Reinventing Dell – book notes

Reinventing Dell is short. I read it on a business trip to Belfast from Copenhagen sitting in a crammed airplane with my Kindle. The planes was delayed, but even without that annoyance, I would have finished it in 2-4 hours. Short is good as the points are pretty clearly communicated.

Throughout the book the story of Dells rise reeks of good leadership, boldness and knowledge of own strength and weaknesses.

Dell had a clear advantage in terms of business model. They spoke directly to their customers and quantified their marketing way before it was an industry as today.

The rise

To build an organization able to innovate requires three capabilities:

  • Creative abrasion (creating a multitude of options through debate and discussion)
    • Fostered by diverse backgrounds and personalities
  • Creative agility (quick iterations, experiments and potential change of direction)
  • Creative resolution (the ability to make integrative decision)

Rules of engagement. Everyone is encouraged to innovate, experience and fail – but it is clear who has the final say.

Rather than being locked down between option A and B, leaders of innovation must look for ways of obtaining bits from both.

Lack of trust, fear of conflict, lack of commitment, avoidance of accountability and inattention to results undermines innovation.

“As organizations and programs expand and age, they often propagate ever more convoluted procedures and processes. Ballooning brigades of administrators must justify their existence. So they busy themselves by writing more rules and requiring colleagues to jump through more hoops – stealing bandwidth, effort and willpower from more essential work.”

“Each quarter, the dell leadership team would figure out exactly what we needed to do this quarter, or for the next two quarters. They would make it absolutely clear. We would focus on that and we would just go fucking do it. And that is exactly what would happen. There was leadership, and employee commitment, and people getting it done.”

In the second quarter of 1993, Dell announced its first and only quarterly loss, of $76 million. The loss was attributed to a write-off of Dell’s line of notebook computers (Dell indeed scrapped all of its notebook products and boldly started over, under the leadership of John Medica, formerly of Apple)

“We were working 14 -16 hours a day, and not feeling tired at the end of it. That was due to the employee commitment, and the leadership. There was such alignment between the top levels and the front-line employees. We were very aligned – amazingly aligned, actually.”

There were very few “prima donna” executives at Dell in the early days, Michael included. This made them accessible and approachable, which fostered both the sharing of innovative ideas and the speed of decision-making and execution.

Michael [Dell] has two other hidden talents that serve him well. First, as he has publicly said, he never thinks he is the smartest guy in the room. And if he does, he goes and finds another room.

There is no data about how a genuinely new idea will interact with the world in advance of said new idea actually interacting with the world. Therefore there is no way to prove it will work in advance.

There are very few people who are wired to be ‘strategic doers.’ They’re either one or the other.” Finding a critical mass of these strategic doers was not easy, but Dell managed to do it through the early 2000s by looking specifically for such attributes as “dealing with ambiguity” and “learning on the fly” when hiring.

The fall

Dell goes through a lot of challenges in the early 2000’s. They take wrong turns in terms of strategy but even more significant in terms of the downturn is the cultural shift. The once innovative, experimental and risk-willing company grows into a bureaucratic risk-averse monster.

The books thesis is that this is caused by hiring people with “MBA” and “Consultant” backgrounds. They focus too much on numbers and risk-aversion. Trying to optimize the status quo instead of experimenting, iterating and taking risk. Leaders are focused on limiting risk and safe-bets to “keep their track clean”.

The tolerance for risk-taking in the company was, at the end, almost completely and totally, none.”

Public firms choose more conventional projects. Their managers appear shortsighted: they care too much about current earnings. They find it difficult to pursue complex projects that the market does not appear to understand well. Public firms go private after adverse shocks, when it is clear that their business models are no longer working, and there is a need for restructuring.

This “focus on the core” in order to hit short-term earnings targets took its toll on Dell’s ability to capitalize on major industry product transitions. Sharpe states, “Dell completely and totally failed to see where the future of personal computing was going – Apple moved into content, started to create an ecosystem

Dell also struggled to find an inspiring purpose, an element in Hill’s framework, after it achieved the #1 worldwide market share position in 2001. A former marketing director says, “Dell became a soul-sucking experience over time. It had a purpose at the beginning: to be #1. After we hit #1, it was ‘then what?’ There was nothing to strive for anymore. Dell had a purpose, but the purpose wasn’t reset. It just became about costcutting: ‘How can we squeeze more blood out of the turnip?’ Employees became cogs in the machine.”

Reinvention

Michael Dell when returning as CEO in 2007 wrote: “We have great people… but we also have a new enemy, bureaucracy, which costs us money and slows us down. We created it, we subjected our people to it, and we have to fix it!”

“Create a set of values that this company is about. Dell’s gotta find what its purpose is. What kind of culture is valued? And then protect those people, even if they piss people off. Not caustic people but people who are doing the right thing for the business, not for personal gain. If the culture’s about risk-taking, don’t beat people up who make mistakes. Protect people who live the values. The risk-taking culture doesn’t survive without leaders backing you up.”

“To get Dell out of where it is and to go forward, it still needs leadership and employee commitment. I don’t know if Dell can get the culture back. It is so big and has been there for so long now. If it did some really interesting recruiting, took risks at the leadership level, maybe. Hire mavericks, risk-takers, people who are not afraid to lead, with some charisma.”

Impressively, and perhaps most importantly, Dell has also put in place many elements required to recreate its original entrepreneurial, risk-taker’s culture – an organization both willing and able to innovate. The cultural change is arguably the most crucial, as it will allow Dell to continue to innovate as required over time. It is indeed “the soft stuff” that will make or break Dell’s reinvention

First, Dell should fly its freak flag in hiring, at all levels. Urban Dictionary defines the term “fly your freak flag” as: “A characteristic, mannerism, or appearance of a person, either subtle or overt, which implies unique, eccentric, creative, adventurous or unconventional thinking.”

Second, Dell should hire managers who listen and who encourage risk-taking and thoughtful failure.