Dell's Hail Mary

Posted by Doug Davidoff

May 25, 2007 1:12:01 PM

Wow! The king of direct selling, the company that once proudly rejected retail distribution, announced today that it will begin selling computers through Wal-Mart (Wal-Mart!) beginning June 10th. Is this the marriage of two powerhouses that will lead to success for both – or is it a sign of desperation?

Put me in the desperation camp.

Dell’s fall from its previous lofty heights – and it is a big fall – is a clear indication that if you do not listen to your customers, you will fail; no matter how superior your processes or business model are. If you fail to make a promise that your customers and potential customers care about, nothing else really matters.

In a previous post, I quoted Corning CEO, Wendell Weeks, as saying that the biggest lesson he learned was “it's not enough just to be the best at what you do. You also have to understand your customers' business model and your customers' customers' business model.”

Dell, still a manufacturing wonder, has clearly failed to do that. You can see this, first in decreased stock performance, then in Michael Dell’s return to the CEO post and now in the abandonment of its core principle – providing customized computers direct to consumers to provide value. Rather than finding new ways to create value, Dell has decided to give in and let their computers become just another commodity among all the others at Wal-Mart.

There was another company that faced challenges very similar to Dell’s. It was Apple. If you recall, its death was predicted several times. The difference between Apple and Dell was that when Steve Jobs returned, he stopped looking for the easy solution and got back to creating and innovating. Michael Dell has apparently decided to take the easy way out.

My prediction: Dell will see an increase in sales, a decrease in margins and – ultimately – a relative decrease in shareholder value. This volume obsession is a sign that Dell has not learned its lesson. Make sure that you do.

Topics: Performance, B2B Sales Strategy