Open Letter to Michael Dell

May 10, 2013

Michael Dell
Chairman of the Board, Chief Executive Officer
Dell Inc.

Dear Michael,

There is a way to reinvigorate your PC business.

When mobile and PC markets were distinct, products in each of those markets could be placed somewhere on a line from consumer to enterprise. In todays market, those lines define a plane, with fixed to mobile on one axis and consumption to production on the other.

Until your PC business gets stronger, your efforts anywhere on this new playing field will suffer, and it will be tempting to trot off into data-center land. But don’t, or at least not exclusively. You – and by that I mean you, Michael Dell, not you, Dell, the corporation – can make Dell’s PC business strong again.

Dell and Costco grew dramatically by sharing an attribute that Dell has lost and Costco has not: “effortless value.” If you find something at Costco, the value will be high. Period. Looking around for a better price for that item is a waste of time. “Warehouse theater” doesn’t hurt either; shopping at Costco feels like value.

It used to be that buying a Dell branded product was the same experience as shopping at Costco. Value was effortless. Pick a price, buy the Dell PC at that price, and move on without a backward glance.

However, through a thousand efforts at margin enhancement, sales channel conflict differentiation, and who knows what else, Dell now offers what can only be characterized as a baffling and incomprehensible array of product lines, products, configurations, and segmentations.

There is some correlation to erosions in your margins, in market share lost and customer loyalty dissipated. You can start getting it back by dramatically simplifying the product line. There will be many benefits. Most importantly: fewer products can be better products. Component selection will be less about “different” and more about “best.” The impact of corporate pride on products matters: right now, you have a lot of products over which to peanut butter that pride.

Presentation becomes simpler, too. The analogy for Costco’s “warehouse theater” is a clean, simple, and fast website driven by the customer's intent rather than product marketing’s segmentation. Product promotion becomes more targeted automatically. You’ll start to get back some of the surprising number of sales you’ve lost through your crisis of complexity.

And your legendary supply chain managers must be able to wring some savings out of having only, say, three primary laptop models and three desktops. Apply those savings, and whatever you allocate to price promotions, which should end now, to improving quality, lowering prices, and maintaining margins. In that order.

Just like Nixon going to China, only you make this happen. I'm sure you'll need to get personally involved in the tough decisions, the mandates, and the allocation of resources, whether capital or headcount.

Simplifying the product line and fixing the website is just the beginning, but it is something you can do right now.

I have some thoughts on the post-PC world, how Dell can be successful in mobile, enterprise products, etc. But right now, it is time to kick some PC market ass; all that requires is for you to sail upwind through a gale of internal opposition. I know that isn’t easy, and that you are somewhat preoccupied right now, but I also know you can do it.

Warm regards,

Larry Zulch