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Step Eight: Repeat Steps One Through Seven for More Effectiveness in Irresistible Force Management

Apr 11, 2008
"Few things are impossible to diligence and skill . . .
Great words are performed not by strengthen, but perseverance." --Samuel Johnson

Many businesses enjoy one smashing success but are then unable to repeat that breakthrough in the future. As the world changes around them, the benefits of the initial advantage erode and performance lags. They need help, fast! Is there a doctor in the house?

Consider Xerox, for example. The company's Palo Alto Research Center (PARC) invented the software that made connected personal computers possible. PARC also created the practical model for user software conventions that Microsoft and Apple Computer have built upon. Yet Xerox reaped little benefit from this remarkable work, in part because the company had a limited understanding of the irresistible forces that would shape the personal computer business.

In contrast, consider Dell Computer. While just a teenager, Michael Dell spotted an important irresistible force: Personal computers are far more attractive to customers when the machines are reliable; easy-to-use; quickly available; work faster; have more capabilities; and cost less.

Dell thought first of all like a customer, and he soon found ways to improve off-the-shelf machines to run faster by adding relatively inexpensive components. He bought excess and discontinued IBM personal computers from computer stores at a discount, improved their performance, and sold them directly to customers at a lower price than a computer store could charge. Dell was up and running.

Next, Dell customers began demanding faster service than could be provided by sending the machines back to the company. Dell responded by finding service providers who could come to the customer's place of business or home and make repairs on the spot.

Because such service calls are expensive, Dell quickly designed ways to help customers solve their own problems. Soon, fewer than 10 percent of the problems required a service visit.

This approach also provided Dell with customer feedback about faulty components. Dell could replace the bad parts in newly built machines much sooner. Fast action also meant that few customers would have problems.

By continuing to examine why breakdowns occur, Dell determined that reduced handling could help. Suppliers did the inspections at their facilities so that Dell didn't have to. This solution further reduced handling that could damage components. Problems rapidly declined.

A few years after Dell started up, IBM responded to the challenge presented by Dell and others by changing the pricing on its newest computers. The result was that upgrading the performance of new IBM machines would provide little profit.

This irresistible force made Dell realize that the company needed to manufacture its own personal computers, using standard components in high-performance designs. Direct selling continued to provide a large cost advantage. Dell was soon able to produce custom-built-to-spec computers in a short period of time. Sales again soared, as did profits.

Continued success soon brought Dell Computer to a crisis point. The company was growing so fast that it could not both meet the immediate demand and add the personnel, systems, and discipline needed to keep up with the market's irresistible forces.

Like a sailboat in a hurricane, sometimes you have to reef many of your sails to avoid being overwhelmed by the force of the winds. Dell learned the lesson of pursuing controlled, profitable growth rather than maximum growth.

Corporate intranets expanded. Customers then wanted thousands of machines delivered simultaneously around the world in compatible configurations for easy installation, communications and maintenance. Dell found that it could under price rivals by preloading the customer's own data and software on the machines at the factory. This innovation reduced the customers' costs by more than $200 per machine.

Understanding the customers' needs required a new approach to direct selling, so Dell began assigning salespeople to work on-site with customers to help them plan for their future needs. Dell beefed up its worldwide shipping and service capabilities to back up this expanded market opportunity.

Soon the company was growing at an enormous rate in countries it had only begun serving a few months or years earlier. With its newly created worldwide scope, multinational corporate accounts became Dell's mainstay in the mid- to late 1990s.

Since these customers also wanted to have a single supplier for the whole network, Dell began offering an expanded product line. Servers became an important part of its capabilities in attracting these accounts.

With greater volumes, the time from order to shipment continued to drop. By 2000, most of these custom-built computers left the shipping dock within 30 hours of being ordering.

This speed also provided Dell with another important advantage: the company didn't need much capital in order to grow. Its use of working capital was very small.

Customers usually paid Dell before Dell had to pay component suppliers. By using standard components and largely unautomated factories (to provide maximum flexibility), the company also was not very fixed-capital intensive.

During the late 1990s, Dell was able to use excess cash flow to repurchase shares at a time when other fast growing companies had to either borrow large sums or sell more common stock. As a result, Dell's stock price soared even faster than its market share, revenue, and profit gains.

Because the stock was growing so rapidly, the company soon began making a tidy profit selling put options to buy back its stock at lower prices. In such an attractive environment for employee stock options, Dell found itself able to attract and retain many of the most talented people in the personal computer industry.

Observers and executives at Dell have been unanimous in ascribing this excellent adaptability to irresistible forces to Michael Dell's thorough understanding of and unstinting attention to the irresistible forces. Many have wondered how this precocious teenage leader could have emerged into the longest-serving CEO in this very demanding industry.

Clearly, Michael Dell believed in repeating the search for locating, anticipating, and adapting to irresistible forces. That repetition kept him ahead of the competition.

To repeat outstanding success, you must continually reapply what you have learned about irresistible force management.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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