Richard Binhammer of Dell and I have been crossing swords on Twitter… something I did not intend to do, rather my questions to colleagues in social media land were never really to Richard or Dell, but a deeper question about social media, its value, and it’s limitations as a way of communicating, as opposed to the overall value of business and tech strategy.
If you are new to the story about Dell, social media, customer service and strategy here’s a recap:
- In 2005 Dell had problems with customer service, but those problems with customer service were because of underlying structural problems with Dell products, and customer service.
- Wrong product set, and issues with operations.
- Dell fixed the structural problems, and ramped up social media as a way to communicate those changes.
- As a result Dell became the industry’s poster child for corporate social media.
- The company was held up high as an example of a company that used social media well and had ROI and value out of the effort.
The Dell story wasn't really just about a social media though; it was really because a crisis in social media ignited wider customer negative sentiment against Dell, Dell listened, which resulted in the company making significant changes.
Yet Dell had once been the number one PC manufacturer, but in recent years has lost ground to other competitors, I was wondering if fall from grace were part of the underlying reasons for the crisis in social media?
Dell Hell 5th Anniversary
Looking back last year in 2010 on the 5 year anniversary of Dell Hell, I looked at how Dell was being covered in the media. 2010 did not look like a good year; the company had lost more ground to rivals, and was getting criticized in the media for its overall strategy.
“As the consumer market shifted away from traditional purchasing models, HP built far better computers than it had for years, and Dell lost its way, the company was marginalized. Its dominance gave way to HP, and after a short fight, Acer. Today, Dell is the world’s third-largest PC manufacturer and it’s trying desperately to catch up with HP and Acer,”
“"[Dell] seems to have lost sight of what it's good at and how to find new opportunities to leverage that." This is in sharp contrast to the Dell of yesteryear, he says, which confidently won "customers who valued its tightly run business model," designed to churn out economically priced computers with a snap of the finger,”
"When the warning signs start to appear that your current strategy is reaching its expiration date, resist the knee-jerk impulse to put all your energies into saving the bottom line. If you have to cut, then do so -- just make sure you're putting as much, if not more, emphasis on creatively attacking your bigger strategic challenges,"
from the Harvard Business Review's Dell's Cost Cutting Is Not a Growth Strategy.
“Dell is taking some big risks that could turn today's triumph into tomorrow's tragedy,”
This week I saw an article by Geoff Livingston and Jason Falls about Dell's social media efforts. And while good, I had to ask, wait, isn't the bigger question about Dell’s overall strategy and how social media is influencing their structure, biz strategy and tech strategy?
I asked Geoff and Jason this question, and Geoff challenged me to read his book, and cc'd Richard at Dell.
Challenged by Richard Binhammer on twitter I hit the search engines looking for media stories about Dell and showing an uptick in sentiment. There are some high spots. Dell now has a multi-billion business through resellers. That touches me having started my career working for resellers and tech companies in the late 80's and early 90s.
“Four years after its formal channel entrance through PartnerDirect, Dell now generates close to a third of its sales through partners,” from Beyond the tipping point
Sam Trendall of CRN asks Kathy Schneider, Dell’s EMEA director of channel marketing and programmes about Dell’s reseller program, “Sam: How hard has it been to win over partners with long-standing relationships with HP, IBM, EMC or others?...” “Kathy: The mid-sized partners are more flexible, the bigger ones have more concerns. But now they are saying: ‘For two years we have blown them off, we can’t any more. Other resellers are winning business with Dell.’ We are on track to be a $2bn business,”
But Dell continues to decline when it comes to the rest of the PC market, getting edged out by other rivals.
