Dell and the Corporate Fountain of Youth

It appears that going private has been an effective strategy for Dell.

There is an interesting backstory that is at the core of Dell’s Annual Analyst Conference (which is where I am writing this) this year. It has to do with whether Dell has discovered the equivalent of a Fountain for Youth for Corporations.

You see, firms go through a life cycle and most don’t even make it to 10 let alone to 30. It’s Dell’s 30th anniversary this year. The reason is that as a firm moves from private to public they tend to implement programs like Forced Ranking that are focused on making management easy but work against agility and employee retention. And they increasingly focus on keeping financial analysts happy as opposed to taking risks to anticipate market changes and drive their markets like many did when they were younger.

Michael Dell and his executive team are attempting to turn the clock back and about half a year ago they took the company private and, according to the financial reports they are sharing, Dell already looks much younger than it did last year.

Let’s talk about Dell’s Corporate Fountain of Youth this week.

The Aging Company

You see this in spades in companies ranging from Apple to Cisco and Oracle. They have gone from firms that once drove their respective markets to firms struggling to contain market share, profit, and customer declines while facing new waves of younger firms that aren’t hampered by the need to protect the status quo.

What appears to define the aging company is a swap from a focus on innovation and agility to a focus on avoiding mistakes, assigning blame, and pretending the world hasn’t changed that much. Reminiscent of that old guy at the family reunion who complains that the kids “don’t get it,” the aging firm struggles to balance the massive pressures to meet quarterly expectations with the need to retain and motivate employees and keep customers happy.

Some firms simply move to mine customer resources while others bleed ever larger groups of employees because they simply can’t maintain the balance and go into decline. Keeping that from happening – particularly in the face of increasing market pressure – seems almost impossible, but that is exactly what Dell is attempting.

Restoring Youth

Part of being young is being able to take risks and in general public firms struggle with this. That goes to the core of why Dell went private. By taking the pressure off of quarterly results they are now much freer to take chances and attempt to innovate because the fear of being pummeled by financial markets if that gamble doesn’t pay off is eliminated.

Dell has also been able to reverse decisions like moving to Forced Employee Ranking that plague public companies today (to their credit both Microsoft and HP have done this as well). This allows them to behave more like a younger firm and once again innovate and move with more youthful agility.

Results

One of the problems with being private is that much of the information the market gets doesn’t come from quarterly financial reports but from competitors and from guesses by analysts. I call this last the Analyst Psychic Network and neither source is as reliable as the firm itself.

Dell is reporting their 5th quarter of expanding market share and financial growth. This contrasts with most competitors who seem to be trying to effectively manage declines. When a firm moves against the tide, in this case growing while competitors and other technology companies decline, that suggests they are benefitting from the market change like a young company, would rather than being hurt by it like an older firm.

While we are still early in the process, Dell’s reports this week suggest this effort is successful and that a Corporate Fountain of Youth is at least possible.

Wrapping Up: Restoring Corporate Youth

I had a chance to talk with Michael Dell last night and he appears far more relaxed and much more excited about what his people are doing this year. In prior years he was much more measured and clearly concerned that Dell was then struggling to understand, let alone react, to the massive changes in the market. In effect he seems more like a CEO from a younger company and, strangely, he actually acts more like a younger CEO in terms of balancing pressure and expressing excitement and hope.

The idea that it is possible to restore an aging company to youth is a relatively new one and it appears that Dell may have found the path to making this happen. Perhaps more firms should watch Dell because Dell’s path may represent their best option for assuring they don’t become obsolete as well.

In the end, companies that can focus more on customer needs, employee retention, and are able to advance tend to be both more fun to work with and more focused on what's important; something you may want to consider as you make your own choices.

Photo courtesy of Shutterstock.




Tags: IT management, Dell


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