The Demise of the One-Trick Pony(ies)?

Although Dell has suffered significantly over the past few years, with revenue below management projections for seven straight quarters, Dell in its heyday is still studied and known as the master of the supply chain. In 2005, only eight years ago, Dell was the number two computer company in the world. So how did a company, now heavily scrutinized in the media, achieve such a high level of success since it’s founding in 1984?

The answer is relatively simple. Initially based out of his college dorm room, Michael Dell decided to take a unique business approach from his competitors. Dell sold his computers directly to consumers, cutting out both wholesalers and retailers. Utilizing this strategy, known as disintermediation, Michael Dell sold $180,000 worth of PCs during his first month in the business.A direct business model approach allowed Dell to lower prices, sell more desktops, and boost overall margins significantly. Another key element of Dell’s model was its decision to manufacture in-house, enabling Dell to configure desktops from start to finish in about 4.8 hours and to move inventory within 72 hours. These computers particularly appealed to consumers because of their ability to customize specific preferences, which gave Dell a competitive advantage and drove revenue. According to Forrester Research analyst David Johnson, “what Michael Dell was all about was getting products to people faster and more directly and at a lower cost than anyone could.”

Dell Stock
                                                      Stock quotes from 1988 until today

However, the same business processes and customization that made Dell a success also has contributed to its current precarious state. Many argue that Dell is a “one-trick pony”, incapable of expanding its PC dominated business and surviving in today’s world of smartphones and tablet computers. According to Vivek Sood, author of The Five Star Business Network, “Dell’s only trick so far was its cash actualization acumen. It stood up the industry model in the PC industry on its head, reduced the Cash-to-Cash cycle from an average of 46 days to a negative number and created a competitive advantage that lasted it nearly a decade and a half. That one trick allowed the company to coast for the last several years, while its former suppliers metamorphosed themselves into formidable competitors.” To learn more about Dell’s current affairs, check out this Forbes article, “Dell outlines the death of the PC”:

http://www.forbes.com/sites/adriankingsleyhughes/2013/03/30/dell-outlines-the-death-of-the-pc/

While this is all good and true, a vast number of people already know the story of Dell, and frankly, many don’t care that much about its future. So what’s the takeaway? Why talk about Dell in the first place?

In my opinion, technology based companies should use the story of Dell as a reminder that they must be constantly innovating. Today’s success and hottest trend might very well be tomorrow’s old news. Another company dubbed a “one-trick pony” by critiques is Google, receiving a lot of attention in the past year, particularly after it announced its decision to shut down Google Reader. Some argue that Google’s biggest problem is its inability to develop new lines of business that can keep the company growing. A January 2011 article by Bloomberg Businessweek reported that Google still produced 90% of its income from key-related advertising. While I’m personally optimistic about Google’s future (see video below), most importantly I want to emphasize that Google, like many other tech companies, must constantly seek new ways to satisfy customer needs and keep up with changing consumer preferences. One trick just might not be enough to cut it in today’s day and age. We are living in a technological era and really have no idea what the future will look like. If companies cannot innovate, business tycoons in today’s spotlight might be the next Dell—and hopefully that’s something they are wary of.

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11 thoughts on “The Demise of the One-Trick Pony(ies)?

  1. You did a really nice job reflecting on class discussions and taking it even further with your research and variety of embedded links (graph, article, and video). Additionally, you took all the information talked about in class and new things you discovered, synthesizing this all into a thoughtful and informed opinion on the future of “one trick ponies” such as Dell and Google. You seem to be advocating for a type of industry shift similar to Apple when it began making iPods. My one suggestion for future posts would be to take us readers a little further from class discussions with the topic of your post initially, and then bring us back to what we are hearing in discussions towards the end. I really liked this post

    • Thanks for the suggestion for my next post! I will definitely try to do this and I think it could make my future posts more interesting for readers.

