Big Ears and Digital Transformation: How Dell Reinvented Itself
In August 2015, I predicted that within 5 years, 50% of Dell's profits would come from businesses it wasn't even in 5 years ago. Dell had just recorded another year of flat revenue growth, the stock had flatlined for the better part of a decade, and Carl Icahn was calling for Michael Dell's ouster.
People thought I was nuts.
“I’m calling it now, in August 2015. Dell stays private. By the early 2020s, revenues are $90 billion or so. Profits are $6 to $7 billion. Dell is recognized as one of the world’s most innovative firms. Go ahead and call me crazy. You’ll be buying the beers.”
2015 projection of Dell's radical business transformation and its impact on revenues.
Fast forward almost exactly two years, and the Forbes headline reads: How Michael Dell Reinvented His Company. In the article, Michael Dell talks to Rich Karlgaard of Forbes about how he turned his company from a respected but seemingly dormant PC giant into an innovative, $80 billion+ provider of the cloud-based IT infrastructure that powers the biggest productivity acceleration since the Industrial Revolution. I'm talking about billions of connected sensors and devices, and the critical data each can provide.
Dell talks about many things in the interview, but three stand out for me: big ears, data (and lots of it), and savvy cloud-based acquisitions (as well as a culture that lets those acquisitions stay nimble).
Big Ears
““We started as a company that had big ears and listened, and we’ve continued that way. I believe it’s a good way to do business, right? We learn from all the things our customers tell us. It’s not that hard to figure out.””
That's right. Dell is at heart a listening company. Its roots as a direct company required this. And then it became a massive competitive advantage and not-so-secret weapon.
The power of listening became apparent in the age of social media, where thousands of messages compete for our attention each day. Customers want to be heard, and they reward companies that engage with them. A few facts:
- Customers spend up to 20% more with a business that responds to a customer service tweet (Twitter/Applied Marketing Science survey, 2016)
Customers are 30% more likely to recommend a brand if the brand responds to their Tweet (TechCrunch, 2016)
88% of consumers are less likely to buy from a firm that ignores online complaints (Kelley School, 2014)
After a noticeable early lapse into Dell Hell on social, Dell has become one of the world's leading social companies. Dell's Social Media Listening Command Centers listen in 42 languages worldwide, and Dell provides customer care in 17 languages. Employees are activated to engage on social media, and trained that 80% of the conversation should not be about Dell. To wit:
That's right. One of Dell's biggest and most enduring advantages is something your Mom taught you: Listen. Don't always talk about yourself. Be yourself. Well done, Mrs. Dell.
Data
Michael Dell thinks Cisco's estimate of 50 billion connected devices by 2020 might be on the low side. He points to the rise of sensors in everything from tires to coffee machines, and the enabling 5G network, which focuses not on voice communications but on low latency, device-to-device connections. And the cloud, of course, enables the storage, transmission, and retrieval of all that data, at light speed. A major tenet of Dell's vision was and is to provide the IT infrastructure that enables customers to store, share, analyze, and use the data coming off of those billions of soon-to-be connected devices.
“The fuel for this is the data. And nobody stores more critical data in the world than we do. I absolutely get the sense that it’s some kind of inflection point.”
When looking at your business, ask yourself: do we have data that, either alone or in combination with other products, could be valuable to either current or new customers? We saw this with one of our clients, which makes fuel-saving technology. Increasingly, their customers are as interested in the truck sensor data our client provides (driver behaviour, truck efficiency, and the like) as they are in the fuel savings itself. That is because the data allows them to improve their operations throughout the lifecycle, not just on one line of the P&L.
Acquisitions...and Culture
In Reinventing Dell, I wrote that Dell's transformation was likely to come in large part from developing and managing a portfolio of acquisitions, large and small. Truth is, in the digital era, when Moore's Law puts the power of a 70s supercomputer on your phone and innovation flies around the globe at the speed and cost of a keystroke, the most innovative ideas are not likely to be found in your own shop. By combining Dell's massive capital and an Intelligent Gambler©'s approach to innovation, Dell has connected innovations from agile software development and the cloud (Pivotal, which enables rapid development and deployment of cloud-native apps) to security intelligence and threat detection (SecureWorks and SonicWall), and of course to EMC, one of the world' largest providers of data storage infrastructure. It is the combination of these ideas which is so powerful, and the advantage very large corporations have is that they have the capital and the patience to bring these ideas together.
We use this framework with our clients, asking them what it would take to move an existing product from, say, the Sustaining Innovation box to the Game Changers box. The answer to that question is often an outside acquisition, partnership, or new technology breakthrough (such as an industry breakthrough which doubles the life of a battery while reducing its size).
Michael Dell also talks about the importance of staying out of the way of these smaller acquisitions, so their speed and decision-making are not hindered by the mother ship. He also says that a private company shifts the time horizon for the entire organization, to a three, five, or ten year view. Indeed, going private removes the flawed decision-making that arises when managers are hyper-focused on making this quarter's profit numbers.
So, what'd we learn? Listen to customers. Trust the data, Luke. It's where the future is, and it just may be the product. And work well with others. Especially those who are smaller and quirkier than you - they may not be as crazy as them seem.
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