3PAR Overbidding Is a Sign of Cookie Cutter Dell Strategy

One of the things that was so thrilling about Dell’s early business strategy was how clear and simple it was.  Dell built high-quality but essentially commodity computers faster and cheaper than anyone else and developed superior supply chain and order taking processes that took years and years for competitors to even approximate.  Looking at Dell and HP’s bidding for 3PAR recently, I think M&A run amok like this usually means the companies involved don’t have a lot of other strategy ideas to execute.  It’s a shame to see Dell trying to buy growth now in contrast to their early strategic clarity.

I thought I’d dig a little deeper, so I took a look at Dell’s 2010 analyst meeting presentation.  It’s a solidly put together presentation, but it bears the clear signs of a big company that has little insight into how to change markets.  Dell’s big strategy is to execute a “growth strategy built on delivering enterprise solutions and growing operating income and cash flow.”  In a nutshell, to grow and make more money, or in other words to be successful.  The problem is that a strong strategy should explain how you’re going to achieve your goals, not just what they are.  The “…by doing X, Y, and Z” portion of the strategy is largely missing or perfunctory.

Dell does make a few motions at discussing product strategy, but stating that you’re going to provide “integrated, best-of-breed solutions,” for example, is unenlightening if not a contradiction in terms.  Likewise, aiming to be make products both “capable and affordable” seems like a strategy to get stuck in the middle, neither truly differentiated nor a cost leader.  Perhaps Dell is keeping the good parts of its product strategy to itself, but at least taken at face value, it’s not very convincing.

The same theme continues as you go further into the presentation, with Dell listing goals like the following:

  • Improve profitability
  • Get our fair share of IT spend
  • Deliver strong cash flow + ROIC
  • Disciplined capital structure

Similar bullets appear in the investor presentations of most Fortune 500 conglomerates.  While those goals aren’t bad from an execution perspective, they signal a focus on running the existing business more or less as is rather than changing the market.  I haven’t had a chance to look at the investor presentations of HP or IBM recently, but I have a feeling that Dell could boil its slides down to, “Do what our competitors are doing, but slightly better.”

What do you think?  Is Dell as strategically aimless as they seem from their investor communications, or is there something I’m missing?


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