Oct 13, 2011, “Lenovo has taken a thinly veiled sideswipe at market leader HP after Gartner figures confirmed it is now the world's second-largest PC maker,”
November 30, 2011, “According to IHS, Lenovo shipped 12.5 million units, up 14.5 percent from 10.9 million in the second quarter. HP retained the lead with 16.3 million units, but increased its shipments only 5.9 percent sequentially. Dell had a weak quarter with just 1.3 percent growth to 11.3 million PCs and dropped to third place,”
“Chinese PC maker Lenovo surpassed Dell to become the world's second-largest PC brand in the third quarter, with HP still retaining the top spot, according to IHS,”
Dell’s growth was down by 7.2% in the 3rd quarter of 2011 from the previous year, from Apple's Share of U.S. PC Market Leaps to 12.9% in 3Q 2011
Dell had been the number one PC manufacturer for a lot of the last decade, HP took the spot in the last few years, and now Dell is heading for number 3, from Market share of leading PC vendors
Now it seems to me this maybe more a matter of the economy, and Dell's channel strategy overall, or is this fall from category leader, and the number two spot because of a failure of tech and biz strategy?
The PC business after all is a commodity business, and maybe it doesn't really matter if you are good at social media, but what’s more important is your company's ability to reduce expenses in operations, or develop a tech strategy that puts you one step ahead of the competition.
“News of its consumer netbook cull comes less than two weeks after it emerged that Dell had canned its 7in Streak tablet PC in the US. Earlier in the year, the 5" version of the device was also axed,”
Dell like many other companies dabbled in the tablet market, but like many other rivals to Apple, the response was to jump in fast without thinking about their overall product portfolio.
Dell is still a Fortune 500 company, a multi-billion dollar company and has strength in social media, but I ask has too much effort been put into innovation around business process instead of technology strategy?
I think I can say that if a company is a category leader then the goal would be to maintain that leadership; but are structural issues the real cause of the overall loss of confidence in the company's products, exacerbated by social media. As a result Dell had to work harder using social media to mend fences, while rivals may not have had to exert themselves with social media quite so strongly, and as a result could expend more time on technology and business strategy instead of resolving larger communications issues? But in turn was it also because those competitors did not have the same structural and strategy problems as Dell?
I don't know and I'm not sure I'm qualified to even discuss some of these issues, but I read the press, and I get back to a fundamental question when it comes to social media. What's the ROI? Did Dell make money on its social efforts; is it just a cost of doing business? Or are Dell's problems with biz and technology strategy over the last ten years the more important issue to watch, while social media however successful is just a distraction? In some ways if you look at how the company is trending you’d almost say social media dealt a blow the company has not recovered from.
Apple’s Success With Tech Strategy
I don't pick on Dell because I dislike the company; rather it is a case study. And to contrast Dell with another case study; against Apple, here's a company that's done amazingly well; they have a superb technology strategy. Apple’s product portfolio for innovation cannot be beaten. Each product where they have achieved leadership has won through technology leadership on platform technologies, which are then leveraged from that product to the next. iPod, to iPhone, to iPad. iTunes, to touch screen, and the iOS to name but a few technology platforms. Yet Apple is famously not a great social media participant, but that lack of participation doesn't appear to have harmed the company.
Maybe the lesson for companies is do a good job for your customers, and think about leading the category that’s most relevant and you don't have to worry so much about getting into a social media crisis, but put a foot wrong on your core products and strategy, and beware.
The Dell Social Media Story
When I was writing my case studies about Dell in 2007 and 2008 what impressed me about their story was that Dell was not just running up the flag of social media, but also attempting to tackle structural issues. Dell addressed some of the criticisms made in social media, and then used social media to do business and communicate those changes as a way of doing business, that was the story. But as I could not describe the Dell social media story a few years ago without looking at strategy and structure, I cannot return to the story and not ask about the fundamentals because that’s what the social media story was always about, not merely whether Dell used social to communicate with customers, but what they were talking about.
Therefore my questions to Geoff and Jason were that, what about the fundamentals? What’s changed? Did consumer insights from social media influence Dell’s tech and biz strategy? Some things certainly have changed, a new reseller strategy that’s humming, but instead of being the number 2 PC manufacture they are now number 3. What is Dell doing wrong? Has social media helped, hindered, or been a distraction? Or doesn’t it matter what comms and marketing do with social media if R&D, operations, and executives don’t get their biz and technology strategy right?