How Dell Conquered the Computer World
Dell: one of the top names in the computer revolution. 30 years ago, Michael Dell revolutionized the entire business model behind computers, and to this day, his company remains one of the biggest computer makers in the world. In this post, we’ll see how Michael Dell started a world-changing business from his dorm room, and how that made him one of the richest men alive.
The love for computers
As befitting of the man who would revolutionize the computer business, Michael Dale spent his childhood experimenting with the early computer. He would tinker around with his Apple II, but more importantly, he’d also get a sense for business very early on.
As the story goes, Michael had a summer job in high school selling subscriptions to the Houston Post. Instead of making random cold calls, he tracked down newlyweds and families that just moved into the neighborhood, the people most likely to look for a newspaper subscription.
He ended up making $18,000 that summer, all by targeting his buyers directly.
Now, although his parents wanted him to be a doctor, Michael wasn’t ready to give up his interest in computers. While enrolled in premed in 1983, Michael spent his free time repairing and upgrading PCs, which he sold as an informal business from his dorm room. The 19-year-old’s hobby quickly proved profitable, and Michael dropped out of university to pursue his startup.
In January 1984, Michael registered his company a PC’s Limited and began selling computers from his condo. A young entrepreneur, Michael was faced with a question: “How do I compete with established competitors who not only have name recognition, but also a network of retailers to push product?”
At the time, customers went to retailers to purchase their personal computers. The staff at a Best Buy or a Radio Shack would help shoppers find the right computer, and in return for their services, these middlemen would raise prices by 10, 20, or even 30%. Michael figured: “Why not cut the middleman out completely and sell directly to consumers?”
Learning the business
Although it will be harder to attract buyers initially, PC’s Limited would be selling at a discount compared to its established competitors. Michael went all-in on his approach, which became known as the direct model of selling. He advertised directly to knowledgeable consumers in computer magazines. This experienced consumer base could pick options to have their PCs custom assembled, a service that could not be provided by mass production giants like IBM.
And so with the use of Chinese component suppliers and assembly plants, Michael Dell’s PC’s Limited began manufacturing and selling personal computers. In the first year of operation, PC’s Limited sold more than $6 million worth of computers, which proved the potential of his new business model.
Michael’s company rode the computer boom through the late 80s, growing rapidly as word spread of its direct selling and lower prices.
In 1987, the 22-year-old CEO changed the company’s name from PC’s Limited to Dell Computer, and just a year later it’s sales hit $160 million. Michael’s vision extended beyond just direct consumer sales, of course, and now he finally had the resources to expand his clientele.
One of the most frequent criticisms Michael had to face was that his model could not be applied to businesses and big clients, who were exactly the sort of customers any growing company would want.
The Golden age of Dell
Michael, however, was ready to prove the critics wrong. He attracted corporate clients by not only assembling built-to-order PCs but also pre-loading them with all the software they would need.
If you were, for example, an oil company filling a new office space, Dell Computers would not only build your PCs for you with appropriate hardware, it would also load the systems with software to track sales of your gas stations across the country.
Dell was finally making PCs for everyone, but what truly kickstarted its global ascent was the advent of the internet. When Dell launched its direct sale website in July 1996, it gained access to enumerable customers. For the first time, people could purchase PCs online instead of having to call up the company or sending faxes.
Within two months of the website’s launch, Dell was averaging internet sales above $2 million a day. By 1998, that figure had gone up to $5 million, and Dell has remained in the top three computer manufacturers ever since. Michael Dell is still the CEO, even despite all the shenanigans around taking the company private and then going public again, which are honestly complicated enough to warrant an article of their own.
If you enjoyed reading this post, help us make more by clicking that clap button👏! And don’t forget to subscribe to our YouTube channel, where you can watch more than 80 videos on businesses and their history.
