Laptop Dip

Tuesday, June 5, 2007

Last week I attended an event featuring Seth Godin, the marketing guru and author of such books as Purple Cow, Permission Marketing, and Small is the New Big. (Apparently he is B-I-G on the West Coast.) He was in Ann Arbor as part of the book tour for his latest, The Dip: A Little Book that Teaches You When to Quit (and When to Stick). His argument is that successful people (and organizations) quit all the time. They succeed because they know when to either quit or push through what Godin refers to as “the Dip” – the point in the process where things get really tough and you start to question why you’re even in this. They also excel in recognizing and abandoning efforts that are headed for a dead-end -- “the Cul-de-Sac” in Godin-speak.

Which brings me to the news from late May that Dell will start selling two desktop PCs in Wal-Mart and Sam’s Club starting this Sunday. So Dell is going retail, into the heart of Hewlett-Packard territory. The two have battled it out for some time as to who will be the world’s largest PC company. As I understand the story, a few years back, Dell’s direct sales model (you order and customize your PC online and it is shipped to you directly) was kicking H-P’s retail model, primarily on price. H-P decides to play the Dell game and tries to compete on price, laying off employees to get the low cost structure that Dell can achieve through low inventories, since they make PCs only on demand. H-P starts to lose big. Out goes CEO Carly Fiorina and in comes new CEO, Mark Hurd. About this time the laptop revolution starts to kick in and more buyers gravitate to retail locations where they can check out the look and feel of the laptop. At the same time H-P gets its internal operations in order and yesterday the Wall Street Journal publishes an article entitled “How H-P Reclaimed Its PC Lead Over Dell.”

So here’s where “the Dip” comes into play with Dell. Mr. Godin points out that “the stupid thing to do is to start, give it your best shot, waste a lot of time and money, and quit right in the middle of the Dip.” Even though Dell says this is the first step in a broad, global retail push, it seems like a weak first step. Let’s face it, Wal-Mart and Dell? If you’re going retail, you got to go with Target. And it’s only two models of desktops. (I thought the laptop market is where the action is nowadays?) From an organizational culture standpoint, Dell needs to live-and-breath retail, something that doesn’t happen overnight. In the process, Dell will need to relax the “direct sales dogma” that has brought them much success. In an email to employees a few months ago, Michael Dell stated that “the Direct Model has been a revolution, but it is not a religion.” I suspect many within Dell found the statement to be heretical – the Direct Model has been their Holy Grail of competitive advantage for some time. Some say “you can’t serve two masters” and Godin the Oracle says “you really can’t try to do everything, especially if you intend to be the best in the world.” Seth, do you want to be the one to tell Michael Dell you can have a Dip on the way to a Cul-de-Sac?