DELL's Re-positioning Effort

A recent issue of Business Week features an in-depth account of Dell's strenuous effort to re-position itself in the rapidly changing PC market through complete restructure, under the leadership of Michael Dell. Dell's strategic make-over is primarily a forced (and maybe also a much delayed) response to its plunging stock and shrinking market share. As illustrated in the graph below, Dell has retreated steadily in the past years while rivals Apple and HP enjoyed substantial growth.



The old Dell succeeded by undercutting rivals on price. Mastery of logistics and supply chain, together with minimal investment in R&D, allowed Dell to operate at a low cost. Investing less than 1% of its revenue in R&D, Dell used to rely on Microsoft and Intel for most innovations. But as computer technologies advance and consumer needs change, this same strategy that gave Dell its price advantage proves to be irrelevant in a changed market. Lack of innovation comes to hurt Dell’s business.

In this situation, Dell plans sweeping shifts along four lines: distribution, innovation, acquisitions and management. To read the full account of Dell’s shifts in process and personnel, please go to
http://www.businessweek.com/magazine/content/09_43/b4152036025436.htm.

Now I’ll just comment on moves where I see most innovation.

In search for “a heavy-hitter to go up against Apple and HP,” Dell invited Ed Boyd, an experienced designer at Nike to join the crew. Recognizing customers’ desire for more personalized products, Boyd introduced a feature called Design Studio, where customers pay an extra $85 to get certain designs on laptops. A large and ever growing selection of more than two hundred designs is available. Although personalized laptop decoration is nothing new, Dells makes a pioneer in PC manufacturers to provide this much discretion to customers. This can be seen as Dell’s first attempt to find its Blue Ocean—introducing value-adding features without heavy invests in the development of core technologies. Some may say that this Design Studio option doesn’t amount to a real Blue Ocean, since it appears to be easily copyable to other PC manufacturers. I’m not sure how copyable this actually is. Understandably, personalized product will incur more production and shipping cost and pose challenges to the company’s customer services (e.g. guarantee & return policy). It demands more from the management of supply chain and distribution network. Without actually knowing relevant costs, I expect the above-mentioned implications to give Dell some room to play with. If the Design Studio feature work well with Dell’s existing distribution network, it will give Dell advantage as a first-mover and merit the concept of Blue Ocean.

Another evidence of Dell’s re-positioning and rebranding effort. With increased investment in R&D, Dell is developing a new flashy product line, the Adamo Series. The Adamo XPS, world's thinnest notebook, at 0.39-inches thick will be launched pretty soon. Garriques, head of Dell’s consumer division, says the $2,000 computer will serve as a statement about Dell. "This isn't going to be a high-volume product for us, but it's going to be a product that says, 'Wow! Dell did that. What else does Dell have?' " How will it work? Let’s wait and see.