Why history isn't on Dell's side

Nice colors and a new ad agency won't change the biggest problem in Round Rock: The computer market has fundamentally changed and Dell hasn't.

Correction, 1:20 p.m. PDT: This blog initially had an incorrect first name for the former CEO of Dell. He is Kevin Rollins.

Tech pundit Nicholas Carr predicted Dell's current predicament more than three years ago.

Carr, in a guest column for BusinessWeek Online, wrote that he worried Dell didn't understand how the computer market and consumer tastes where changing. (Full disclosure: I was the editor on that column, but Carr's spotless writing made my job pretty easy.) In fact, he found then-CEO Kevin Rollins' dismissal of the iPod as a "fad" and a "one-product wonder" troubling. Carr found a nice way of saying, "Are you kidding me?"

Is Dell the Ford of computers? Dell

Spin forward three years to the onslaught of bad Dell news: Rollins is long gone, and Michael Dell is back in the corner office, trying to get his company back on track. Dell announced Thursday that layoffs are likely to go deeper than the 8,800 already announced. It has lost the biggest computer maker mantel to Hewlett-Packard (CNET blogger Don Reisinger has a nice take on Dell's market share issues), and the stink of the subprime loan mess could even rub off on the Round Rock, Texas, company.

But Dell's issues go a lot deeper than managing expenses, and adding a line of nicely colored laptops and a new ad agency, as Dell has done, won't make them go away. In short, Dell just isn't cool anymore, and it probably never was.

Carr nailed Dell on this. For people who want to understand how the computer industry works (and how in many ways it's not all that different from other industries), the column he wrote for BusinessWeek should be required reading. Carr compared Dell's run in the 1990s to Ford's early success in the auto industry. Like Ford with its Model T, Dell stuck with its bland box strategy for too long. Carr wrote:

Like Dell with PCs, Ford Motor came to dominate the car market a century ago by turning the automobile into a cheap, mass-market product. Other manufacturers couldn't compete with Ford's extraordinarily efficient operations. By the early '20s, sales of Ford's drab but well-built Model T surpassed those of all other U.S. automakers combined.

Then the market changed. As consumers began to take cars' basic functions for granted, they started seeking a little pizzazz in their vehicles. An unadorned black roadster was no longer enough--everyone suddenly wanted a stylish set of wheels. Niches proliferated. Fashion mattered.

Ford was out-innovated by General Motors, which understood consumers wanted style, taste, something that represented who they are. That's something Apple has always understood about its customers. Even HP got a handle on this several years ago. By 1926, GM's Chevrolet was taking market share away from Ford. By 1927, Chevys were outselling the Model T. Carr continued:

Ford was slow to respond to the rise of the mass-class market for cars. Finally, however, it took action. On May 25, 1927, Ford announced it was discontinuing the Model T and would close down its main factory in order to revamp it for a new line of more attractive models. But the carmaker's glory days were over. It would never again come close to dominating the market the way it had just a few years before.

Ford's fall stands as a cautionary tale for all companies that have thrived by riding the commoditization wave of a new consumer product. If Dell wants to continue to rule in the home as well as the workplace, it may need to class up its act. Rather than dismissing fads, Rollins should try starting a few.

The 1990s were for the computer industry what the 1920s were for the automotive industry. One size fits all is long gone. Consumers are going mobile and making statements about who they are with the computers they buy. The question now is whether Dell & Co. can find a way to prevent history from repeating.

 

Join the discussion

Conversation powered by Livefyre

Don't Miss
Hot Products
Trending on CNET

HOT ON CNET

Want affordable gadgets for your student?

Everyday finds that will make students' lives easier: chargers, cables, headphones, and even a bona fide gadget or two!