“I've learned from experience that a company can grow too fast,” says Dell. “You have to be careful about expanding into new businesses because if you get into too many too quickly, you won't have the experience or the infrastructure to succeed.”
It is said that there are two basic types of entrepreneurs. There is the roving deal junkie, who engages in a never-ending search for new deals and markets. Then, there is the methodical optimizer, who takes one good idea and works it to death. “I’m not a deal junkie,” says Dell. It is this quality that is perhaps the secret of Dell’s success. Once he knew he had landed on a great idea, Dell stuck to it. The few times he chose to veer off course, his company suffered. Dell learned from the mistake and would never make it again.
For over 20 years, Dell has made the concentration of his company on the building of quality, custom-made computers to be sold directly to customers at a lower price than his competitors. That was what he was known for and that was what he excelled at.
In 1991, Dell veered off course. He decided to expand his company and try selling products through computer superstores and warehouse clubs. The experiment failed. Looking back on that experience, Dell says, “It was just a bad chapter of the company’s history…[It] was both a violation of our core business strategy and incredibly confusing to our organization.”
But, Dell took what he could from that mistake. “What's interesting is that when we corrected it, there was almost a galvanizing force on the culture and on the strategy of the company,” he says. “Because it became crystal clear to everyone what the strategy was and how we're going to execute, and it was reinforced with great success and growth.”
Critics point to the lack of innovation occurring within Dell. In its first twenty years, Dell Computer had been awarded just 867 patents – less than the total many of its closest competitors receive in a single year. Skeptics also claimed that Dell was simply filling a niche market, which would soon expire. But, unlike in 1991, today, Dell knows his company’s place in the industry.
Dell is no longer trying to go retail and he’s not trying to compete with the likes of Microsoft. Instead, Dell is focusing his company on what it’s done best since its inception, providing customized Dell computers direct to customers. And, since it uses standardized components, it admittedly doesn’t need to spend money on research and development. “Fortunately the niche became the whole market,” says Dell. “So our focus on executing the business model after that misadventure turned out to be a powerful force for us.”
Dell’s direct business model – with no inventory and no middlemen – has withstood the tests of time and critics. By narrowing his focus, building up slowly and learning from his mistakes, Dell has transformed and revolutionized the industry.
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