Steady Focus at a Higher Level
I attended a panel discussion last week where the topic was how Dell has managed to overtake Compaq, and stay on top in such volatile times. There were many reasons offered up from the panel, and indeed, to stay atop any sector of the technology field one would have to excel in several areas simultaneously. While doing nothing innovative on the product front, Michael Dell has continued from the days in his Texas Dorm room to excel in both customer intimacy and business excellence.
I believe this is the key unstated element – Dell is indeed innovative, in their ongoing precise tuning of their business processes. As their understanding of their client base grows and they can more effectively segment them, they continue to focus on explicitly streamlining the supply chain for each of those differentiated clients. They are staying true to their stated tenets of managing hypergrowth and always improving, in a mature, disciplined manner. As a result, they continue to trim all the fat that continues to plague their competitors – the ones that have been caught sleeping and now are scrambling to play to someone else’s strengths. Dell has the flexibility to profit at a similar price or to undercut the competition, and their market share is growing in most sectors. As long as Michael Dell can continue keep his company true to their talents and their stated tenets, I expect that they will continue to dominate as they expand into sectors such as PDA’s and peripherals.
I don’t think there is a clearer example than Dell of a mainstream company that has dominated by leveraging a strong focus on continuous refinement of their practices.
That domination is in a market that is, on average, significantly more focused on efficiency and effectiveness than the software sector. Industry pundits such as the Standish Group and Larry Rubin have cited software industry average project overruns greater than 100% and rework greater than 30%. These numbers, frighteningly, would be welcome relief for many companies (statistically speaking, half of the projects surveyed would be worse than these averages)! I have yet to come across an example in the software industry where a company has excelled through a focus on refined practices – despite many companies’ claims to the contrary (feel free to correct me here…). Feature differentiation is the driver in software, rather than business excellence, and that is where I believe we are mistaken (what percentage of the features in Microsoft Word have you ever used?).
It is a rare software company that will focus on refining its practices without external pressure to do so. Whether it is ISO Registration to gain entry into Europe or a CMM rating to access defense or government contracts, the primary reason is usually to provide external marketing clout to gain the job rather than to reduce internal risk and inefficiency while the job is being performed. I find it interesting that Dell doesn’t heavily push its key strategic strength – they are dominating through their actions, not their words. In most software markets, there is probably room for an astute vendor to quickly rise above the others and dominate, as Dell has done in its markets.
I don’t think there is a more compelling path for competitive differentiation in the software industry than to maintain a steady focus at a higher level, as Dell has done in its niche. – JB