This week I'm at the Dell financial analyst meeting in lovely and hot Austin, Texas. Dell is feeling pretty good at this meeting and for the first time in a long time is actually doing a forecast. It's forecasting a positive year going forward. This is not only another indicator that the economy might be improving, but a strong indicator that Dell might have turned the corner and that corporate buying, which makes up two-thirds of Dell's income, is coming back.
Let's talk about the highlights of this meeting and the changes both in Dell and the market in general.
The Power of a Founder
There is something about an active founder that makes a big difference when a company is in trouble. You see this with Steve Jobs at Apple and Michael Dell at Dell. Both men left their companies and came back. Jobs came back first and has had more time to revive Apple. His first step was to massively simplify Apple. Michael Dell took Dell the way it was, with an over-emphasis on business buyers, and has had a more difficult path as the corporate buying market collapsed.
However, one of the advantages of a founder is the ability to think long term and not just about tactical short-term gains that maximize their stock options or bonuses. If it sounds as if I don't like the way most companies compensate their executives, you are reading me right. Founders tend to care more about the future of their companies, and it shows in the care they take in the details.
Jobs is known for caring about the way products are showcased, for instance, something below most CEOs' interest. Before this event, Michael Dell was seen personally checking each display to make sure it met his personal expectations. That's the way a CEO should behave. Most don't, though. I should be able to point out those that don't do it as exceptions, but the reality is that Jobs and Dell are the only two CEOs I know of at firms of this size that take this level of interest.
Net Promoter Score
I've written in the past about EMC and how it has driven NPS (Net Promoter Score) into the corporation. It's actually improved on this scoring method to assure that the firm is thinking about pleasing customers to a degree that these customers become advocates and help sell the company's products. Jobs seemed to get this concept before there was an NPS metric.
Dell is now using NPS broadly and built it into the compensation plan for its executives. While not yet as advanced as EMC's efforts, it still is a top-level focus that cuts across products and services and likely is why companies that are currently buying from Dell seem so much more pleased then those of a decade ago.
I don't understand why more companies don't get this. When Pat Gelsinger left Intel and went to EMC, he was amazed at how much better EMC's client relationships were than Intel's. He concluded that EMC's greatest asset wasn't its products but its customer loyalty. I could argue the same for Apple. Its greatest assets aren't its products, but the loyalty of its customers. Dell had this loyalty at one time and lost much of it due to an excessive focus on short-term profits. IT is now correcting that mistake. This focus on building advocates is undoubtedly the cause of the company building better-looking and more reliable products, building out its service organization again, and vastly improving both its online and retail businesses. For instance, it is investing $100 million in improving its Web experience this year because that investment should result in customers that will be more thrilled buying from Dell improving their customer loyalty.
If you focus on customer loyalty, you can grow market share and profitability. If you don't, you generally have to trade off one against the other. This should be part of a business 101 course. Surprisingly, it isn't.
Dell's new handheld efforts weren't on main stage but it was showcasing the products to those who looked for them in the product showcase. Unlike most companies, Dell isn't building Apple clones based on Android. It is using Android but seems to be looking at building products that are unique to Dell. The keystone of this strategy is the Dell Streak, a blend between a tablet computer and a smartphone. It potentially has the advantages of both and falls into a gap that Apple and others do not yet address. It targets folks who don't want two devices that don't work together, but instead want one device that is portable and can serve both functions. Risky, but I've never been a fan of simply coming out with a product that copies someone else. No one can build a better iPhone than Apple because Apple defines the iPhone. But you might be able to build a product people like better; Dell is exploring this riskier but potentially more successful path.
Windows 7 and Office 2010 Demand Increasing
One of the big problems for Dell and the Windows PC industry was how few companies wanted to upgrade from Windows XP and Office 2003. It was as if the entire IT world said thanks but no thanks to both Office 2007 and Windows Vista. (I still think this is partially because Microsoft decoupled the products and Office no longer is used as a major showcase of the features of a new version of Windows.)
Apparently, Dell is seeing significant demand for both Windows 7 and Office 2010 and was pretty much gushing about the revenue growth it was seeing from increased adoption of both products. Both consumer and business segments highlighted the need for individuals and companies to move off the old aging platforms and onto the new Microsoft offerings. Apparently, many are buying new hardware on this cycle (which is what many of us recommend) and that is providing much of the foundation for Dell's projected client hardware growth.
Wrapping Up: Dell's Looking Better but Challenges to Come
Dell has a lot of reasons to be excited about its future. However, one of the difficulties in competing in a world increasingly defined by Apple and Google is to step out of the noise and be perceived as something beneficially different. Marketing and demand generation are so incredibly important if you need to showcase what makes a company different and we didn't see much from marketing at all. This is a traditional mistake made by most technology companies. Apple, and occasionally HP, are the successful exceptions.
That aside, the event showcased an improved Dell -- one that is more confident and customer focused than the Dell of a decade ago and that should pay dividends for its customers, employees and investors.