I saw a post on Ziff-Davis (Dell: Turnaround interuptus as share grab hurts net, margins) about how Dell isn’t quite out of it’s problems. There is an infamous quote by Michael Dell in 1997 (“I’d shut it down and give the money back to the shareholders”) that is hard to live down when the tables are turned and now Dell is struggling and Apple is doing very well.

But there is a reason for the disparity. Beyond the marketing and music tie-ins that are often pointed to as the reason for Apple’s phoenix-rise, there is a darker manufacturing reason for Dell’s continued struggle.

Like the Automotive business, the Computer business is all about “The Product”. And products need a certain level of Focus. Too many products and you cannot focus on the key points that differentiate your business from the one down the street. Brands go nowhere when there is no differentiation. When you have too many products, you have too much cost in your system, and your business struggles.

So I did a quick brush across the web sites of Apple and Dell, asking the question of “how many products does each offer?” I was going to do all the products, but after spending enough time in just the computer section offerings I’d had enough - looking at music players, phones, printers, monitors, music sales, and so on were not going to yield any additional insight (imagine if I were looking to buy something on these visits? Sad.). The computer systems tell the story.

Apple has all of three laptops and three desktop offerings on their web site.
Dell has 37 laptops and 60 desktops to choose from. And that is before you can “customize” your order on either site.

Granted, Apple and Dell are very much differently sized companies, Dell has a lot more employees to cover these products (or have this many products because they have so many employees). Half of Dell’s laptops are consumer, the other half are targeted at “businesses”, and 30% of Dell’s desktop machines are consumer while the remainder are traditional desktops plus workstations and servers for businesses. Dell does a lot of corporate sales (otherwise known as low margin high volume). Apple sells to businesses too - but they are the same machines the consumers get - thinning fixed costs there.

I’ve done this type of analysis in the past looking at the automotive companies with similar results. The company with fewer products is more nimble, gets a better brand image, and is more profitable than the company trying to offer something for every niche.

Having too many choices confuses most purchasers. There will be a select few who really enjoy comparing and researching every minute bit about their intended purchase (or some who do it out of fear they will choose incorrectly and might later suffer buyer remorse). But most shoppers do not - they will get an idea what they want, check on a few things and then try placing an order. This is where having too wide of a product portfolio to choose from is a major disadvantage - the potential buyer on one site will get overwhelmed and feel they are wasting time and abandon their shopping cart in the middle of the checkout page.

In the manufacturing realm, this complexity drives potential permutations like one automotive manufacturer I know could produce every variation (color, engine, seat configuration, etc) for a whole month and never repeat the same machine (two plants producing a vehicle every thirty seconds or so, over three shifts and five days a week). A lot of choice, but too much.

So what do you think? How should Dell pare down it’s offerings and restructure its web site/business to make shopping more simple? To reduce their complexity, cut costs, and drive a better business model?

Cheers!

Just a quick note on computer operating systems today. Dry you might think? How applicable to my Automotive or Manufacturing business struggling right now with high fuel costs? A lot.

It’s not too hard to get into a cocktail discussion comparing Windows Vista (or XP) to Mac or Linux and find fans in each corner. But looking at these three operating systems through the Lean Manufacturing lens reveals something interesting.

Microsoft has a product development cycle that mirrors many huge automotive corporations. A standard 5 or possibly 7 year refresh cycle - not much different than GM, Ford, or Chrysler (yeah, there are some fancy creative ways to count to say that cycle is only 3 years). Sure there are some design studio tweaks every year with trim and colors and fabrics to entice someone to upgrade, but the main architecture remains constant between major redesigns. Why? It’s hard and expensive to develop all that stuff and make tools and test it and all this activity in a huge organization.

Apple is a smaller company than Microsoft. They have found ways to launch new operating systems about every 2 to 3 years where Microsoft takes 5 to 7. What this allows is Apple can better anticipate what hardware will be available two years out - those crazy chip makers like Intel and AMD can show them what they’ve got going for Holiday Sales two years from now - because it’s right there on the bench getting tested. Meanwhile, Microsoft has to guess out 5 years. Those chip makers are guessing out that far themselves (”we think it will be round or possibly triangular this time”).

Just like Automobile manufactures have to guess what consumers will want five years from now. Like will gas prices be high or low? Guess one way and all your competitors are making huge profits in SUVs and have to answer to Wall Street hecklers or you’re stuck with a pile of Trucks that no one wants to put fuel in. You can put a nice word on it like “forecast” but in the end it’s just “guessing”.

The solution to all of this is to consider how to make your product development and company “Lean” so you don’t have to guess at all.

There is a fast mover in Linux operating systems, headed by Canonical, that is an amazing beast - an open source operating system that is consistently releasing new code with as many changes as Microsoft and Apple do in their more sedentary pace - but releasing every six months - “Ubuntu Linux” (ubuntu.com). In terms of just Linux operating systems it rocketed from obscurity to the top spots of the Linux popularity tracking lists (distrowatch.com). It’s helped get Linux on the radar of long-time Apple and Microsoft fans. And it’s increasingly becoming easier to use for the casual computer user (it’s certainly more secure and stable for its existing fan base).

The more I look at Windows, Mac OS, and Linux through the lense of Continuous Improvement in the Lean Manufacturing toolbox the more I expect Linux will vault far ahead of the other two operating systems - and quickly. Mac OS is noted for its stability, some advantage due to a small controlled set of hardware where Microsoft has to work on a lot of random hardware pieces, ease of use, “and beauty”. Windows is known for being able to play the latest games, and do some office-type work.

Ubuntu goes through four to six product generations in the time that Apple updates Mac software and a whopping ten to fourteen generations between Microsoft revisions. Ubuntu (which is pulling along all the other flavors of Linux in its wake) has really only recently entered this OS race, but that sustaining that product refresh cycle will propel it past Microsoft and Apple. Watch for continued stability, better hardware recognition, and a more beautiful operating system.

Imagine what GM, Ford, or Chrysler could do if they began structuring their operations with the flexibility to really redesign products every year - not just lipstick and trim? Or if their component suppliers could do the same? It’s hard, but mandatory for survival, that the Automotive Companies begin thinking like this.

A faster cycle from a streamlined process will take the guess-work out of building the next generation of cars and trucks.

Hard, but doable.

Cheers!