BEST PRACTICE

INSIDE

DELL COMPUTER CORPORATION: Managing Working Capital
By Lawrence M. Fisher
The secret to excellence lies in doing many things well. It also requires staying focused on the goal even when tempted to do otherwise.

O

F ALL THE

creators of share-

holder value in the 1990’s, the most dramatic have

been strategic innovations, those bold new business models that forever changed the rules of the industries in which they were applied. But in today’s competitive world, a brilliant business model alone does not create

a sustainable advantage, unless it is supplemented by operational excellence, the continuous identification and adoption of best practices. By any measure, the Dell Computer Corporation’s direct sales model is one of the most successful strategic innovations of the past 15 years. With the deceptively simple concept

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L a w rence M. Fisher has covered technology for The New York Times for more than a decade and has written for dozens of other publications. Mr. Fisher, who is based in San Francisco, holds an M.A. in journalism from the University of California at Berkeley. He is a recipient of the Hearst Aw a rd for investigative journalism.

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F i rs t Q u a r t e r ’ 9 8 Illustrations by Jean Tuttle

BEST PRACTICE

of bypassing the retail channel to sell directly to consumers, Dell created a model that undercuts its competitors on price, forges closer links with customers and provides shareholders a return several times that of market averages. But Dell stumbled badly four years ago and might have failed, were it not for the timely addition of seasoned management and with it the adoption of a new structure, new processes and new metrics. Dell is not the largest personal computer company, but it is the fastest growing. Dell’s year-over-year unit sales rose 67 percent in the