ecosystem of new cutting-edge technologies
Use PCs for customer acquisition
Dell on privatisation
“Leading Dell now is more fun. I
get more time with customers, more time with products, and as we would say
in Texas, there’s less bulls$#@ to deal with”
MICHAEL’S MANAGEMENT MANTRA
Take bigger, bolder bets
Increase customer-centricity & build the business customer back
Unleash entrepreneurial energy, creativity and innovation within ranks
Simplify the products and the organization structure for customers
Build an ecosystem of partners and align them to the strategy
PRIVATISATION PERKS
Focus on long-term strategy without short-term quarterly distractions
Ease of restructuring:
Ability to take difficult organizational decisions while accelerating
transition into an endto-end solutions provider
Increase R&D budgets and spur innovation over a longer horizon
Better re-investment of free cash back into business and maneuver the price
game better
Use the freedom to experiment and innovate
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