In 1997 this Texas based company was converting every $1 invested into $1.54 - well ahead of IBM who could only offer $0.47. (McWilliams, 1997). Today (2006-02-17) it's stock opened at $31.99 with almost 40m trades.
In his book Direct From Dell Michael Dell describes his moment of epiphany. In the first 6 months of 1993 the company made a $65 million loss from inventory write-downs partly due to an industry wide price war started by Compaq. At this time it had moved from its original direct sales model to a retailer model (Kraemer and Dedrick, 2001).
Dell subsequently returned to a business model for minimizing inventory and maximising return on investment. Dell complemented this with its vision of a 'virtually integrated business' in which information is more important than assets. Dell used the Internet to bring customers and suppliers into the business. Dell already provided its clients and partners with a time-conscious, customer-centric approach. It was this low-cost, fast-paced customer-centric business model philosophy which Dell translated to the Internet and which ultimately led to increased dividends and market share.
This is the key point; it is not enough simply to add technology - it must be evaluated to ensure that poor processes and practices are not replicated. Bringing in technology is an opportunity to re-engineer poor processes and practices. Failure to do so will mean that the same mistakes will be replicated at the speed of light. The Internet brings the added risk that potential clients and business partners will be able to see at a glance that an organization is not able to meet its needs due to internal structural weaknesses.
Before the Internet was opened up for commercial use in 1995 Dell employees were accessing financial reports, customer data, technical and product information as well as HR data across the corporate intranet, which was known as Dellnet. By 1995 essentially Dell used the Internet to offer the same tools to its clients and business partners as it gave internally to its sales team. This 'value web or the virtual corporation' (Kraemer and Dedrick, 2001, page 9) allowed Dell to expand its business without increasing its overheads.
Prior to launching Dell.com Dell was already ahead of its competitors in shaping demand by providing advisories to corporate IT buyers, educating them about alternatives and persuading them that it could offer a better return on their IT dollars, and lower their overall cost of ownership. For example, as part of its custom-built approach to hardware Dell's sales advisors were provided with compatible but also easily available parts, which they would then suggest to clients who invariably agreed with the 'expert' sales team. (McWilliams, 1997). As Dell's products were only available by direct order it was able to take advantage of just-in-time manufacturing where it was able to see a 6% profit advantage over its competitors. Dell also insisted that components used in its machines were warehoused within 15-30 minutes of its manufacturing line (Kraemer and Dedrick, 2001). From the beginning Dell used the Internet to build on those strategic advantages. The Internet became one of its most effective communication techniques to build its brand, eliminate the middleman and segment its market. In particular