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Saturday, September 04, 2004

The Soul of DELL - Its winning culture via S&B

By nearly any measure — market share, return on invested capital, or simple revenue growth — Dell is among the most successful companies created in the last 50 years. This year, its 20th anniversary, the company expects to reach nearly $50 billion in revenues, and to grow more, in dollar terms if not by percentage, than in any previous year in its history.It’s easy to forget that Dell’s success was not foreordained. Indeed, the company’s resurgence and sustained growth during the past several years owes much to its leaders’ insight that something fundamental — at least as essential as its supply chain, and perhaps even more so — needed to be reformed: Dell’s soul.“What great companies have always done is to find ways to appeal to another side of human nature, wanting to be associated with something that’s great,” says John P. Kotter, an expert in leadership and culture and a retired Harvard Business School professor. “You want to find the nature of what you’re making exciting and believe that this product or service does something useful for humanity. Great companies institutionalize that, and you can’t fake it.“It’s not just in your business model,” Professor Kotter says. “It’s in people’s hearts.” Whereas a performance crisis is often the wake-up call that forces a company to attempt bold change, in 2000 Dell had not experienced a catastrophe. Although not achieving all of its business plan goals, the company was still more profitable than its major competitors, including Compaq, Hewlett-Packard, Sun Microsystems, and the relevant portions of IBM. Moreover, it gained market share in 2000 and 2001. Still, the slowing of Dell’s historically rapid growth rate allowed the company the opportunity to step back and reflect on what its culture represented and what it really wanted to be.In contrast to large industrial-age companies that struggle to adapt to the demands of today’s competitive environment, Dell was naturally lean, fast, and entrepreneurial. These were the desired attributes of a large high-performance company in a high-speed and unpredictable business world. This spared Dell the pain and disruption of a major downsizing and restructuring as it dealt with change in its corporate culture. Even after two decades, Dell has retained its informality and the energy to execute like a startup company. Dell is a prototypical flat organization. From the factory floor to corporate communications, decisions are made quickly and without the burden of superfluous hierarchy. If a supervisor on the factory floor sees ways to reduce component inventories, he simply does it, without going up the chain of command for approval. Dell’s internal communications have stayed efficient, so that decisions that don’t require the attention of senior management get made without them. Dell's conscious all round resurgence when things began to slow down around Year2K is a case study - the best results are beginning to get heard, as DELL is decisively moving into "DigitalHome" market.

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