Dell as a China Powerhouse

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This week I’m in China as Dell’s guest. The reason is they want us to focus on this market where they are incredibly successful and not on the ailing US market where everyone is struggling.

Here in China, according to Dell, the company does $23B in business which, when combined with related services and goods, adds an excess of $50B to the gross national product of China and contributes to the employment of two million people.What the company is most proud of is the fact it’s growing 2.5 times the industry average here in technology, making it a true powerhouse.

Part of why it’s so successful is Dell invests heavily in the area. For instance they provided 7,000 volunteers, 20 learning centers, $9.3M and 6 tons of earthquake relief after the last disaster.You typically don’t see this kind of commitment from an offshore company but Dell, realizing it would have to compete with companies like Lenovo which are local, would have to create the impression that they are just as local and that meant a significant commitment.

The reason why this commitment was made and they want us focused on this geography is that this market is expected to blow by the US market to nearly double the US size by the end of 2015. This was a fundamental strategic move to ensure they didn’t become second-class when the US market does. And it is this same set of numbers which are driving HP and IBM’s efforts into China, and should create concerns for those following Apple, which has had a great deal of difficulty penetrating this region with PCs or phones.

Selling In China

One of the lessons from China and the Middle East is that buyers are culturally oriented to buy and barter from real people.

They find direct selling largely unsatisfying and, as a result, the Dell of China is vastly different in operation than the Dell in the US.They rolled out a program consisting of 600 partners covering 86% of the available market, 155 solution centers focused on SMB, and Dell on wheels in 100 cities, with the mission to make Dell as trustworthy as any other brand.

Their plan is to expand the solution centers to 1,200 over the next few months.This is all effectively modifying the direct model to meet the needs of what otherwise would be an indirect market that actually wants to deal directly with its vendors.

It’s interesting to note that in the Middle East and China, US brands are viewed as premium brands, which naturally make them desirable. To address this massive opportunity Dell is expanding from covering 90+ cities today to covering 1200+ cities in the 2015 timeframe.

This is a massive increase in commitment but necessary if Dell wants a shot at the top technology position in China. And with China, by default, they get the top position in Asia if the market growth numbers are accurate.

Part of what can make the difference between success and failure in any hot market is to shift product design into that market so that the offering meets the unique design and function requirements that every market enjoys.

For instance, part of what makes Toyota’s US success so pronounced was the opening of design centers in the US focused on building unique targeted cars for us. It’s an interesting side point that in China over 100 new model cars are launched every year, suggesting this market likes substantially more diversity than the US market does.

The Bridge Too Far

To address this need Dell has created an impressive design center focused on the Chinese market. But I wonder if one of the core differences for this market isn’t design alone but a massive number of choices, and whether any technology vendor from any geography is truly ready to step up to this unique product requirement.

It also partially explains why Apple does poorly in China in that they have the fewest choices in their class and lock their customers into those choices, both of which appear to be incredibly undesirable to Chinese buyers.

However, the Dell Design center is responsible for most of the desktop and mobile products not only for China but emerging markets and global markets.This increasingly means that, for Dell, product design is led from this massively growing Chinese market, given the labor costs and that the vast majority of the parts are built in this region. This collocation should result in better designs China and lower prices for the rest of us.

Studio Hybrid Example

This Studio Hybrid was designed to be skinned, responding to the need for a high degree of uniqueness while maintaining the cost advantages associated with a standard design.

The product is highly configurable up to and including tuners and Blu-Ray support. It has a low carbon footprint and is made largely of recycled or recyclable products.But the big aspect, other than its small size, is that it can be skinned with various colors and various materials including bamboo – perhaps one of the most ecologically friendly materials you can build while making a statement that resonates with both the needs of the emerging and the more mature markets.

This product showcases that maybe design isn’t a bridge too far and that maybe you can create something that provides for the massive level of unique needs in places like China, and the small size for places where space is a premium like Japan. And, too, with low power for places like the US and the European Union where power conservation and the ecology are increasingly important.

Closing on Green and the Promise of Financial Success

Michael Dell, who is one of the few CEOs who regularly meet and chat with press and analysts one on one, closed with his focus on Green and reiterated his incredible growth in the Asia Pacific region and the emerging markets.

This, he argued, will offset the economic weakness in the western markets.But one thing he did point out was that Dell has saved its customers billions of dollars by the application of green technologies.This is the sustaining power of green in that it doesn’t have to be something you do to feel good, conservation saves not only the lives of future generations it conserves the resources of this one and leaves us all with more funds to spend on other things.This financial benefit will, I believe, be the biggest driver of green initiatives for the next few years.

Steve Felice, who I’ve known personally for years, is the head of the Asia Pacific region and he closed with his outlook, which remains positive though clearly moderated by recent events.He argued that if there is a region that can offset the overall downturn in the world market it is in Asia Pacific where long term balance of trade benefits have created substantial cash surpluses, and the need to modernize the region remains strong.This is because inflation and related labor costs are going up dramatically in the region which is increasingly looking to technology to contain this cost growth.

In the end this was one of the most powerful presentations about how to take on a market I have ever seen.In a month of bad news it was nice to see a vendor focused not on containing the bad news and layoffs but on creating opportunities and building revenues.It left me wondering what would happen if the US Government took a similar focus.