Business Management – Look for the long term, don’t be like Dell!

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This is another installment of my Business Management posts, geared towards those of us who are business owners and/or consultants.

Just for clarification, I have nothing against Dell. I actually think Dell is making some nice PCs right now, and their AIOs (All-In-Ones) are pretty nice. None the less, Dell made some grave mistakes that they’re now trying to peddle back on. In this post, we’re going to take a look at what happened.

In the early 2000s and for the following decade, Dell was a leading PC manufacturer. In fact, they became, and for many years held, the top PC manufacturer in the world title. They beat out Compaq, Hewlett-Packard, Gateway and many other manufacturers. So what happened ? In the years 2006 / 2007, PC sales began dropping and Dell started looking at making revenue elsewhere. They purchased gaming-computer maker Alienware. They began increased sales marketing for their TVs and other products. As a public corporation, shareholder demand for meeting quarterly sales targets pressured management and senior executives. In 2007, the US SEC (Securities and Exchange Commission) began an investigation on Dell. It was later revealed that certain accounting employees had changed corporate account balances, in order to meet those quarterly revenue targets. Cost cutting measures were undertaken, and things like customer care were outsourced overseas. Customer opinion of Dell began to decline, and today, they hold the number 3 spot in the world of PC manufacturer, trailing both HP and Lenovo. In early 2013, original founder Michael Dell made a proposal to take the company private and regain control from public shareholders, which was accepted.

So, what happened here ? What can we, as business owners, take away from Dell’s misfortunes ? The biggest thing we can see here is how the greed and impatience of shareholders can be. Quarterly financials. Hitting sales figures. Increasing stock price so investors can cash out and make money, as quickly as possible. This is what happens when you make a company public, and people who have no real interest in your success beyond a quarterly stock jump start making decisions. As business owners, we need to look for the long term gain, not the short one. For example, say a potential client is looking to purchase a new server and have someone regularly maintain and administer it. You would be better off making only 10% profit on the cost of the server, and then getting those monthly support hours for an indefinite amount of time, as opposed to trying to make 50% profit on the cost of the server, in which case you might likely get out-bid by a competitor.

Looking for the long term and setting long term goals are important, and can help you succeed in business. It’s pretty rare to become ‘rich right out of the gates’, and demanding quarterly returns isn’t always going to work. Owning and growing a business takes time, effort, a lot of frustration and a lot of dedication. If you’re not willing to put that in, then maybe you should just invest your money in a public company instead. Just be careful that company isn’t on the downswing because of like-minded people.

Author

Martin Lehner

Martin Lehner is an technology professional working for an IT services firm in Whitehorse, Yukon (Canada). He has been working in the technology field for over a decade. With a degree in Business Admin and numerous industry certifications, Martin leads a team of IT professionals that provide third party support for clients. Originally starting a company to offer web development services, Martin quickly realized that clients wanted the entire spectrum of technology services. When Martin is not at work (which is not often, since his company offers 24/7 support), he is busy at home spending time with his family.

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1 Comment

  1. Ali Green September 2, 2014 at 10:39 am

    A little like the corporate/VC greed that saw what happened to the Cisco founders happened. I had no idea!! I was stunned when I watched that story on YouTube just the other day….

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