Implementing Processes in a Fast-Growing Company, Lecture by Michael Dell / Dell, Inc. (2007)

Video Lectures

Displaying all 17 video lectures.
Lecture 1
The Origins of Dell, Inc.
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The Origins of Dell, Inc.

Michael Dell, CEO and founder of Dell, Inc., describes how the idea for Dell, Inc. originated. Dell was fascinated by the emerging field of the personal computer and disenchanted by the way technology was being provided to the consumer. To challenge what he noticed was a very lengthy and expensive process, he experimented with the concept of selling the product directly to the customer.




Transcript



Well, you know, it goes back to the beginning of the formation of the personal computer industry, which ... that sounds like a long time ago. And I was an interested user. I became fascinated with the idea that the PC could really change a lot of things. And it was exciting and interesting, and this device that had all this computational power that any person could afford or start to afford, that was just really interesting to me. And as a user, as a customer, I was sort of disenchanted with the experience in the computer store, and saw that the way that computers were being sold and the way that technology found its way from the lab all the way to the customer, it just took an enormous amount of time. It was very very expensive. And so I thought, hey, what if you sold the product directly to the customer. And so that's what I did.

Lecture 2
The Culture and Dynamics of Dell, Inc. During the Early Years
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The Culture and Dynamics of Dell, Inc. During the Early Years

Dell explains the culture and dynamics of Dell, Inc. during its early years. The company was run by hardworking, versatile people who were action-orientated and willing to listen. Many of those early employees went on to fill important positions at the company later on. Some employees, however, had a hard time as the company grew, even though they had performed well when the company was smaller. At a fast-growing company, Dell notes, the job grows faster than the person. A certain kind of job will vary enormously during different stages of the growth of the company.
Lecture 3
Take Caution in Forming Close Friendships in a Company
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Take Caution in Forming Close Friendships in a Company

Dell cautions against forming very close friendships in a company. He believes this blinds entrepreneurs from objectively assessing the work-environment of the company. At the end of the day, an employee should be evaluated by how well they do their job, not how fun they are to be with.




Transcript



I think one of the mistakes that I think you can make in a company is to build really close friendships. And the reason I say that is that those really close friendships can actually blind you to objectively assessing the situation. And so we sort of sit back from the situation and say, "Look, hey, you're a really nice guy, and we like you and your family. And you're fun to be with and we like your jokes, but you didn't get the job done." So you just have to be able to do that and say, "Hey, I might like you and you might be a great guy, but at the end of the day... " If you limit a company by its people, or the limitations of those people, you ll get a certain kind of company. And that might be just fine. We didn't really want to do that. We said, "Okay, what's the real potential of this business, and how are we going to draw that out?"

Lecture 4
Setting up the Initial Board of Directors for Dell, Inc.
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Setting up the Initial Board of Directors for Dell, Inc.

Dell talks about how he setup a board of directors to raise capital for Dell, Inc. After initial talks with investors at Goldman Sachs, he was told Dell, Inc. was not ready to go public yet because it was a young company without a board of directors. As a result, he formed a small board that turned out to be very helpful in bringing in capital.




Transcript



You know, the only reason we set up a board was that we were going to raise capital. So I hired a president, and we started to talk to investment bankers. And they'd show up, and each one kind of looked better than the next one. And it's kind of fun. They're sucking up to you. Yeah. And then we kind of figured out that what we really wanted was Goldman Sachs, because they were a little different than all the others, and they actually had a great track record in our industry. And they gave us an answer which was very different than all the other bankers. They said, "You know, you're not ready to go public yet because this is a young company." The first thing they said was, "You have no board of directors," because I was the board. I was the whole board. "You can put the president on the board, you've got to go get at least two other board members and then we, as investors will bring one board member." So that was the initial board. It really formed only at the point when we started to bring in capital. And it turned out to be very very helpful.

Lecture 5
Enhancing the Effectiveness of a Board of Directors
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Enhancing the Effectiveness of a Board of Directors

Dell describes what he looks for his board of directors to do in a business that changes rapidly. He requires each director to select and learn as much as possible about an area of Dell, Inc. During board meetings, the directors report what they have learned. This method, Dell notes, is much more effective in increasing the knowledge of the board and understanding the business of the company. To ensure that the company gets a board of experienced leaders, Dell uses a well-established company process to evaluate their development capacity.




