Dell's Direct Model to Success - Dell's Business Plan
Written by Richard San Juan for Gaebler Ventures
What once started in a dorm room has now become a global company that is ranked the 25th-largest company in the Fortune 500 list, as well as among the most admired companies according to Fortune magazine. This is a brief article on how Michael Dell achieved great success utilizing his core concept in setting the foundation for his company.
An entrepreneur once said, "Innovation distinguishes between a leader and a follower."
This quote epitomizes how Michael Dell transformed his former University of Texas dorm room adventure into a multibillion-dollar corporation.
Dell wanted to be able to offer customers better quality at a bargain price. To achieve this objective, he incorporated a customer-centric philosophy in his company.
His focus on concrete issues like cutting operation costs, improving delivery time, and maintaining customer service is the underlying force that has driven the company. Michael Dell's establishment of the "direct model," as well as his exploitation of the benefits of the Internet, has contributed vitally to the company's successes in both the US and overseas markets.
The basis of the "direct model" is to improve efficiency by effectively eliminating the intermediaries thereby allowing the company to speak directly to the customer. Dealing directly with customers allows Dell to customize their orders according to the customers' needs.
Listening to the customer directly takes the guesswork of what to include in the computer and wasted resources out of the equation altogether. Moreover, this "direct model" concept can also be applied to Dell's suppliers. Without the massive inventory that other corporations have, inventory costs were kept to a minimum and obsolete products were minimized. This significantly added to the ability of keeping the costs small for the customers.
With the "direct model" initiative achieving preliminary success in both domestic and international markets, the materialization of Internet technology played a major role in sustaining the rapid growth of the company by allowing Dell to get even closer to its customers.
This also created more options for customization. The establishment of www.dell.com opened up the company's product to a greater number of potential customers. Dell customers could configure and order their PC online, get technical support, and download updates to their software. Another breakthrough due to the Internet was the start of E-Support Direct. This helped revolutionize customer service by enabling automation and acceleration of the support process. Internet has truly helped Dell expand globally.
Entrepreneurial Lessons Learned
What future entrepreneurs should learn from Dell's success is that innovation is crucial in solving many key problems that face business today.
Michael Dell believed in not only working harder, but working smarter as well. The concept of the "direct model" was born from this idea.
Dell realized that the company must focus on venues that are profitable and worth Dell's resources. The "direct model" that Dell employed demonstrates that to comprehensively solve the problems that face business, it is not only enough to search for solutions using traditional means but instead to have the ability to create new solutions by thinking outside the box. Innovation means finding news ways to serve your company, the client, and the relationship in between better.
Oftentimes, findings of new successful business models become a game changer in that particular industry and will give entrepreneurs a world class solution that will help put the company ahead of its competitors.
Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.
Share this article
Additional Resources for Entrepreneurs