Michael Dell was a featured speaker at Connecting Technology (CT) Spring 2001. While visiting CT, Mr. Dell graciously agreed to an exclusive interview with CHIPS magazine.
The Dell success story begins in 1983 with Michael Dell as a 19 year-old freshman at the University of Texas in Austin. Although he was a biology major, he spent much of his time upgrading computers. It was at this time that Mr. Dell investigated the concept of a direct sales company. With $1000 of investment capital, he started the Dell Computer Corporation in 1984.
The Dell business strategy of direct sales eliminates dealer mark-up, and reduces overhead costs, while providing reliability, service and support. Online (or telephone) direct sales allow Dell to receive an order and assemble it exactly to customer specifications. The computer is then boxed and sent directly to the buyer within the week. Dell's revenue for the past four quarters totaled $32 billion. Dell, through its direct business model, designs, manufactures and customizes products and services to customer requirements, and offers an extensive selection of software and peripherals.
At CT, Mr. Dell discussed Dell's partnership with EDS in the Navy Marine Corps Intranet (NMCI) program. Mr. Dell said he is very excited about Dell's opportunity to participate in such an important, innovative partnership to transform military business processes.
CHIPS: You said "The Internet will become as fundamental to business as electricity," to business leaders attending the Microsoft Corporation Windows 2000 Deployment Conference. Do you think businesses are using the Internet as a utility — as fundamentally as electricity in their business processes?
Michael Dell: As far as the Internet being fundamental to business, this is still very true but we still have a long way to go before businesses realize and use its full potential. In fact, I just recently saw a survey that showed that only one out of 10 sites that sold things online actually accept online payments. So we are still in the early stages of the build - out and development of the Internet. Electricity is ubiquitous — a part of daily life and every business uses it. People use the Internet too but they don't use it as well or as deeply as they could, especially for organizational communication, that is, machine-to-machine communications.
CHIPS: You also said at the same conference, "The Internet removes friction from all interactions and improves business velocity, efficiency and, I believe the overall customer experience." What do you mean the Internet removes friction?
Michael Dell: It works this way in organizational processes that occur today over the telephone or by forms — the longer it takes for that process to occur or the more people it involves - the more cost. And that time and cost is a kind of friction. But if you can bring this process online and have this transaction online where this process is Internet driven in a self-service fashion then the cost goes down. We have seen this in our own business with sales, technical support, in inventory reduction, and internal HR processes such as pay, training, benefits programs, HR administration - it has brought down the cost while it's increased speed. So we have taken the friction out of the Dell system and it has made us become more efficient.
CHIPS: The Navy is moving forward to Web-enable processes and make administrative and business processes self-sufficient and Web-driven so that military and civilian personnel can perform their HR type processes online in addition to actual business processes. The Navy has been increasingly looking to private industry to model their online success stories. Do you think private industry has much to share?
Michael Dell: Innovation certainly comes from lots of different places. But it is kind of interesting though, the Internet started as a government project, but now it is out in the commercial world and utilized by lots of different organizations. They add a kind of chain reaction of explosions — some of their ideas [private industry] worked some of them didn't work. Now we are getting back to the kinds of things that really make a difference — getting costs down and increasing speed. I think the Navy is exactly on the right track in improving efficiency in enabling Sailors and the entire force with these tools for greater speed and allowing them to spend time to do the things, which add value as opposed to doing things, which take time, add cost and add friction to the organization.
CHIPS: You are quoted as saying that the PC is here to stay but will undergo radical changes to accommodate wireless users. What will be the essential devices you think your customers will be using in a year or two?
Michael Dell: In a year or two you won't see dramatic change but one of the things definitely happening is more often we're moving from a fixed computer to a mobile computer. So where typically you would have a desktop, in the future it is more likely to be a notebook, which means you take can take it with you, use it wherever you are and have access to your data. Wireless will play a big role in accessing data wherever you are and this enables a new form of productivity because now you can work and have access to secure data anywhere.
CHIPS: I'm kind of skeptical that users will prefer notebooks unless absolutely necessary. Every time I've used a laptop, I've been frustrated and disappointed both in the features and speed. The experience has been so inferior to using a desktop. I've never used a Dell notebook but for ease of use and speed, you still think most people would choose a notebook over a desktop?
Michael Dell: If you think about the cellular phone, it was the same way when the cellular phone first came out — people felt the same way about using a portable telephone. Here you've got a portable tape recorder [gesturing to the CHIPS' tape recorder]. When the first portable tape recorders came out they weren't any good. They were either too big, used too many batteries and were unreliable. But over time mobile products in the electronics world, almost always take over from fixed products. I grant you it is hard to predict at what rate this occurs. In the large corporations — our largest worldwide customers have already made this transition, where more of them are now buying notebooks than desktops.
CHIPS: You mean they are buying a notebook instead of a desktop not a notebook in addition to a desktop?
Michael Dell: Right, not all of them are but more of them are buying notebooks than desktops for their employees.
CHIPS: In an interview last year when asked about whether an entrepreneur today could duplicate your success with start-up funding capital of $1000, you responded that it would be much easier today than it was for you to start with so little and that you advised against over-funding a new venture. Why is it easier now and what is the danger of too much funding?
Michael Dell: Actually, a year ago it would have been easier to start a company like Dell and the reason is that a year ago, I could have got venture capital funding from my dog, (Laughing) I mean it was just crazy — there was all sorts of venture capital being thrown around. In 1984, the industry was actually going through a pretty big depression, that might be too strong a word but demand had fallen way off, there were some who thought the industry was finished — Atari and Commodore were closing up shop. There were all kinds of bad things happening. But that was the year our company got started. The availability of capital changes from time to time but actually I think one of the problems that some of these emerging companies had is that they had too much capital.
CHIPS: What is the danger of having too much capital?
Michael Dell: Well, for one, you'll spend it. (Laughing) When you spend money you don't need [to spend], bad things happen.
CHIPS: Do you mean if companies had fewer funds they would have been more conservative in their decision-making?
Michael Dell: Yes, and more careful. There are probably lists floating around out there about the top 100 dot-com excesses (Laughing) and there are lots of good examples of this. But those are the kinds of things that happen in these cycles of market excitement. Now we'd be very ashamed if people were to comment on the current environment and say, "Oh yeah, I told you that Internet thing wasn't going anywhere." Because that's actually not the case, it's a case of the market getting very, very excited about it [Internet] and now they are losing attention. But the current technology has a tremendous opportunity to impact emerging organizations. It has an even greater opportunity and I didn't make this up, Jack Welch [CEO of General Electric Corporation] said it, to effect existing organizations because they can improve their efficiency. You know, one out of 20 new companies survive and what we have just seen [with the demise of the dot-coms] is the other 19 companies going away.
CHIPS: You personally and the Dell Corporation have both had much recognition. You and your company have experienced phenomenal success. For example, Dell stock has risen nearly 50,000 percent in the past decade. What achievements have given you the most personal satisfaction or what has been your biggest thrill?
Michael Dell: It is coming home to my family after a long trip, that's the biggest thrill for me, really. (Laughing) I think we certainly have had a box load of great achievements. I don't think I can pick just one.
CHIPS: Friends say they can remember you with your sleeves rolled up selling computer parts from your "dorm room". When you envisioned the future of your company in 1983 did you envision the type of success that you have achieved today?
Michael Dell: No, no! But what is exciting for me is to see the company grow, and grow to its full potential. It is still a young company. We don't know what the full potential is but we know it's a lot greater than it is today. So I focus on where we are going as opposed to having a big trophy case of past successes. There is so much more ahead.