• Young Turks

Differentiating his PC business which cut out the retailer, the “Direct from Dell” approach helped Dell earn his first billion in 1992. By 2001, Dell became a global leader with 30 percent market share. But the last decade hasn’t been smooth. Dell stepped down from the post of CEO in 2004 and subsequently the company lost its leadership position. This prompted him to return to the helm in 2007 and, in three years, Dell is back on track.

Shereen Bhan (SB): Today everybody is talking about creating billion dollar enterprises. Is it easier to create these today as compared to what it was when you started off?
Michael Dell (MD):When I started, the industry was certainly much smaller and the place where we started with the micro-processor based computers was really in its infancy. What you see now is a much larger industry; it’s a Rs.90 trillion industry. Just given the size and the change dynamics; you see a lot more new companies and entrepreneurialism, creativity and innovation. The kind of cycle of new ideas and new companies is as active as ever in our industry.

SB: Do you think these companies will actually survive the highs and lows of the economic cycles?
MD: Markets always tend to get a little too excited, and that happens in any growth market. But if you look back over the last few decades, there are only about five new companies each year that become significant.

Many other important companies get acquired or carve out niches here and there. But I think the turbulence and dynamics is not going to slow down at all. You can argue that it’s accelerating as the ingredients are changing, as we have more globalization, more consumers actively playing with and having information in a much faster way, all the trends around social computing and mobility also add to it. It’s just accelerating.

SB: We’ve seen the LinkedIn IPO, there are a couple of other blockbuster IPOs in the pipeline. What do you feel about the kind of valuations people are talking about?
MD: Valuations can be very disconnected from reality. Certainly, if you look at the fundamental basis, people are pricing in incredible assumptions about future growth. The amount of capital that’s been thrown at these new ideas makes investors very excited.
We at Dell are at a different stage. There are certainly exciting new things that we’re doing. But we are also in the well-established income producing type of business today.

SB: You spoke about valuations being perhaps disconnected from reality. Are you beginning to get worried? Do you see a sort of irrational exuberance building in as far as the technology and internet side of businesses is concerned?
MD: If you look at the valuation differences among the new shiny objects—I refer to the new small startups in certain very attractive categories versus the well-established companies—then you find that the gap is as great as it has ever been and it is probably quite unsustainable too.
It creates all sorts of challenging dynamics and certainly you have different kinds of investors that are attracted to you.

SB: What are the challenges of dealing with unanticipated growth?
MD: As our company grew from millions to hundreds of millions to billions and tens of billion, we outgrew every imaginable system or capability or facility that we could create. We needed to expand our teams and our human resources as the business became more global, and we needed more capital. All sorts of challenges had to be faced at a very accelerated rate. The tools that we have today and things like mobile internet and globalization are enabling companies to grow much faster than was possible a few decades ago.

SB: You’ve often said that you don’t need to be a genius, a visionary or even a college graduate: you just need to have a framework and a dream. As you sit here today and observe the Dell story and its evolution, what do you think has been the single biggest contributor to your success?
MD: Customer-centricity, understanding our customers and where value shifts are taking place, these have contributed to our growth story. We have the flexibility and the agility to adapt and respond to these. Certainly the things that caused Dell to be very successful in its 25 years are a bit different than the things that are causing us to be successful now. Now we’re experiencing record profits and our earnings are quite strong and we’ve taken on a much more solutions-based approach.

SB: How bullish and optimistic are you about India? I know you have a target of achieving about Rs.9,000 crore, do you continue to stick with that or are you perhaps even upping it?
MD: I don’t know that I could be more bullish on India. We are very excited about our business in India. This last quarter, revenues grew about 30 percent, units grew almost 50 percent, our fastest growth is in small-medium business where I believe we grew over 100 percent. We have about 25,000 team members, we’re expanding our manufacturing. We started out with a capacity for 4 lakh, then grew that to a million and now we will take it to two million probably. We have a broad range of activities in India, from research and development to sales and service and call centers. We continue to expand our capacity here and I think the market is growing and we are once again in the number one share position across the entire market, with a commanding lead, selling about a third of all notebooks in India. It’s a fabulous market and we’ve invested very heavily in it.

SB: As you grow, what is the emerging market contribution you are looking at, specifically from markets like India?
MD: We believe that Asia has two-thirds of the world’s population and also that the PC is a kind of the frontline of IT. IT goes well beyond the PC, obviously, but when you have countries like India that are expanding very rapidly, the PC is sort of the first point departure in terms of the journey of IT. We think these markets will continue to grow; we already have substantial portions of our revenue in brick countries and what we consider to be the key strategic fast growing countries, which India is certainly a part of. Last year we acquired eight companies, and we’re finding that many of these companies have operations in India, so those are adding to our capability there. I am very open to acquiring companies in India.

SB: I want to go back in time to your own entrepreneurial journey. You decided to step back in 2004 when things went wrong and decided to come back in 2007?
MD: Our board asked me to come back into the CEO role and having founded the company and being the Chairman I felt a special responsibility to the company. I’ve had a great time. It’s been fun. We’ve had a chance to take a good look at our strategy and what was working and what was not working well; we figured out what Dell needed to do. We are doing some new things, we’re investing a lot more in research and development, a lot more in innovation. This whole acquisition strategy is a completely new approach for us, we’re allocating our capital a little differently now.

SB: No plans to step back anytime soon?
MD: No.

SB: What are the imperatives for young entrepreneurs as they go about building their sustainable businesses? What areas do you think they need to have their fingers on?
MD: You don’t have to be in Silicon Valley to be an entrepreneur. There are certainly many great ones there but there are a lot of great ones all over the world. You must have an acceptance of risk and an ability to take chances. You must accept failure and experiment and be agile to look for new opportunities. Look to creating value where it hasn’t been created before. I love strategies that incumbent competitors will not adopt because it undermines their current positioning, so it’s always fun to think which things are changing. Think how you could create a strategy that is fantastic for customers but that existing competitors wouldn’t want to do because it would alter what they think of currently as good business. We see plenty of opportunities to add and grow organically/inorganically in those kind of businesses.

SB: As you look to the future, what are the cornerstones of growth in terms of the way you look at Dell and the world?
MD: If you think about commercial IT, it’s essentially the business of productivity. Business is good, there is a lot of demand for productivity. There are so many untapped fields within it. If you look at the mid-market, everybody knows about the world’s biggest corporations and they’re pretty good at using IT, so there’s still some opportunities there.

SB: What has been your biggest personal lesson as an entrepreneur? If there is one thing that you could perhaps change, what would it be?
MD: Investing in talent and growing talent. When you grow a business, the real limiter or enabler is how strong the talent is. How you grow and develop your people and give them the opportunities to succeed and investing in that is something we’ve spent quite a bit of time on at Dell in the last few years. Quite frankly, I feel we should have spent more time on this in the first 10-15 years of Dell’s history.

SB: Your message to young entrepreneurs reading this?
MD: Be willing to experiment, be willing to make mistakes, learn from those mistakes, don’t wait for the perfect plan. Go out there and do something new and different.
Copying someone else or trying to do something a little bit better than someone else did (is) probably not going to be a big breakthrough. You’ve got to really innovate and do something new and different.

©Entrepreneur September 2011

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CEO, Dell, IPO, LinkedIn, Michael Dell, PC, plan, Shereen Bhan