Dell Opportunities
Phil Laube, Dorothy Skowrunski, Tom Vaughn
Executive Summary
Core Competency
Dell has a strong core competency in supply chain management but has made a fundamental shift in business strategy. They began selling pre-built units to third party retail stores in the US and created brick and mortar stores in emerging global markets. Dell needs to examine their supply chain flexibility and take whatever steps are necessary to maximize their flexibility in the face of greater global economic turbulence.
Emerging PC Market Opportunities
Growth in the PC market will be primarily in the emerging markets of China, Brazil, Russia, and India, where industry forecasts 566 million new PCs will be in use by 2010, up from 75 million. Dell must develop a new generation of PC products that are low-cost and simple to use, localized to reflect the cultural values of the country, including local languages, religious and social practices, and local content.
Mobile Gaming
We recommend that Dell develop a high end, multipurpose mobile gaming PC. Computing will continue to move to smaller, more mobile devices that can be accessed from virtually any location. The Millennial generation expects computers to be fun and social. The popularity of this device would also assist Dell in other markets.
Medical Mobile Device
The technology of the Mobile Gaming unit could easily be ported to medical situations allowing access to specialist information in virtually any location including rural areas, field settings, and emergency rooms.
Tablet PCs
The initial failure of these units creates an opportunity for an improved version that would address the traditional weaknesses of the current units. Largest of these are a ready source of applications that allow for greater use of the unique tablet features. We recommend partnering with a software company to offer its users either bundled with the unit or available for download at a significant discount. Targeting these units to specific markets such as the medical market would also create a niche opportunity not exploited by the competition.
Servers
While not uncontested space, there is great opportunity for growth in the server market with the increasing development of “cloud” computing centers and Software as a Service (SaaS) providers. Areas of development important for this opportunity are performance, which may benefit from development in the core processing of the gaming units.
Recommendations
Core Competency
Dell Computer’s core competency is supply chain management. They have honed their supplier processes (and the terms and conditions under which they buy PC components) to an art form. Dell turns over inventory at a rate at least 10 times higher than their nearest competitor. This allows them not only to have lower profit margins, but also to thrive at those lower margins. Recently, Dell made a fundamental shift in business strategy. They began selling pre-built units to third party retail stores in the US and created brick and mortar stores in emerging global markets. Dell’s biggest challenges will be scaling production with enough volume to drive down prices to meet affordability requirements, and to effectively plan and execute in a new emerging market that it does not really understand yet. Because of ongoing global economic turbulence, Dell needs to examine their supply chain flexibility and take whatever steps are necessary to maximize their flexibility in the face of greater economic uncertainty.
Emerging PC Market Opportunities
Mature markets in the US, Europe, and Asia-Pacific will add 150 million new PCs to the world market by 2010. Notebook PCs dominate this market. Significant more growth will come from emerging markets, such as China, Brazil, Russia, and India for which industry forecasts that 566 million new PCs will be in use by 2010, up from 75 million in 2003, a 31% Compound Annual Growth Rate.
Dell must develop a new generation of PC products that are low-cost and simple to use, localized to reflect the cultural values of the country, including local languages, religious and social practices, and local content. The products must be useful - providing practical applications that simplify daily lives and durable enough to endure a wide range of operating environments that are unlike anything they are used to in more mature markets such as:
· Unreliable power suppliers
· Antiquated communication systems
· Potentially harsh environments
The huge growth potential in these new markets makes it a blue ocean opportunity for Dell.[1]
Mobile Gaming
Opportunity for new products is in the mobile gaming unit. Dell has experience in gaming PCs, being the first major manufacturer to focus on the gaming PC market in 2000. The market for gaming PCs remains fragmented today. The lack of large focused competition offers a “blue ocean” of relatively uncontested space for one of the established manufacturers to offer a comprehensive product and consolidate market share.
Current market
Dell recognizes the potential of this market with its 2006 acquisition of Alienware. HP countered the same year with its acquisition of VoodooPC. Rumors indicate that HP has apparently not been able to resolve the culture differences of VoodooPC’s boutique build to order environment with its more traditional R&D operation[2]. Alienware, as a larger more packaged manufacturer, was a much closer fit to Dell’s culture. Small units in the gaming space remain single purpose gaming machines such as Sony’s PSP and Nintendo’s DS unit. Sony built some other functions into the PSP, such as the recent addition of Skype[3]. But the unit remains primarily a gaming unit without the necessary interface to offer additional functionality as we propose below.
New Gaming Product & Community
We recommend Dell look to a new mobile gaming unit and community to capitalize on this opportunity. Combining a unit with a community, we believe Dell could create a new demand and market space that could then move to other markets.
The unit would be a smaller unit, possibly similar in size to a UMPC. Features would include technology not currently available in a mainstream unit:
· A 3D / virtual reality (VR) type of display. Research and development would need to determine which specific type of display would work best, the 3D rendering on a traditional display or something that would incorporate an augmented reality device[4].
· Input would also incorporate some VR components. The technology could build on that used in the Nintendo Wii joystick, but could also possibly include something similar to the camera-based input offered by Extreme Reality. This technology captures the movements of a person through a video camera and translates this into actions in an application without any other direct connection[5].
The unit needs a broadband wireless connection to allow connection with an online community. Dell could create this community or explore an acquisition or partnership with an existing company. This community allows Dell to capitalize on the success of games like Blizzard Entertainment’s World of Warcraft, but across a broader array of games.
The unit, a multipurpose machine, would leverage Dell’s knowledge and competencies in PC manufacturing and supply chain management. Unlike the PSP or DS units, this would also allow the unit to appeal to other high performance markets such as the medical field or research.
