Cause and effect

It’s now over two decades since Michael Dell attempted to turn a simple vision – to sell built-to-order personal computers direct to the customer – into reality.

Having revolutionised the way that technology is purchased, and made it more accessible and affordable along the way, it would be safe to say that Dell has used that time wisely. Today, the company is a global leader in the provision of technology solutions and the industry-wide phenomenon of its incredible success even has its own name – ‘the Dell Effect’.

Talking exclusively to BM Editor Alice Hoey, Paul Bell, Senior Vice President, EMEA, reveals some of the secrets to the company’s success and explains how, by driving forward process efficiency within, it can provide optimum value for its customers.

BM. Agility is a much-used buzzword and goal in business today. Why do you think it is so vital in Europe and what does it mean to you at Dell?
PB. What we see consistently around the world, and in particular in our own industry, is a very rapid pace of change on a number of fronts, which necessitates the ability to remain agile and responsive and where possible to anticipate change.

With technology itself evolving very rapidly, we need to be able to respond to the resulting trends in customer demand. Meanwhile, we also see changes in the competitive set, because much of our industry is based on open standards that can be acquired by all. While that’s ultimately good news for our customers, it does mean that the competitive landscape can change very quickly.

When it comes to our agility as an organisation, we aim to be as forward-thinking as possible and to anticipate possible trends in the industry. In general, we know what technologies are in development and are involved in their development, so we can usually anticipate what’s coming out by 18-24 months. However, as it isn’t always possible to predict perfectly what standards will take hold or what customers are going to adopt, it is crucial to remain agile.

We also try to build a culture at Dell that enables us to move quickly into new initiatives and to change direction as and when we need to. That comes in part from experience within the company, as people understand the kind of changes that have been necessary in the past. For example, they have experienced periods when it was necessary to find expense reductions in response to price declines, or during the launch of new product categories, when everyone in the organisation has had to learn to design, build, ship or sell that new offering. Because change such as this has been such a big part of our company experience over the years, it has institutionalised itself, so everyone in the company is prepared.

BM. New technologies can now provide valuable tools in enabling that business agility. With that in mind, have you seen the role and importance of the IT department evolve or grow over the years?
PB. We certainly see the role of IT within the business continue to increase in importance. However, in contrast with my experience of many other IT departments, I’d say Dell’s IT organisation is quite unique in that it has always been at the forefront of what we do. Even early on, as a direct company, we were reliant on IT systems to run our build-to-order model, which was unique in the industry and highly information-driven. Then followed a phase where we were driving our business more online, throughout which the IT department was of course vital.

There is now a shift towards allocating more of our budget on new capability development and new projects. That has partly been accomplished using the architectures that we promote and sell, which are largely open standards based, highly scalable and reduce the cost of running the infrastructure of the company. With these cost savings, we can then devote a higher budget to new projects each year.

That is part of our agility, because it’s essential to constantly find new ways to remain competitive – whether that’s through a particular service or a value-add that customers can only get from us, by driving productivity forward and reducing costs, or simply creating the IT infrastructure for the new businesses we enter. Right now, our IT department is working on around 1000 major or medium-sized projects that bring this functionality to the business.

BM. Having cut out the middleman, customer service and your use of customer information must be of particular importance to Dell? What technologies or strategies have you taken on board to enable better service to your customers?
PB. There are a number of systems and tools that we use in the different phases of our ‘customer lifecycle’, including CRM solutions and different ways of capturing account information – where a product has been deployed from, what parts were built where, and so on.

After-sales support is also very information intensive. We need to be able to track the status of a situation, know what issue was raised by the customer and when it will be resolved, and to feed that information into a database. This can then be used to improve our diagnostics and response should the case arise again.

At Dell, we utilise a tool called the Dell solution network, into which all of our technical agents around the world can tap. Increasingly, we’re also putting that online to enable our customers to access it and find resolutions to problems they may have with their systems. This is particularly valuable as we find that 80 percent of the calls we receive concerning problems have nothing to do with the hardware. There are various software and operating system issues that can usually be resolved over the phone or over the internet, and that has become one of the most valuable services we offer to our customers.

The fact that we order and ship direct to our customers, and know exactly what configuration they have purchased from us, means we have access to the kind of information not normally available to others in the industry selling through a channel. It has therefore been of huge benefit to us to use IT tools to leverage that information to the benefit of our agents and customers.

BM. Likewise, having a reliable, streamlined and cost-effective supply chain must be vital to your success? What work has or is being done to tighten that further?
PB. Our supply chain has become increasingly complicated over the past four or five years as we have diversified extensively into many more product categories in that period. In terms of driving efficiency, we’ve invested very heavily in information-sharing tools that can provide constantly updated supply and demand information, up and down the supply chain. We find that because we have very little inventory (only about four weeks), we are able to get the newest technologies into the hands of the user faster than our competitors, who may have several months of inventory. Because that information acts as an early indicator to suppliers about what’s selling and how demand trends are changing, we utilise it as quickly as possible so that everyone can take advantage of it.

Another key thing we’ve done is to insert ourselves at more levels within the supply chain. While we might buy, for example, a sub-assembly from one supplier, they in turn will have their own parts suppliers, and so on. We try to understand what’s going on at each of those stages, partly in order to understand the logistics of the supply chain better, but also to ensure that each intermediate step is working as efficiently and to as high standard as possible.

We’ve gone further upstream in the flow of materials used in our products, to better understand the processes going on in the factories. This means we can monitor their standards and then support and advise them if any changes need to be made. To summarise, the supply chain needs to be understood on levels of cost, velocity and quality. We’ve found that by getting closer into the supply chain and achieving these things we can provide better value to our customers.

BM. It’s over 20 years since the Dell concept was first conceived and ‘the Dell Effect’ was instigated. Have the objectives changes much in that time?
PB. The term the ‘Dell Effect’ wasn’t something we came up with ourselves. It essentially refers to how we enter into markets and drove considerable operational efficiencies in product categories that are becoming more standards based. When ourselves and other players in the industry have achieved that, the result has been great improvements in productivity and efficiency, which helps to accelerate growth in the marketplace.

There are fundamental elements that have enabled us to achieve this in the past. For example, the build-to-order model kept inventory costs low, and eliminating the middleman mark-up was key. However, since then, there have been many elements that have become important in our ability to create value for our customers. Some things have come only with time, for example, our sheer size. Now that we have a global reach, we can be a great partner to big international or global companies in need of an organisation that can be with them all over the world. As our purchasing scale is second to none in the product categories we serve, we can buy in volume and pass on lower costs to our customers.

Our over-riding goal is to concentrate on those product categories that are largely standards based, and to be as efficient and productive as we can be so that the customer gets a great product and overall buying experience.

Ensuring the quality of the customer experience is something that has always been very important at Dell, and it’s also an area in which we’ve made particular progress in recent times. We have various metrics and six sigma projects going on to improve our processes and have built up a strong organisation capability to drive process excellence in ways that the customer finds easier and more reliable. That’s a very important element in our customer value and our competitive advantage. In the customer-facing roles that we have – in sales and customer care – we regularly survey our customers and track customer satisfaction scores. I’m happy to say these have been going up very steadily in Europe.