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Product Development at

DELL Computer Corporation


Introduction - Dell's Portable Division
Headed by Mark Holliday had to reach on a decision for the development of new laptop computer in order to add
value to its product line.

- Already was their 2nd try in market, 1st attempt had failed due to technical problems,
costing company $20 Mn in development expenses alone.
- As part of laptop development, market research revealed a list of features that were important to customers.
One of those features was battery life, ranked #3 only behind price & microprocessor choice.
- Wanted too differentiate new product line through battery life using LiOn technology.
- Had to decide on, what kind of battery (NiHi vs LiOn) Dell would put in its new line of laptops.
- After failed earlier attempt, Dell planned development process & require final decision.
- In spite of new development approach, teams usually did not embrace new process.
What competitive forces are shaping the computer industry in 1993?

Became commodity & Customer were less willing to pay for service & hand holding.


- More attention to details & issues. Quick product development .

- Compact light weight products at low cost. Quick processors

- To maintain quality standards.

- Competitive Features as per Market Research (Customer purchasing factors) :

- Low Cost /Price -54%, Microprocessor -35% , Battery Life -27%, Screen Resolution -15%, Reliability -11%, Weight -9% & Others -13%
What has been the state of Dell prior to and in 1993? Its financial situation?
Its customer base? Its product quality and product development process?

1983 Started & 1st month sales - $180,000.

1985 Grew to $6 Mn. Introduced its own brand of PC & ended with $70Mn in Sales.
1990 Spawned Gateway 2000 & CompaqAdd. Lead the market.
More into Desktop selling business till the development of Portable Laptops , and supplied to Oil companies & government agencies .
Matched needs of his customer i.e. quality & reasonable price ,
Providing 24hr complaint hotline and high quality service also supported Dell to win many customer and grow quickly .
Was successful to assure product quality by extensively pre-testing all the configurations options , it was also supported by 24hr telephone support system ,
Build strong relationship with their suppliers and they effectively became their partners and they lasted this partnership with suppliers.
1991 - Dell expanded to retail for small customers. Annual sales jumped from $90 Mn to $2Bn a year later.
Overshoot 199`s sales target by half a billion dollars. 14 Consecutive quarters of growth .

1993 - Rapid race caused Cash crunch. Profits slashed to $10Mn , half they projected. Stocks plunge $7 a share to $25.
Gateway stuck to Direct model grew from $275Mn in 1990 to $914Mn in 1992.

- Lost attention to detailing (Dell`s forte). - Lost direct contact with Consumers.
- Came into Retail selling against Direct model of Selling used by Dell.
- Not able to turn inventory . Dell did 12 times- competition was doing twice of that, therefore hard to find premium in market.

- Cancelled new line of Laptops were slow & expensive. Subsequent loss of $20Mn in portable device division wrt development.

- Desktop division racked up by 155% , notebook sales dropped by 6% against growth of 20-25% in sales.

- Suffered significant underinvestment and shrunken desktop mentality. Poor Inventory management & product forecasting.

- Quality issues Customer reported smoke & melted spot on plastic housing, stresses such as jiggling the power cord & AC adaptor , the component could crack.
Recalled 17000 notebooks. ATTITUDE series of laptop. Restructuring of team, 18 month development program with 6 phases.
Why has dells senior management introduced the new 18-month
development process? What are they trying to change or improve?
Dell's marketing team felt that introducing a good Dell product might enable them to recapture its previous market share of 2. 5% or even increase market
share to 3%.
To prepare for tough challenges ahead- they needed solid planning & for developing new portable product as per market focusing more on imparting
tangible features & customer needs.

Senior management realized that structured approach is necessary to adapt to the increasingly rapid product development cycles in the computer industry.
14 months in Development & Process of tooling 4-5months, covered detailed activities of each process of development of new product such as , Profile
phases , planning phase , Implementation phase , qualification phase , launch phase , acceptance phase .

Re-organization of team for quick decision making.

To develop devices with specification data after Market research.
To develop growth plans, pricing & marketing strategy and to find resources for implementing successful strategy.
To coordinate with multiple teams (Electrical , Software, Mechanical, Design) before finalizing product.
To finalize product features, sizes, specification , to develop as per market requirement.
To select suitable sources & suppliers.
Huge team having different visions.
Complete risk analysis of every suggested changes or developments.
Improve Battery Life was their focus.
Which battery option should Hollidays team select? Stay with proven NiHi battery technology?
Or go with the new LiOn battery technology under development at Sony?
Or should they differ the decision until the qualification phase review?

Option 1 Risk free, More space to accommodate more features, No delays, Quick Launch.
Limited differentiation in competitive market.

Option 2 Differentiated 1st to introduce in Laptop.

Unproven & Uncertain technology, Thicker- will increase size & weight.
No positivity wrt supply of LiOn batteries. High Risk.

Option 3a Over design Variable cost will be 2% of margin of each unit. Less attractive. Bulk model.

Option 3b Dual Path - Increased fixed cost of duplicating. Additional expense of $2.5Mn.
Demoralization of engineers for discarding half of either project but Risk free.

Best option seems To differ commitment till Preview phase & by the time LiOn is being tested in Laptops.
Dual path seems more secure. Cost of 2% of margin on each unit sold is more than one time investment of $2.5Mn.
Will get enough info until qualification phase can switch to option 1.
How do you evaluate their product development process?

Detailed process proactive approach.

Screening at every stage Only potential projects can pass further.
Risk assessment in every step.
Involved market research , market testing & customer feedback.
Process to satisfy customer needs, leverage new technology & gives best product to market.
But Very Lengthy 18months and time consuming. Each month`s delay causing 4% loss in sales.