Dell is known for its direct to consumer PC selling model. In a significant shift in strategic intent from the past, Michael S Dell said " The direct model has been a revolution, but it is not a religion".
The direct sales model had been the key to Dell’s success. Taught in business schools and imitated by companies in other industries, the model enabled Dell to be the low-cost producer of computers and dominate an industry known for falling prices and low profit margins. Dell’s direct model came under pressure as the market for PCs shifted to notebooks from desktops last year. It is harder to custom configure notebook computers, so they had to be manufactured in advance, which lost Dell some of its cost advantage. In addition, consumers were showing a preference for touching and feeling a notebook PC before buying it.The Dell memo signals that the company is preparing to shift toward more full-fledged retail operations. Mr. Dell disclosed that the company is putting in place new manufacturing and distribution models in the United States and overseas.
For me, clearly, this shows that no strategy or business model is cast in stone. What was relevant a decade ago can become irrelevant quickly and suprisingly consumers adapt to these changes faster than companies! Companies need to come to terms with this change and executives in companies must have a keen eye to spot these trends.Else, they will keep doing more of the same, ending-up trying to extract value out of businesses that really have very little future value creation and relevance. Also, it signals the importance of "customer experience" in scalable operations. Off late over the past few years, since the advent of alternative channels of customer interaction like internet, call centre, mobile etc., I have heard company executives talk of self-service channel migration and lower cost-to-serve models. I think one needs to keep a fine balance of the same else every customer interaction will be a transactional relationship leading to little differentiation and value.