Transcript



And what do you look to a board to do? The first thing I'll say is, when you have a business that's changing very rapidly, if you have five or six meetings a year, it's incredibly hard for somebody on a board to know a whole lot about your business. So one of the things that we've done for a while now is, we have this thing called Director Day. And we require each director.. We give them a list of areas in the business, and they get to select their first, second, third choice. They're required, every year, to go into the business, into one part of the business for a whole day and learn everything there is to know about that. We're not there, we're not watching them or anything. And then they have to come back to the board meeting and report what they've learned. And I found that that increases their knowledge and understanding of actually what the company does tremendously, because somebody comes in, presents for an hour, "Here's what we're doing in China." "Okay, fine, how much of that did you really capture?" It's just very hard. So I think that that's helped a lot. We've looked for the board to help us avoid some of the potholes that they might have seen in their experience, and to kind of be a sanity check on our plans and our strategies. Not so much for technological advice, which is extremely hard to get in a board sense, but more on "Does this business strategy make sense?" and helping us evaluate the team. We have a pretty well-established process at Dell now where we evaluate our leaders and development capacity. And we go through that with our board as well, for all of our senior leaders, so they kind of see how our leaders develop.

Lecture 6
Overcoming Some of the Early Mistakes of Dell, Inc.
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Overcoming Some of the Early Mistakes of Dell, Inc.

In 1989, following the year when Dell, Inc. went public, Dell explains how the company had a large problem with inventory management. As a result, the company failed to transition properly in the industry from one technology to the other. However, because of this critical mistake, the company learned how to correctly manage their inventory, and according to Dell, became the best in the world at it. Later on, Dell also notes the company did not have the systems and processes to deal with rapid growth. This experience, however, proved to be another learning lesson for the company, as it installed a much better set of processes that helped further its growth.




Transcript



A lot of it was dealing with very rapid growth. We made some mistakes. And many people would look back on Dell and say, "You just went straight up." Well, not exactly. In 1989, about a year after we went public, we had a horrible problem related to inventory management. And specifically -- our industry's constantly transitioning from one technology to another, and we sort of screwed up one of the transitions. And we learned a lot about how to do that correctly and arguably became best in the world at managing inventory and dealing with technology transitions after that near-death experience. Fast forward just about four years later, and the company's literally ten times larger. And that created enormous challenges, because we had all sorts of mismatches in terms of our capability and systems and process to deal with this tremendous growth and expansion. And we had to kind of slow down and instill a much better set of processes. But once we did that, we kept growing. And the company grew 80%per year for the first eight years compounded, and 60 % per year for the six years after that, which adds up to tens of billions real quick, as you know.

Lecture 7
The Reasons Behind Dell, Inc. Going Public
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The Reasons Behind Dell, Inc. Going Public

Dell talks about some of the reasons behind Dell, Inc. going public. The transition was done primarily to raise more capital, attract more people, and acquire a measure of financial transparency. Tens of thousand of employees that the company would need to hire would be easier to find, as there was a lower risk and widespread recognition for joining a public company.




Transcript



But I think the reasons we did it then were, yes, liquidity, really, more capital for the company, but also the ability to attract people. Because as a young, four or five-year-old company, if we're trying to attract somebody from a company that's been around since before I was born, that is in the computer industry, that's pretty hard. The risk tolerance curve for the tens of thousands of people that we needed to hire, you just couldn't quite get them. So going public, I think, helped us enormously in terms of attracting a broader set of people. It was also important in terms of becoming more of a peer with our customers and having some measure of financial transparency where an Exxon Mobil, or General Electric, or Boeing, or Ford could look at the company and say, "Okay, we kind of know what this thing is. We're not buying from some unknown entity that we can't really quantify."

Lecture 8
Critical Changes to the Business Model of Dell, Inc.
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Critical Changes to the Business Model of Dell, Inc.

