July 12, 2006
Excerpts: The Secret Language of Competitive Intelligence by Leonard Fuld
What is intelligence? If you were Leonard Fuld, you'd answer, "Intelligence is the art of applying imperfect knowledge. It is the art of the SWAG, the Scientific Wild-Ass Guess. No matter how much information you gather, uncertainty will always exist; still, you need to make decisions."
This excerpt from The Secret Language of Competitive Intelligence is on how Michael Dell and Richard Branson used their intelligence to excel in computers and airlines.
COMPETITOR INSIGHTS, BYTE BY BYTE
Shortly after IBM announced the sale of its personal computer division to the Chinese computer company Lenovo in late 2004, a reporter asked Michael Dell if he was concerned about mergers in the PC business. He said no, he was not worried. He could not recall a large merger in the computer business that had actually worked as promised. We like to acquire our competitors one customer at a time, he said. It was this final statement from Dell that spoke volumes on his view of the competition and how he will attempt to outmaneuver them in the future.
Michael Dell is in many ways Waltons spiritual heir, inheriting Waltons penchant for controlling market conditions, as well as absorbing vital intelligence from both suppliers and customers.
Dell Computers rise is nothing if not meteoric. Started in Michael Dells college dormitory in 1984, Dell has become predominant in almost every category it has entered. It has become the largest seller of personal computers and in 2000 even surpassed Sun Microsystems as the largest seller of workstations.
Like Wal-Mart, it has harnessed technology to both collect market data and reduce cost of operations. It has done so in a gargantuan fashion.
According to a fact book located on Dells site,Today,Dell operates one of the highest volume, most frequently visited e-Commerce Web sites in the world, with approximately half of the companys $32.1 billion in annual revenue being generated online. Dell.com . . . receives an average of 9 million page views per day at 80 country sites written in 27 languages/dialects. It manages 400,000 customer transactions a month in 40 different currencies.
Unlike Wal-Mart, Dells target market is not the individual consumer; it is the corporate customer. Dell aims to sell nearly three-quarters of its computer and computer products to corporations. This makes its extranet an even more powerful tool, a force to control supplier costs as well as to harness its knowledge of market demand.
The Dell extranet has succeeded in reducing the number of suppliers by 75 percent and its inventory to no more than five days worthan industry low. At the same time, Dell has used its extranet with its largest corporate customers to learn in detail who their customers are, their buying patterns, and the kinds of problems they have had in corporate computing (which in turn gives Dell an intelligence jump on the solution needed).
Dells customer reach is deep, very deep. At least ten thousand customers communicate with Dell each and every day.With such active customer participation and communication, buying patterns and trends become evident quickly. For instance, if Dell begins to see it is running short on a fifteen-inch monitor, it may begin to lower the price of the seventeen-inch monitor. This realtime customer data (perhaps only matched by the airline industrys ability to balance its load factors to fill airplanes) allows Dell to forecast accurate market demand and customer trends as far as three months into the future.
Michael Dells drive for ultimate customer intelligencethat is, knowing what the customer needs perhaps even before the customer doescame through during a talk he gave at the giant Consumer Electronics Show in Las Vegas. I started off like pretty much all of you as a customer and I was frustrated by the computer dealers at the time who werent offering much in the way of service and support and at the same time has high markups . . . if you have a problem and you tell the dealer, does the dealer tell the manufacturer, does that get all the way to the guys that are designing the products?
No was the answer to his question. Dells need to eliminate the no is what drives him to close the intelligence gap between his suppliers and his customers.
Sam Walton would have been proud.