The 1980s and 90s were interesting times for tech experts in the United States. This was the time when Steve Jobs laid the foundation for Apple, Bill Gates started Microsoft, and Larry Page and Sergey Brin were dreaming of building the most powerful search engine in the world.
Michael Dell was also one of those lucky individuals to make the most out of the computer boom. Like Steve Jobs, he was able to turn his small startup into a thriving multi-billion dollar company. Here’s what you need to know about Michael Dell’s success story.
Humble Beginnings
Michael Saul Dell was born in Houston, Texas, on February 23, 1965. From a very young age, Dell showed interest in computers. At the age of 15, his family bought an Apple computer. Dell tried to disassemble the machine to see if he could put it back together.
Dell’s parents wanted him to be a doctor. In 1983, Dell was a pre-med student at the University of Texas. During the first semester, he used to buy outdated personal computers from local retailers, upgrade them, and then sell them from his dorm room.
As Dell’s business of upgrading and reselling old computers grew, he realized he needed more space to store his ever-growing inventory. When Dell announced his plans to drop out of college to pursue a career in computers, his parents were furious.
In order to please his parents, Dell decided that if his sales turned out to be disappointing, he would go back to med school. During the first month of his new-found business, Michael Dell was able to sell off nearly $180,000 worth of PCs. From this point on, there was no turning back for Dell, and he never went back to med school.
First Business Venture
During the early 80s, Dell was quick to realize that personal computers would become an essential commodity in the near future. And when it comes to commodity, price and delivery are important. Dell figured out that he could easily purchase components and design PCs, which he can then sell to consumers at low prices.
In 1984, Dell launched his company under the name PC’s Limited. His idea was to sell personal computers over the phone directly to customers and offer 15 percent discounts to reputed brands. The technique would go later go on to establish Dell as a billionaire.
During the first year of its operations, PC’s Limited became one of the fastest-growing computer companies in the United States. The company reported $6 million in sales during the first year of business.
Unlike his competitors, Dell did not focus on simply inundating the market with thousands of generalized computers. His strategy was to create customized machines to address the needs of end users.
In 1987, Dell changed the name of the company to Dell Computer Corporation. Sales continue to soar, and they reached nearly $160 million by 1988. During the same year, Dell’s company issued went public. The IPO raised an additional $30 million for the company, out of which $18 million went to Dell’s own pocket.
Two years later, Dell married a young fashion designer named Susan Liberman. They have four kids together. By 1992, the 27-year old Michael Dell became the youngest CEO to lead a Fortune 500 company.
Unparalleled Growth and Other Issues
Once a small startup becomes an established company, business owners often think about entering other ventures. However, Dell took a different approach. Instead of opening up new companies that focused on other areas of expertise, Dell entered into a fierce competition with IBM.
In 1992, Dell set a goal to achieve more than $1.5 billion in sales. Thanks to Dell’s business acumen, the company was able to generate sales in excess of $2 billion for the year. However, the company’s growth soon spiraled out of control for the young CEO.
By mid-1993, Dell’s stock prices dropped from $49 to $16 per share. The company’s CFO resigned and left. Furthermore, Dell had to remove its new lines of notebook computers due to quality control issues and high production costs. As a result, business suffered throughout the year.
However, Dell wasn’t eager to give up. He hired Mort Topfer and Kevin Rollins, two of the most seasoned and experienced managers, to oversee day-to-day operations at the company. Dell was also able to hire Apple Powerbook designer John Medica at a lucrative package.
Within 12 months of the new hiring, the company was able to get back on track and record profits of up to $150 million. However, Dell now faced increasing competition from several other companies that were producing computers.
To overcome competition, Michael Dell and his top executive made two bold decisions. Firstly, the company would focus on high-margin business customers. Secondly, the company would solely focus on direct marketing rather than retailing.
Many tech experts criticized Dell’s decision. However, Dell proved everyone wrong. By using telephone and internet marketing, the company was able to push its sales to $7.7 billion in 1997. Dell was the first ever IT company to develop a niche in direct selling. By 1999, the company outperformed both IBM and Hewlett-Packard and its sales increased to $12.3 billion.
Takeaways
Michael Dell’s success story has been motivational for some, but confusing for others. Critics often question how his company was able to grow at such an exponential rate by focusing on direct marketing and ignoring retail stores altogether.
The answer lies within Dell’s ability to rethink his business operations. By 1997, Dell wasn’t focused on producing computers in bulk. Instead, he was trying to reduce his machine’s failure rate. By implementing a few thought-out strategies, the company was able to reduce its hard drive failure rate by up to 20%.
Another point worth noting is that Michael Dell was gifted with a business mind. Even during his high school years, he was making thousands of dollars by selling various newspaper subscriptions to a target market he himself had identified.
When he was 18, Michael Dell said that it was his dream to compete with IBM. Today, many employees at IBM dream about competing with Michael Dell.
by Bobby J Davidson
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