Michael Dell, Founder of Dell, Inc., describes three critical inflection points in the business model of his global enterprise. During the early stages of the company, expanding outside the United States became a top priority, even though the company had very little capital and people. An unprecedented on-site service program for PC's became a tremendously successful and unprecedented undertaking for a manufacturer, and eventually led to redefining the industry. And Dell also elected to go into the server business, making the enterprise well-rounded and multifaceted. These decisions were made through fair amounts of discussion, data analysis, and observations of industry trends.




Transcript



Well, if you go all the way back to 1986, it was some fairly big decisions the company had to make at that stage. And we set out three priorities for the company. The first one was, we said: we have to expand outside the United States. This was a pretty unusual objective for a company with no capital and with no people and no anything. The second objective we had was: we had to sell to the biggest companies in the world. And the third was: we had to be a leader in service and support. So we created this on-site service program for servicing PCs, which had never been done before. And so literally, the company was two years old when we came up with these. I think there was another key one in the mid-90s when we said: we have to go in the server business. Who makes that kind of decision? What was the process inside Dell that percolated that up as something that was a major strategic initiative for the company? You know, we have a group process to do these things. A fair amount of debate and discussion. And we're data junkies, so we like to get a lot of data before we make a big decision like that. But it was completely obvious that that was where the profit was shifting in the industry. Our competitors were using that to subsidize competing with us in the client market. We didn't anticipate, at that time, what's happening now, which is, you're seeing value get stripped out of the client and into the server, which makes it even more important to be in the cloud, so to speak. Those are certainly key ones.

Lecture 9
Self-Disruption at Dell, Inc.
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Self-Disruption at Dell, Inc.

Dell describes the process of self-disruption at Dell, Inc. He explains how the company examines its internal processes and constantly considers recreating ways to do them better. The company also adopts a mindset of looking at how these processes would be done differently if they were to start from scratch.




Transcript



If we were recreating an ability to provide some part of what we do, or what we'd like to do, how would we do it? And how are we going to get from where we are to where we need to go? This happens quite a lot in our business. And it's a real danger of incumbency. It's also the opportunity that new companies have, because they don't have the stuff that gets built up inside companies. So we're constantly looking at, "Hey, if we were redoing this thing from the start, there's a whole bunch of things we would do differently. How do we move there, fast? We have to." So you sort of have a zero-base budgeting model of, "If we were a start-up, what would we do? How would we organize to deliver value to the customers?" Yeah. I wouldn't say we're doing that constantly, but we certainly force ourselves to do it when there are new clear disruptions and whenever there's a clear crisis in the business. It's a great chance to do that.

Lecture 10
Starting a New Company in an Inefficient Industry
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Starting a New Company in an Inefficient Industry

Dell explains where he would look to start a new company. According to him, there are many companies that are slow to innovate. He would focus on a creating a company in a large, fast-growing, yet inefficient industry that is not keeping pace with change.




Transcript



If I were starting a new company, I would look for some large, fast-growing industry that was inefficient, and was not keeping pace with the changes that are possible. There are still plenty of them out there. You'd be amazed at how slow many companies are to change. And we see this, because a lot of these companies come to us because they want to see if they can learn this from us. I'm not going to name any company or industries, because they're all our customers and they'd be upset. But they constantly show up and they say, "We've brought our team of people, and we want to learn." And it's just very hard to change something that hasn't changed very much. Yes?

Lecture 11
Implementing Processes in a Fast-Growing Company
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Implementing Processes in a Fast-Growing Company

To implement processes at Dell, Inc., the company studied what other corporations were doing and came up with a unique set of processes that complemented their culture and business. Dell points out that the processes were centered on executing efficiently, since the company was selling to hundreds of thousands of customers daily. Without these specialized processes, Dell, Inc. would not have been able to succeed, he adds.




