“Like many long-forgotten former champions, Dell succumbed to complacency in the belief that its business model would always keep it far ahead of the pack. While Dell broadened its product line, it never dealt with the vast improvement in the competition or used its lead in direct sales and the cash generated to invest in new business lines, talent, or innovation that could provide another competitive edge. ‘Dell is a textbook example of single-formula growth: ‘We make PCs cheap. This is what we do, and we do it a lot,” says Jim Mackey, managing director at the Billion Dollar Growth Network, a research consortium focused on large-company growth. ‘You can grow very fast when you’re on a single formula, but when you get to a certain point, you don’t have the ability to create new growth,'” Nanette Byrnes and Peter Burrows report for BusinessWeek.
MacDailyNews Take: “You can’t just have one product and then say you’re the innovative leader of the world. I’m a big admirer of everything [Apple’s] done. It’s phenomenal. But then to say it’s the world-beating wonder of forever? No, it’s not.” – Former Dell CEO Kevin Rollins, February 22, 2005. How’s “early retirement” treatin’ ya, Kevin?
Byrnes and Burrows report, “Long-term success demands constant reinvention. Research done by Mackey and others shows that most fast-growing companies hit a point somewhere over $50 billion in revenue at which they falter. By then, growing apace demands billions of new sales every year. Rarely is the original, unchanged business model up to the job. The only way around the challenge: Nurture the next growth platform long before it’s needed.”
“Dell has struggled to find other growth areas large enough to matter. After a promising start in printers, moving quickly to No.3, the most recent quarterly data from research firm IDC shows Dell’s market share at 3.6%, down from 6.2% the previous year. Its once-promising move into networking gear has fizzled, and its share in the storage systems market is flat compared with a year ago,” Byrnes and Burrows report.
Byrnes and Burrows report, “And Dell’s management bench doesn’t seem as deep as it should be. When Dell ousted its chief financial officer on Dec. 19, the company ended up filling the spot with an outsider, board member Don Carty, the former CEO of AMR Corp., the parent of American Airlines. Industry sources say many of the recent management departures were not terminations but rather people burned out by an increasingly dismal turnaround effort.”
Full article here.
[Thanks to MacDailyNews Reader “LinuxGuy and Mac Prodigal Son” for the heads up.]
MacDailyNews Take: Gee, that’s too bad for Dell, huh? What would we do? Glad you asked! We’d shut it down and give the money back to the shareholders.
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