Leader Analysis – Micheal Dell
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Michael Dell is the founder and the chairman of one of the most successful computer companies in the world. He led the company on its way to high growth and profitability. The company was always in the forefront of the direct selling concept and currently dominates the personal computer business.
Business the Dell Way, by Rebecca Saunders studies the leadership and entrepreneurial skills of Michael Dell and his influence over his organizations success. The Book brings into light an array of leadership secrets critical for any business. Michaels interests and business ventures during his school days and his entry into the computer business are also explored. The book also states some criticism on Michael Dell. Rebecca Saunders thoroughly examines Dells business model – creating mass-customized computers and selling directly to consumers. The model has been supported by excellent leadership, continuous improvement and a steady flow of ideas from employees and feedback from customers. The book explains how any student, manager, entrepreneur or investor can learn from the Dell story. It is an inspiring story of success and contains invaluable source of lessons for the budding leaders and entrepreneurs.
Michael Dell heads an innovative organization which always searches for ways to improve the value of its products and to exceed customer expectations and of course adapt to the changing external environment. He found a company based on a good idea and then build on that idea, constantly improving on it and, adapting when the opportunities exist but never losing his strategic focus. That is why he is termed as a Methodical Optimizer.
Michaels entrepreneurial instincts were evident at the age of twelve; he created his own stamp business. He got a few people in his neighborhood to give their stamps to him, advertised Dells Stamps, in a trade journal and earned $ 2,000. According to Michael, it was then that he learnt the importance of eliminating the middleman. This became a guiding principle for all his ventures. At sixteen, he got a job selling newspaper subscriptions to the Houston Post. Even after he went back to school, Michael continued with his work. Soon thousands of subscriptions poured in and he earned $18, 000 more than his teacher earned in a year.
Michaels interest for computers started when he was in junior high school, when his instructor installed the first teletype terminal in their school. Soon it became a hobby and on his fifteenth birthday he got an Apple Computer and his curiosity prompted him to tear it down and understand its functioning. In 1981, Michael replaced his apple computer with the newly introduced IBM PC. He was amazed by different software and programs available for range of purposes. Soon he realized its the next big wave impacting the businesses across the globe. He spent a lot of his time learning about functionalities of computers and he was quickly able to improve the performance of these PCs by adding more components. He bought parts from the distributors instead of retailers brining the cost down significannot
ly. In 1982, he went to a Computer Conference where he found that PCs were sold for a high cost with least customer support. Also, he realized that the sellers had minimal knowledge on computers. He wanted to compete with these sellers and applied for a vendors license in the state of texas and started selling high-performing computers much at low prices. His PC business continued to grow and soon won a lot of bids for selling computers.
In 1984, he registered a company PCs Limited with a 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 May 1984, he incorporated DELL and hired a few people to take orders over the phone. He then realized that the company would be more profitable if it makes own computers rather than buying from grey market. So, with the help of few engineers DELLs first 286-based PC was built.
Michael found that his direct model could easily become a strong differentiator for the company as it reduced unnecessary distribution overheads that clogged 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 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 a 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.
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.” According to Michael, the direct model gave DELL a fundamental advantage, which was strengthened by the internet.
DELLs business grew; Michaels 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 only entrepreneur who was not eclipsed by the hardware giants. Today his firm is bigger in personal computers than IBM.”
MICHAEL – THE LEADER
He would seem to be a quiet person but when it comes to business, everybody listens when Michael talks. In the book, the author describes him to be an introvert. But, he is agreeable, open, stable and conscientious. His fundamental belief was to be successful. This behavior of Michael was instrumental and appropriate for reaching goals. He had a positive attitude towards himself and others. His positive mental attitude does significannot
ly reflect the high morale in his