Notes from "A Conversation with Michael Dell"

I.                   Richard Attiyeh, Vice Chancellor for Research and Dean of Grad Studies

a.      New UCSD School of Management

                                                              i.      Technology focus

                                                             ii.      International focus

II.                 Robert Sullivan, Dean of future UCSD School of Management

a.      Kick-off event for public forums and partnerships across campus

b.      Hosts

                                                              i.      Frieder Seible – New dean of Jacobs School of Engineering

                                                             ii.      Larry Smarr – Director of Beyster Institute

c.      Michael Dell

                                                              i.      1980’s developed Dell @ UTexas

                                                             ii.      2003 Dell revenues up quarter per quarter, now ~$10 bill.

III.              Dell w/ Seible

Q:  Explain “Customer First”

A:  Inventor -> Standards -> Customer

Instead of working on technology, work on delivering value to customer’s demand

Work backwards from customer

Q:  How to implement this?

A:  Watch economic situation

Understand problems: productivity, entertainment, ease-of-use, etc.

Different users have different needs (home, biz, K-12, universities, etc)

Drive cost down through standards (printing is next)

Q:  What can UCSD contribute?

A:  Research for future technology products

Nanomachines, photonics, bioengineering, etc

Molecular materials for future

Wireless, routers, etc. tech is from research universities

In US technology promotes growth

Q:  Shift from private research to university research – true with Dell?

A:  Yes, need new ways instead of outdated AT&T/Bell Labs model

Firms have to cut costs from competitive pressure

But technology will still grow

Q:  What are the two next breakthroughs

A:  1) Wireless

     802.16, 802.20         100-400 Mb/s

2) Scale-out model w/ enterprise servers

Clustering, etc. grid computing

Democratization of computing power w/ clustering technology

3) Energy & Environment

No lead, etc.

Q:  How many Dell employees?

A:  40,000 right now

Q:  What does Dell look for in employees?

A:  Self-starter, high standards, collaboration, likes to win, not complacent

Ready for ever-increasing challenges and change

Q:  What can university do to train for employees?

A:  Don’t keep students for too long – get accustomed to academic env

Teamwork/collaboration programs -- industry world is opposite of current academic style

Q:  What’s 5-10 years ahead for Dell?

A:  Higher-speed processors

More global – China, Japan, Brazil, India, etc. – countries with developed economies now or in the long term


Technologies will continue to commoditize

     Dell will go after them one by one

Q:  China & Europe: opportunity or competition?

A:  Must view as opportunity b/c alternative is protectionism

China is a resource

               Market growing

               Low-level R&D – also in Taiwan, India, etc


Europe is less willing to embrace change

               Complacent with bad economy

               “In Europe I find they are accepting of things that are not wonderful”

               That’s why we’re all here in America

IV.               Dell w/ Smarr

Michael Dell was role model to other students in Smarr’s MBA classes (Dell was his MBA student – Sullivan was administrator over Smarr at same time)

Q:  What learned?

A:  Great people more impt than perfect organization

Metrics on employees

Leaders who train leaders

Also learned from inventory problems

Q:  How stayed around as a founder-CEO?

A:  Can’t do everything yourself – need great ppl around you

Q:  What is Michael Dell’s weakness?

A:  Strength: strategy

Weakness: Operations

Usually him and right-hand man are each correct about 80% of time

               So both have to agree on big decisions

V.                 Floor opened to audience questions with Smarr interjections

Q:  Houman Haghighi: How to revive PC industry?

A:  Simple law of economics: Value will be rewarded

There’s a lot of companies in our industry that don’t do anything valuable.”

“It’s all about delivering value.”

“I don’t necessarily think you can innovate your way out of a cost problem.”

Q:  What software is needed next to add value?

A:  Wide variety of applications to many markets

Allow customers to decide what software to add next – they must ask

Dell loads a variety of software

Dell does not limit customer ability to add extra software

Q:  Bryan Barton: Advice to entrepreneurs

A:  “Be ready to fail”

“Make a lot of mistakes”

Constrain of capital market makes you think deeply about most value

Try things and experiment – don’t wait for perfect thing to come along

Q:  What would’ve done differently?

A:  Take more finance and micro-econ courses – only took macro-econ

Develop more leadership

Outgrew people and organization or people got rich and retired

Q:  Growth in Asia vs. Legend Computer etc.

A:  Dell growing faster than Legend in China

Cost structure in China is same

Legend doesn’t have distribution, brand, customer relationships

Definitely an emerging competitor

Q:  How get credibility as a startup?

A:  Excellence awards and recognition

Hired prestigious IBM fellow

Developed great products and distribution

Closed loop system to get customer feedback w/o dealer in between

Q:  How did Dell Direct happen?

A:  No exact Eureka moment

Q:  How did you know this business was the one?

A: Computers were about 6x more expensive than their parts and took 1 yr. development cycle to come to market

Did not anticipate Internet for distribution – planned on phone orders

Did anticipate growth in computer usage

Figured out efficient distribution along the way

Driven by economic principles, not particular culture – so translates well internationally

Q:  Which industry will benefit from Dell Direct model?

A:  Lots of businesses have costs b/c have to anticipate future needs

     Must have high inventory b/c of imperfect information

Q:  How did Dell approach and build relationships with suppliers

A:  Industry was smaller

     First went to distributors and later directly to manufacturers

     Be persistent – waited 5 hrs. to see Andy Grove of Intel

     Suppliers like high volume

Q:  How do you fight commodity overcapacity when market matures?

A:  Many say industry already like that, even in services now

     Has caused industry wage deflation

     Interesting fact: When Dell enters market volume increases, market capacity increases, revenues decrease

     Not good for proprietary models

     “If we didn’t do it, somebody else will”

Q:  What could wireless Ethernet in 12 months mean for Dell?

A:  We love wireless and support multiple standards

Q:  Any company religion?

A:  Go direct to suppliers

     Save as much money to add most value

Q:  Kevin Jung: How stay grounded personally?

A:  Family

     Work hard, play hard

     Remind self of better people – keeps copy of Fortune with Ken Olson on cover as best entrepreneur

Q:  How use employee ownership?

A:  Success sharing

     Suggestions between employees