Transcript



As we went from a company with $300 million to $3 billion to $60 billion, we had to put processes in place, for sure, to deal with the complexity of what we were trying to accomplish. And so we learned from other companies. And we hired folks from other companies. We didn't just take their process in wholesale fashion and say, "We want to get what GE has for this and just put it in." But we studied what other companies were doing and said, "Okay, let's come up with the Dell process for doing this that's going to be right for our culture, right for our business and that we can execute." But we are a very analytically driven business. It's also a business that happens in real-time. We're selling everyday to hundreds of thousands of customers, and so it is an execution kind of business. And if you're not paying attention to that, the business doesn't succeed, it just falls down.

Lecture 12
Creating an Effective Communication Infrastructure
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Creating an Effective Communication Infrastructure

To reach out to customers, Dell describes how Dell, Inc. has created blog sites, an idea-generation forum called Idea Storm, and translations of its sites in Spanish. In this manner, the company has begun to build online communities, which has sparked enormous participation from customers, says Dell.




Transcript



Some of you might have seen, we had been setting up a number of ways for us to reach out to our customers. We have blog sites, we have a very interesting site called Idea Storm. And actually, today, we are setting up our Spanish language blog site. So for all of our customers who speak Spanish around the world, we now have a community forum where our customers can comment, our people inside the company can present ideas and new things that we're doing. And we can basically build this online community. And if you go to our sites and you look at these, they're quite fascinating. There's just enormous participation from customers. If you go to dell.com/conversations, you can see all these different sites that we have set up. And we're going to continue to expand this. So we have this site called Idea Storm, which is really fascinating. A customer can go online and just submit an idea, say, "Dell should do the following."

Lecture 13
The Flawed Model of the Early Computer Industry
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The Flawed Model of the Early Computer Industry

During its inception, Dell explains how the computer industry was run by engineers. Over a thirty-year period however, customers began to have an important role in the industry, but many companies were still being run by engineers working to promote complexity. With complicated products being sold, says Dell, customers had to rent specialized software and hire consultants from the computer companies to get their products to work. As a result, to the advantage of the computer companies, customers spent excessive amounts of money on personal computers; a model that Dell calls fundamentally flawed.




Transcript



I think Dell is Dell because we found a better way, and we listened to our customers. And that's not to say that other companies couldn't do that, but they didn't. That's the remarkable thing, in many ways, is that other companies didn't. Partly because they couldn't. They had these cost structures and.. why didn't IBM, Compaq, other people... it's actually not that hard to figure out. If you go back to the origins of the computer industry, imagine a bunch of guys in lab coats sitting around a laboratory, and these are the smartest guys in the world, and they've invented things. And they're going to sell you these machines for tens of millions of dollars. This is like the first computers. And if you are going to get one of these, you are really lucky. That's how the industry started, engineers creating the future. Nothing wrong with that. That's just how it started, right? And what happened is, over a 30-year or so period, the industry really shifted to be one where industry standards started to come into play, the customers started to have a bigger role. But many of these companies were still driven by the engineer. And so this idea of, "You're really lucky to be able to buy this product" ... Still today, our industry is full of big companies who are addicted to promoting complexity. And they sell you a product which is really complicated. And the only way that you can get it to work is to rent the software from them. You can't actually buy, you have to rent it from there. And then you have to hire an army of consultants that they will supply you to get it to work. And they will not leave your company until all your money's gone. And that's the way they like it. And that's fundamentally a flawed model.

Lecture 14
Revolutionizing the PC and IT Industry
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Revolutionizing the PC and IT Industry

To overcome the flawed model of the early PC industry (which benefited only PC companies, not consumers) Dell talks about how his company made the PC easy to use and less expensive. This approach is being used today to improve the IT industry. Dell, Inc. provides cost-effective IT services and products. In this manner, companies can spend less on maintaining their IT infrastructures and more on creating new capabilities. This allows for new business innovations, says Dell, which can stamp out the competition.




Transcript



Well, we have a very different approach. Our approach is, we made the PC easy. We made the PC less expensive, we made it simple. Now we're doing the same for IT, using standards, taking things that are in what's this big bucket known as services and really encapsulating them in the form of services and products, but in a much more cost-effective way, using standards. And so when you start to do this, you can now have a much more portion of your IT spending dedicated to maintenance and sustaining. Most companies in the world today spend about 70 % of their IT dollars on what I call feeding the dinosaurs, just maintaining the old systems. So they only have about 30 % on actually creating new capabilities. So you talked about business models and new business processes, and new business innovations. Now, younger companies aren't so much in that. But as they grow, you get these legacies, and these guys come in with armies of consultants and the software that you have to rent, and the stuff builds up in your company and then you're kind of stuck.

