Talk

Dell is a retailer not an innovator?

I read an interesting editorial in a leading business magazine where the author noted that when he met with Michael Dell he was told that Michael wanted Dell to be the IBM of the 21st century. The author observed that Dell struck him more of a Walmart than an IBM.

Walmart is one of the most remarkable businesses of the 20th century. Walmart's success lies in its superior distribution management technology and prices. They are supposed to have some of the most advanced information technology systems. Their warehouses are apparently extremely automated and efficient. Dell, has probably the best supply chain system in the computer industry. Their inventory levels are measured in hours and not days. This is achieved, because they dont make a machine until its ordered. However once its been ordered to be built, any change in the order results in a new machine being built. The machine that was originally configured continues through the process and ends up in the Dell Factory Outlet. Dell, squeezes down on its suppliers and is known to be ruthless with partners and suppliers.

IBM is one of those companies that has innovated on technology and not just on process. What other companies fit this mould? in other industries? The essential diffrentiation appears to be one of innovation vs process engineering. The retail industry is essentially limited to process engineering, marketing, brand loyalty and price diffrentiation.

As a side note: Dell did briefly enter the retail sales of computers. However that didnt work and they exited the reail sales channel promising to never return. Dell made Direct the theme in its business. Dell currently predicts that 30 million pcs are on their 3rd year and will require replacing in 2002. However, the counter argument is that computer no longer need to be upgraded every 3 years. The Mhz sapping applications are currently limited by bandwith not CPU cycles (thanks to the webification of almost all software applications). However, software vendors like Microsoft are hard at work to squeeze every cycle possible out of silicon.