Reasons for success
· Research on the future of the industry strongly indicates computing will continue to move to smaller, more mobile devices that are accessible from virtually any location.
· By partnering the device with a community, Dell offers a more comprehensive service to differentiate it from the competition, similar to the success of Apple’s iPod coupled with the iTunes store.
· Studies of the Millennial generation reveal a few characteristics that would also point to the success of this formula.
· They tend to be brand focused. Dell would be a more attractive and “safe” source for this device as opposed to the smaller more boutique offerings.
· They look to computers and similar devices as a way to be social – evidenced by the growth of the online communities.
· Because they have grown up using computers for gaming and communication, they primarily view them as devices for fun, making this a natural attraction[6].
· Because it is a high end, multipurpose unit with unique interfaces, it easily adapts to other applications such as medical and education/research. The popularity of such a device could be used in other applications and help to drive its demand in those other applications. An example of this would be the demand by iPhone users that they be able to use it as their enterprise phone rather than just a personal phone. While we are not suggesting a gaming unit will instantly be attractive to doctors, the popularity and familiarity of the power of the unit and the unique interface will make it more recognizable over any competition.
Medical Mobile Device
The unit developed for gaming can be applied to a medical environment. The features developed would have wonderful applications for medical personnel to be able to share or reference information.
3D / VR display provides excellent reference relative to the real 3D patient with which the medical personnel are working. In addition, the augmented reality would offer the opportunity to show the user a specific point laid over the real situation in front of them.
VR input, especially something along the line of the XTR3D interface allows the medical personnel to provide better input relative to the situation. Unique procedures could be performed first in a “test” environment.
Broadband wireless access allows the unit to be used in locations that do not necessarily have access to even a wifi type connection. Examples of areas where this unit would be particularly useful would include
· Rural areas
· Field settings
· Emergency rooms
· Any location where access to specialist information is needed
Education Mobile Device
These same technologies can be used to adapt the unit to the educational market. The Web is a popular platform for training educators and learners in educational systems. The rapid growth of the Internet and computer technology in recent years has sparked a demand for easily accessible and affordable learning solutions in corporate offices, classrooms, and homes. Traditional learning models are challenged by the fast-paced, real-time environments available today. The education mobile device can utilize the VR features developed for the gaming unit to provide interactive experiences. In the same way as the medical device, the education mobile device can allow access to resources for specialty areas that may otherwise not be available. This would be especially important in rural or smaller schools that cannot justify staffing for areas such as gifted education.
This could also extend to areas of educational research. Field research could be transformed with access to information and specialists available anywhere, anytime.
Tablet PCs
Much has been written about the failure of Tablet PCs to capture the expected market share. Some competitors pulled back on development and marketing efforts for Tablet PCs, which can create opportunities for Dell to develop a unit that addresses the weaknesses of the Tablet PC. The weaknesses that need to be addressed are:
Battery life – Battery life in a tablet PC is affected by the extra features available in a table PC. Dell should identify the appropriate new battery technology to integrate into Tablet PCs.
Use of LED screen technology instead of the backlit LCD technology would reduce power consumption
Durability – Similar to PDA devices, screens are handled more impacting the potential for damage. Screens should be more resistant to damage and maintain the resolution and brightness
Applications – For any computer unit to be successful, it must have applications that create demand. We have suggested as least one target market below. Dell should partner with a software company to develop applications specific to Tablet PCs that could be bundled with sales or offered at a substantial discount.
The medical field presents a unique market to best use the strengths of Tablet PCs. Using the Tablet PC, healthcare professionals can be more productive with real-time access to patient information and other data, whether you are with a patient, a colleague, at your desk, or on the go. For years, healthcare professionals captured patient information with pen and paper and recorded audio tapes and medical images to document a patient's condition and care—all of which must be entered into a computer for others to access. The Tablet PC, with its keyboard, pen, and speech capabilities, offers a one-stop solution for recording information. You can customize it to suit your skills and preferences, which improves productivity by supporting your existing workflow while offering greater accuracy and less redundancy. Healthcare organizations can capture information just once at the point of origin (whether it's the doctor, nurse, or other hospital staff), thereby reducing the time, costs, and possible errors associated with entering patient data repeatedly. By having access to the information you need from any location, you can focus on providing quality healthcare.
Medical applications for the Tablet PC:
· Emergency room doctors and nurses - Tablet linked to various trauma hospitals so info on patients needing transfer can be readily available when patient arrives.
· Paramedics – Tablet linked to hospital, info entered instantly available to waiting doctors so they know better how to treat arriving patient.
· Doctors on rounds – Tablet linked to hospital system, notes are automatically entered into patient’s account.
· Hospital admittance personnel - Take the Tablet to a patient’s room to sign forms and or permission statements.
Servers
With a ranking of #2 in terms of market share[7] , Dell has a strong presence in servers. Dell can capitalize on the growing demand for centralized storage created by the cloud computing concept and the growth of software as a service (SaaS).
Examples of these services are:
· Increased use of electronic transactions in financial services, such as on-line banking and electronic trading
· Growing use of internet communication and entertainment
· Shift to electronic medical records for healthcare
· Growth in global commerce and services
· Adoption of satellite navigation and electronic shipment tracking in transportation
· Information security and national security
· Digital provision of government services (e.g., e-filing of taxes and USPS on-line tracking)
The cloud computing servers of the future will require power unheard of in today’s PC. The current PC platform does roughly 3 billion computations per second whereas the future cloud network will demand tens of trillions computations per second[8]. Dell's will need to continue to develop and apply its strengths in both server technology and from the gaming development in the server arena to develop servers that will meet this demand.