High Technology MarketingScott Smith Concept Summary of Direct From DELL Strategies That Revolutionized an Industry By Michael Dell

High Technology MarketingScott Smith Timeline 1980 Purchased first computer and takes it apart 1983Wanted to beat IBM, Sells upgraded PCs out of UT Dorm Room 1984Registers Dell Computer Corporation DBA PC’s Limited Sells Direct to end users mhz 285 based system. 30 day money back guarantee 1987International subsidiary in UK 1988Initial IPO $30 million 1989Accumulates excess inventory 1990First to sell through retail CompUSA, Best Buy, WalMart 1991Converts entire line to 486… high technology priority 1993$2 Billion in sales

High Technology MarketingScott Smith Timeline 1994Launches Latitude Notebook Setting new records on battery life. 1996Introduces PowerEdge servers for small and medium server markets 1998Solidifies internet market. $12 million per day from customers. Sets up supplier network.

High Technology MarketingScott Smith Dell’s Entrepreneurial Spirit Dell’s Stamps: Eliminate the Middleman Look for a Commercial Opportunity The power of catalog advertising Newspaper Subscriptions Identify Segments of High Demand and High Revenue: People who just moved or just married Generate the Lists and Target them Turn Fascination to Hobby and to Business

High Technology MarketingScott Smith Dell Computer Goal: Build a Better Computer than IBM Driving Passion: How can we make the process of buying a computer better? Sell Direct Eliminate Reseller Markup Pass Savings to the Customer For Dell, the timing was right: the beginning of a new consumer industry: Continued high growth and limited supply

High Technology MarketingScott Smith Strategic Questions Where are we today? What do we think it will become? Where do we want it to go? What opportunities can take us there? How can we take advantage of them? Then make a wish list...

High Technology MarketingScott Smith Customer Lessons Learned Form a direct model that specializes on market segments or customer types. Know EXACTLY what the customer wants and then provide it. Price is not a sustainable competitive advantage. Sustain loyalty through customers and employees Response Time Quality Products Valuable Features Make the Experiencing of Products EASY

High Technology MarketingScott Smith Key Actions 30 Day Guarantee (Industry’s First) Performance Leader (Competitive Reviews) Award Winner for Quality, Support, Service Best Value Awards, Highest Performance Awards

High Technology MarketingScott Smith Market Lessons Learned You must target large companies to grow Provide the Best Support Engage in Global Expansion Features must compel the customer to buy Inventory flow speed is the key to survival Identify problems early and then fix them Involve your customers early in development Gradual improvements reduce risk and allow you to take advantage of technology It is hard to notice how fast or slow you are growing Read the market and then try to understand what it means Understand the economies of each segment: Product, Use, Geography, Customer, etc. Measure everything to build improvement. Facts are your friend.

High Technology MarketingScott Smith Analysis is Key There is no system that does not produce enough data to diagnose its own inefficiencies. Define Your Goals: Market Penetration, Growth Rate, Profitability, Sales Force Productivity, Service Level Performance Analyze Goal Progress by Product, Customer, Geographic Area Compare Sales with Total Market Sales, Examine Share, Growth and then understand what is driving us, how to do more, and where next? Eliminate Resellers Eliminate Channel Inefficiencies Speed the manufacturing process Add Velocity less time in channel steps Squeeze investment and inventory out of the channel: 1993 $ 2.9B sales, $220m Inventory 1998 $12.3B Sales, $230M Inventory

High Technology MarketingScott Smith Dell Market Structure Changes Over Time

High Technology MarketingScott Smith Managerial Lessons Learned Hire people for potential to grow and develop: Self Reliant, Results Oriented, Driven to Lead. Recruit for succession (Train them to replace you) Stress Achieving Goals. Accountability for Results 360 degree reviews. Responsibility to one another Do Not Hoard Power Implement through Dual Reporting: By Function, Market, Product Make successes a win for the entire company through communications

High Technology MarketingScott Smith Key Recruiting Issues Can they think in economic terms? What is their definition of success? How do they relate to people? Do they understand the strategy of the business they are involved in? Do they understand our business?

High Technology MarketingScott Smith Talking to Employees What are customers telling you? How do you think the company’s products are doing? What are our biggest challenges? What are the biggest threats to our success? How can the company support you better? Keys: Mobilize people around a common goal, hire ahead of the game, cultivate a commitment to personal growth, get them involved.

High Technology MarketingScott Smith Train Employees to be Owners Look at goals, make them clear to everyone. Study the obvious for non-obvious solutions Ask customers how they would have it solved. Make failures with learning acceptable Constantly question even good stuff. No cover up. Treat employees as owners.

High Technology MarketingScott Smith Dell Market Coups 12 Mhz Computer doubles IBM’s 6 Mhz speed. Analysis: Technology enthusiast market wanted speed most of all. Laptops:Lithium Ion doubles battery life Analysis: Laptop owners want long life batteries. Dell Tied up whole channel by contracting SONY to manufacture. Dell Introduced, chartered plane for reporters and analysts, gave them a laptop and flew to Los Angles… 4 1/2 yours later, they still had power. Great PR Low and Medium Size Server Market Analysis 1: Servers have higher margins Analysis 2: Competitors were treating servers as a cash cow for feeding the PC market. Dell entered market at about 20% lower price and told customers “even if you don’t buy from Dell, ask your vendor to match Dell’s price.” Server Dropped 17 percent in one year and reduced the size of the cash cow for competitors.

High Technology MarketingScott Smith Enter the Web Increases Speed to Market Speeds Information Flow Enables Superior Customer Service. Provides a High Quality Product Gives Customers Direct Access to Custom Made Systems for High Performance Provides the Latest Technology relevant to that customer.

High Technology MarketingScott Smith Enter the Web Dell Premier Pages: Technical Support Diagnostic databases On-Line Ordering Special Pricing Key: Shrink time and required resources to meet customer needs.

High Technology MarketingScott Smith Market Strategy It is better to be first at the risk of being wrong than it is to be 100% perfect two years too late. If customer demand changes, ask WHY?… Challenge them to understand why? (understand the underlying economics from the standpoint of capital, supply chain, technology, market trends). Don’t perfume the pig: Don’t make something appear better than it is. If you accept status quo as good enough, you are managing in the rear view mirror. If we have a problem we have to fix it. We know if we don’t, someone else will. Elevate a win to company wide accomplishment