Michael Dell - The Man Behind DELL

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Michael - The Entrepreneur Contd...

By December 1983, he realized that his fascination with computers was not just a hobby or passing phase. In January 1984, he registered a company 'PC's Limited' with the State of Texas. And through previous contacts with customers and small advertisements in the local newspaper, he began generating business. He sold between $50,000 to $80,000 worth of upgraded PCs, upgrade kits, and add-on components in a month to people in the Austin area. In May 1984, he incorporated DELL and hired a few people to take orders over the telephone and to fill those orders. Though he began by buying computers from the 'IBM gray market,' Michael realized that it would be more profitable to make his own computers. He hired a few engineers and soon DELL's first 286-based PC was built. As his business grew rapidly, he had to shift his office 4 times in the period of 3 years. Michael realized that his 'direct model' could easily become a strong differentiator for the company as it reduced unnecessary distribution overheads that logged other PC majors. Traditionally a long chain of partners was involved in delivering the product to the customer.

Companies with long distribution systems had to fill their distribution channels with inventories in order to meet their financial targets. Such companies were also not aware of customer needs. According to Michael, because DELL was talking to both customers who bought their products and also prospective customers, it had clear idea about what customers wanted. This direct relationship with customers was built initially through telephone calls, then face to face interactions, and then through the Internet.

The direct model was based on direct selling - with no retail channel or reseller. The telephone operator used to take the order from the customer and his requirements for the system; sometimes he even helped the customer select a system that would meet his requirements. Then the order was passed on to the manufacturing people. When the system was assembled, the PC was delivered to the customer. This enabled the people at DELL to benefit from real-time input from customers regarding products and services.

In the early 1990s, business on the Internet was restricted to small tasks such as ordering T-shirts. Michael thought that if one could order T-shirts online, then anything could be ordered online - including computers. Michael saw a huge untapped potential in the Internet and launched www.dell.com in June 1994. The website, containing technical support information and an e-mail link for support, was aimed primarily at customers who were already familiar with computer systems. In 1995, an online configuration facility was introduced to calculate the cost of different PC configurations. Michael commented on his vision behind this initiative, "The Internet will fundamentally change the way that companies do business through its ability to enable people to conduct low-cost, one-to-one customer interactions with rich content."

Michael felt that direct marketing over the Internet would create strong relationships with customers. According to Michael, the direct model gave DELL a fundamental advantage, which was strengthened by the Internet. DELL's website not only enabled customers to research, configure, price and order products online, it also allowed them to check the status of their order online. If they had any questions about the way it worked, they could post their doubts on the technical support page, where they had access to all information which DELL's technical support teams had. Thus, the Internet made the direct model even more direct.

DELL's business grew, Michael's transformation from an entrepreneur into a leader who guided, motivated and implemented innovative methods for surviving in the business was but natural. His vision for the company soon made DELL big enough to challenge industry giants. The Sunday Times said, "Michael Dell is the only entrepreneur who was not eclipsed by the hardware giants. Today his firm is bigger in personal computers than IBM."

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