Lecture 15
Innovation at Dell, Inc.
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Innovation at Dell, Inc.

Innovation is a process, not a thing, says Dell. At Dell, Inc. the company works to find the right mix between solving the needs of customers and using the correct technology. Additionally, Dell points out that the company has a team that focuses on future technology prospects for the next 18 months or later. Ideas and trends discussed by the team may turn into real projects or they are monitored to keep track of their influence in the industry.




Transcript



Well, innovation is a process, not a thing, with a company like ours. And you don't want all the ideas to have to go through one person or one place, because that really slows things down. So we work to have all of our different product teams innovating around the things that we think are most important. And it's not just about listening to the customer. Yeah, you have to do that. But the customer won't always articulate the brilliant new idea. They might articulate a need or a desire, but what we have to do is understand all the technology ingredients and how they're evolving. And then the magic is really finding the right solution in the middle that combines all these needs and desires and wishes the customer has with all the technology ingredients. We also have a group at Dell whose only job is to focus on things that are 18 months or greater in the future. So they're not focused on the products that are coming out later this year, or even next year. They're focused on beyond that and all the materials and all of the things that could dramatically change the world. And then we meet with them about every six weeks. And we talk about two or three key things that might be really really important. We decide, is this something that's interesting? Should we turn this into a real project, or should we just keep monitoring it? So there's all sorts of things that we have to obviously monitor, to keep track of that can influence our industry.

Lecture 16
Finding a Common Language for Improvement inside a Company
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Finding a Common Language for Improvement inside a Company

Dell explains how process is critical for organizing large numbers of people in a company, particular if it has grown rapidly. As part of its business development process, the company allows anyone to get involved in improving things they see could be done better. These improvements can be shared easily across the world, says Dell.




Transcript



You know, my experience with this is, when you go from having a small number to a really large number of people, if you don't a process, it becomes real chaos. So in one sense, it's kind of like: how do you have a common language for improvement and progress inside the company? And that's incredibly important. That may be the thing that has the biggest value, because let's say if you have guys in the product development team, and they're using one particular way of doing things, another team is using something completely different, off in another country, somebody's using something different. There's no way to share, there's no way to prepare these, no way to capture any value from the collective whole. And so in that sense, it's incredibly important. And then you probably saw, when you were in our factory, we have this business process improvement, which is where anyone inside the company can get involved in improving something that they see that could be done better. And actually, all of those projects are then shared around the world. So if somebody in our new plant in Sao Paulo comes up with a great idea, which I'm sure they will, that idea can be transferred to Xiamen, China, or to Ireland, or to Malaysia, or to North Carolina very easily.

Lecture 17
Current Threats to the PC Industry
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Current Threats to the PC Industry

Dell describes the PC industry today as a jump ball environment where no company can stay in a strong position for long. The development of wireless networks, miniaturization, and the influence of the internet has changed the competitive landscape of the industry, he says. One of the biggest threats is the changing computing model. To combat this threat, Dell, Inc. is focused on online servers and storage, new online devices, and anticipating shifts in business.




Transcript



I think the biggest threat is: how does the computing model change? And today, if you look at the cell phone and the PDA and the PC and notebooks, desktops, there's a pretty clear distinction among those various product categories. I think if we look back, five years from now, it won't be nearly as clear how you separate what those products are. And part of this is happening because of the development of all these wireless networks, miniaturization, things moving online. And so it changes the whole competitive landscape. The rate and pace of change in the industry is such that it's always kind of a jump ball environment where companies are not able to hang on to a great position for a super long time. You've always got to be reinventing what you're doing based on the technology and what's going on. So we're very focused on, first of all, the cloud and what's in the servers and storage that people access when they go online, what are all the new devices that are coming online, and how do we shift our business to anticipate that and prepare for it?