Where to now for Dell, Apple and the rest?
INNOVATION TALK:In the face of Apple’s declining fortunes, a rival technology chief executive was asked at a tech conference what he would do to fix the company whose best days, nearly everyone agrees, are behind it.
“What would I do?” the tech titan said to the large audience. “I’d shut it down and give the money back to the shareholders.”
Lest you think this is a bit of an overreaction to Apple’s sharp share price fall, there are two things worth noting – one, the rival wasn’t Google’s Larry Page or Samsung’s Kwon Oh Hyun. Famously, it was none other than Michael Dell. Secondly, Dell didn’t, in fact, utter these words recently – he said them back in 1997.
Dell’s infamous advice to Apple is rather apposite given the fact that last week, he gave the money back to the shareholders and took the company private with a leveraged buyout in an attempt to save his ailing company, whose best days most definitely are behind it.
In fairness, Dell doesn’t intend to shut his eponymous company down, but rather to refocus it away from the prying eyes of shareholders and Wall Street, following the IBM model and concentrating instead on high-value enterprise and consulting sectors.
But that anecdote about Dell’s condescending advice to Steve Jobs doesn’t just provide an opportunity to laugh at his enormous hubris, but also hints at just how shortsighted his vision was – he built a world-class supply chain that gave his company a real edge in the personal computer business, but that was the only thing of note he has ever created.
Dell seemed to assume that was enough, as if the evolution of the computer had reached its endpoint and selling Wintel boxes was going to be the perpetual order of things, but the subsequent 15 years have seen the computer industry’s fundamental principles challenged and overthrown.
Back in 1997, the computer business was a model of horizontal integration – Microsoft provided the operating system and Intel provided the silicon chips that powered computers built by the likes of HP, Gateway and, of course, Dell. Owning the whole enchilada, as Jobs was determined to do when he returned to Apple that year, was seen as eccentric at best, downright suicidal at worst.
As it happened, staying vertically integrated was exactly the approach that allowed Apple to revolutionise mobile computing, and reap monster profits as it became, for a while, the largest company in the world by market cap.
In the meantime, Dell’s supply-chain advantage evaporated as it outsourced manufacturing to the likes of Asus, one of the low-cost Asian firms who soon swallowed Dell’s end of the PC market.
