Comments

Tom: Have to disagree.

Dell are great innovators but not in the way you think. Classic Porter theory asks where you plan to build your competitive advantantage - cost, differentiation or focus. Dell, from day one, realised that the differentiation card was, long term, going to be tough to play. (how do I know this? I met Michael Dell back in 1993 and he was talking this then). Dell decided to be the agent of this change. From day one, they decided that the best way to drive this was to focus on cost advantage and drive all innovation into that. Process advantages, channel advantages, buying power advantages, etc. Their 'innovations' have literally killed IBM, HP, CPQ and others in the process. To this day there is not another company in the computer business (possibly in any industry) that is within a 100 miles of them. As servers in business, TVs and other consumer electronics become increasingly commoditised they will only see their potential market grow.

PS Looking forward to seeing you in London in March.

Posted by Freddie Daniells at February 15, 2005 11:07 AM

"Come to think of it, nothing new in PCs (save Apple!!!!) in years & years. I don't buy that the PC world is 'mature.'"
I don't either. With all the zany caffeine-driven brainiacs around San Jose, there's enough innovation there to make a computer that fits onto a wristwatch.

The problem, as I see it, is (was?) Bill Gates. His relentless pursuit of cornering the software market earned him the undying hatred of these brainiacs in San Jose (Scott McNealy is not the only one) and a well-deserved antitrust lawsuit. Why innovate if you're only going to be bought up or put out of business by the 800-pound gorilla in Redmond, WA? The consumers have lots BIG.

The Mikrotrash wars are not in prominent sections of the newspapers anymore, but with the recent explosion of the internet, there are many computing platforms that can be used now (Linux OS and the Mozilla browser, for example), so hopefully this will marginalize Mikrotrash enough to start more innovation and bring WOW! back to PCs.

Ah, just my humble opinion, and I'm ready to be flamed by those who own MS stock . . . I'm not worried; I've never met a soul who's used MS products and thinks they're the greatest thing since sliced cheese.

Posted by Ron at February 15, 2005 11:08 AM

When I wanted to buy a laptop, I looked at the various manufacturers, and I went with Dell mostly on reputation, but the clincher was that I could go for a DVD drive in a low-end machine, whilst the rest insisted on it only on certain high-end machines, meaning I'd have to spend a lot more to get a DVD drive.

As far as I know, still no other major manufacturer does Dell's customization.

Posted by Tim Almond at February 15, 2005 11:24 AM

I took this another way. Rather than fund copious amounts of formalized R&D why not engrain the mentality in the corporate culture and absorb the creativity of its people? Years from now all executives might find it hilarious that in the past people actually had dedicated areas of research trying to focus on innovation.

Posted by Dau at February 15, 2005 11:25 AM

Tom

Dell does innovate, just not on the technological side. The distribute and manufacture better than the others. They price tighter than ever thought possible.

Innovation is not just the technology.

They let the other guys design the newest, bestest, brightest. Then, and only then, do they determine the fastest, most efficient, most inexpensive way to deliver these opportunities to the customer.

Dell does not equal HP!!!
Dell equals WalMart!!!

Posted by Tom at February 15, 2005 11:38 AM

I'm inclined to agree with those who disagree. The question here seems to be: Is innovating a better, more flexible, more efficient way to manufacture and distribute a thing less important than the innovating that goes into inventing the thing in the first place? The answer: It's ALL important.

My understanding is that most of the "innovation" in the automobile industry comes from the component suppliers, not the manufacturers (assemblers?). Yet probably the greatest innovation of all has been in the manufacturing process itself ("flexible manufacturing"), rather than the product.

Posted by Doug Smith at February 15, 2005 1:09 PM

Sorry, Tom, but I'll weigh in here too that you're wrong. Automatically tying innovation to product is dangerous thinking and can be darn expensive, particularly for those firms that don't know how to tame or channel their R&D expenses (Xerox and Xerox PARC immediately come to mind, but IBM's TJ Watson Research Center, HP's R&D Labs in Palo Alto, and yes, even Apple's R&D team in Cupertino all suffer from the same symptom). While Dell is a follower in the world of technology, if you accept that PCs are already completely commoditized then Michael Dell and team are innovating in a much, much brighter way than Compaq (snicker), Gateway, and Toshiba: they're innovating in how they put things together, how they construct their channel, how they fulfill customer orders, etc.

Posted by Dave Taylor at February 15, 2005 1:32 PM

I guess one of the things we are trying to differentiate here is that the PC market may or may not be mature but is ceratinly commoditised. I would hazard a guess that even high end consumer orientated Windows Media PCs are probably getting only a few pts GM uplift from the most commoditised parts of the market. This allows for very little in the way of R&D. The focus on costs is absolutely the right one in this market. Take a look at other companies with 20-25 GM and check out their R&D levels.

Posted by Freddie Daniells at February 15, 2005 1:41 PM

Many times we discuss innovation and dramatically changing the business environment which Dell has done in the past. If you were to take one of Dell’s current PCs back in time, that $1,000 machine would be worth millions. Image having a 2.8Ghz machine with 80 gigabytes of storage in 1980. By the way in 1988 a gigabyte of storage would have cost $10,000, today its 0.54 cents. Innovation has many dimensions. The real question perhaps is can they do it again, how much cheaper, faster, better can they make the PC? Where Apple takes my breath away is building entirely new business models like getting over a million customers in 6 weeks (ITunes/IPod).

Posted by RTodd at February 15, 2005 1:46 PM

Being the No. 1 player in the world should I guess mean they can make them cheaper than anyone else, simply through buying power. The other channel and process innovations will all be on top.

Posted by Freddie Daniells at February 15, 2005 2:08 PM

I think comparing Dell to Apple is like....

... Comparing Apples to Oranges.

Apple creates new concepts. That is why they have been a roller coaster. There DNA is NEW.

Dell puts things together cheap. That is why they have had staple and consistant growth. There DNA is Process.

Posted by Tom at February 15, 2005 6:02 PM

Tom, I think you are half right. You are right that Dell won't be around if they don't focus on innovation. But I think they are trying to throw HP and Sony a curveball. It's a little bit of the Art of War. They make like R&D isn't important to them and that they won't even compete with Sony and HP. But at the same time they are putting all their creative energy into sneaking up on them from behind. Or even convincing them to leave the entire market to them.

Posted by Steven Kempton at February 15, 2005 7:52 PM

Apple stock is up 4X over the past year.

Apple is using the iPod and the new Mac Mini to introduce a new generation of cool stuff to the market.

Apple is innovating.

Mac OS has not been scourged by spyware and adware.

Meanwhile, Dell just chunks out commoditites called PC's utilizing software that is riddled with thousands of security issues that allow countless worms, viruses, adware and spyware to annoy users to no end.

I am sensing a tipping point.

Posted by Erick Blackwelder at February 16, 2005 12:25 AM