On the corporate Richter scale, where 1 represents the trouble at Microsoft and 10 represents the trouble at Ford, the problems at Dell Computer represent about a 5.
Mark Hurd of H-P and other competitors have begun copying its production techniques. The battery recall cost billions. Michael Dell’s hand-picked replacement apparently got lazy and cooked the books, moving sales so jagged numbers would look smooth.
Michael Dell’s personal reputation has been hurt. People assume Dell needs to play a new game, and question whether Dell has a new game in him.
Well he does, and he will. He has already made a good start, pushing incentives down the chain of command, cutting off the stock option fire hose, reducing direct reports, and trying to shoot straight with Wall Street and regulators.
What happens next?
- Get a handle on procurement. The battery problems happened because Dell got too cozy with a small number of suppliers who could fully meet its needs. Dell needs to bring in more suppliers, make them compete, and rigorously supervise that competition.
- Linux Servers — Corporations want Linux servers. They want quick turnaround on them. A California outfit called Open Source Systems knows how to do this. Buy them. Then scale them, getting them into dozens of locations around the world fast.
- Channels — Dell needs a better way to reach small business customers than just a Web site. Making a deal with BestBuy or (better yet) Wal-Mart could put Dell-trained people into thousands of retail locations around the world.
- Do What You Do Best — Dell doesn’t do gadgets. Dell does complex, customized production and delivery of computer products. Cut the product line down to that.
- Advertise — Dell has retreated too far from the market. Time to get back in. The new ads should feature the man himself, showing the factories, the procurement systems, and the delivery expertise that he’s building. Maybe the first ad could show him popping out of a box with the styrofoam peanuts, then showing how his knowledge and professionalism will transform your home or business.
- Stay Away From Politics — Now is not a good time for a Fortune 500 company, or its CEO, to be seen as cozying up to any political side, in any country. This is not an American point — it will prove your bonafides in China, India and Singapore.
This turnaround won’t be quick, because Dell is a huge operation now, and huge operations don’t turn on a dime. But by working a simple plan, getting leaner and meaner, Michael Dell can make a much bigger name for himself than he has now. It’s a great opportunity.
And it’s also a great risk, as Ted Waitt (left) will be glad to explain.