  2. Insightful blog! I agree with johnbagamery, you did a very good job connecting something that we learned in class, while also giving your own opinion as well as other examples. I am surprised that Google is called a one-trick pony because they are expanding into many different industries. Google’s android platform is a key competitor in the cellphone platform industry and google even has it’s own cloud computing platform. I also think that Google’s situation is different than Dell; yes in a way Google may be a one-trick pony because it makes 90% of its profit on key-related advertisement, however their industry is not quite as substitutable as Dell’s desktop industry. Dell was really good at making desktops, however like professor Kane taught in class, a company can only hold a competitive advantage if its product is valuable, rare, inimitable,and non substitutable. Due to Moore’s law products get cheaper and technology advances exponentially, so Dell’s desktops are not valuable. Desktops are also easily inimitable and there are no many substitutes such as tablets, laptops and cellphones. Search engines as of now are still non-substitutable which allows Google to still reap in a lot of profit. Even though Google’s search engine is not inimitable, it is well established as one of the main search engines which allows them to stay ahead of the game. While I do think that being a one-trick pony is a risk in this fast-paced world, I don’t think that Google has anything to worry about.

    • good point about Google’s search engine being non-substitutable (as of now). I think it will be very interesting to see what the future holds.. its hard to predict where technology will be in the upcoming years. With that said, I am curious to see if one day Google’s search engine will be substitutable (with the development of technology). In this case, innovation and exploring other markets will be extremely important.

  3. This is a very well-written blog. Your use of graphs, article links, and video really adds to the message of the post. It was very organized and each idea lead smoothly into another topic. You also did a nice job of utilizing class vocabulary. I agree with John, however, and my one suggestion would be to to have more focus on new information that relates to class instead of on repeating the class information. However, the class information you did reiterate added significantly to the main point of your blog post. Your connection to google was very interesting. While the video about the google glasses was amazing to watch, I wonder how big of a market there is for them. Just as Professor Kane commented about the iwatch, right now, sunglasses and glasses in general are more of a fashion statement. It would have to take a great cultural/social shift in this respect for something as high tech as the google glasses to take hold.

    • I agree.. I think, as of now, there would not be a huge market for the Google glasses. Over time, however, if prices were to decrease significantly I think the average person may be more willing to purchase the glasses (rather than only “tech geeks”).

  4. I, like the others, appreciated how you tied our class lesson into your blog and then proceed to add your own perspective on the issue. I also think you bring up a very interesting point about Google, a company that most people seem to think is invincible. Some might argue that a single product companies can survive in the business world by focusing all of their energy on that one product. This intense focus can lead companies to produce products far superior to competing companies that are forced to spread themselves thinner over several perhaps less developed products. However, as the room for improvement gap closes I think your point that businesses must be able to innovate new products will prove to be true. At some point Google will need to focus less of its attention on its search engine service and being to invest more of its time and money into innovations that can sustain the business into the future. If Google fails to grow past its search engine into new markets, then we may one day be reading about the death of Google and the search engine industry.

    • You raise a good point that many companies need to consider- should they focus all of their energy on one product or, as you say, spread themselves thinner over several less developed products. There are clearly advantages to both approach, which companies have to successfully balance.

  5. Very nice post! Despite the disagreement shown in the comments, I applaud your initiative to apply the lessons of Dell to a contemporary tech giant. Along the lines of what meifancui posted, I believe the widespread consumption of Google’s ecosystem of products and services creates a substantial switching cost that would prevent the company from going under so easily. Google search and Youtube alone not only dominate how individuals enjoy digital lives at home and on the go, but they also play a large role in how corporations advertise to and educate consumers. Furthermore, the company’s large cash reserve and nimble culture also enable it to innovate and react quickly to competitive threats.

  6. Wow. never thought that the book I am currently reading which is The Five Star Business Network by Vivek Sood, would actually show up on your article. It is gaining popularity over at Goodreads. Anyway as you pointed out this it is a trick and other businesses should not follow what Dell did. There are a lot of article that I’ve read on the net saying whatever it is that Dell does, make sure not to do it.

    • Hi Katie! Thank you very much for this article. Like mynameislukehall said, readers like us are happy to see that the book written by Vivek Sood entitled The 5-Star Business Networks is being quoted in your blog. Very nice argument there. You know you could actually contact the author Vivek Sood if you want to discuss your ideas with him on http://globalscgroup.com/. Your blog is very thought provoking I like it. Keep writing

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