Did you ever wonder how such a successful company as Dell Computers, with an entrenched strategic advantage, lost so badly to Apple? I’m about to give you an inside scoop. I worked for Dell from 2003-2007. This is my story from the inside.
I walked up to the front entrance of Dell Computers in Nashville, Tennessee. As I entered, I was ushered over to a side room in the lobby to sign some forms, and meet up with a small group of bright, young faces. After signing our forms, we walked to a security check point at the edge of the lobby to have our pictures taken and security badges created. Past the security check point, the lobby opened to a large dividing area that separates the two massive wings of the sales complex.
We took a left, and the scene opened up into a room of wall-to-wall rows of desks, computers, phones, and sales agents as far as the eye could see. My eyes lit up. My heart began to beat a bit quicker. I knew I could be great at this, and I wanted the chance to prove it. It was orientation day, and I was about to be unleashed on the public.
Dell’s Nashville complex was the centerpiece of their U.S. consumer and business sales divisions. There were a few other satellite sales offices around the country, but Nashville was by far the largest. It was a four-story building near the airport in Nashville, and employed probably 2,000 people at its height. The main floor was consumer sales. Above us were business sales, tech support, and some administrative offices. The basement level housed numerous large conference rooms, training rooms, and a very nice cafeteria.
In 2003 Apple was a joke to Dell, literally. I remember sitting in on a presentation early on in my tenure at Dell. The presenter gave an overview of the PC market, and which companies had what percentage of the market share within the industry. Dell and HP were the leaders at the time. Apple’s share was represented on a bar chart, so small that the presenter literally took time to crack a couple jokes at how small of a threat Apple was to Dell.
“DC ranked Apple fifth for U.S. PC shipments, behind Dell, HP, IBM and Gateway. The company said that Apple shipped about 1.675 million in 2003, for a market share of about 3.2 percent… By comparison, Dell shipped 16.319 million computers for the same period, for about a 30.9 percent share. HP shipped 10.851 million systems, or 20.6 percent. IBM and Gateway rounded out the top 5 with 2.748 and 1.987 million systems, for market shares of 5.2 and 3.8 percent respectively.”
– MacWorld article
When I first started work at Dell I was in between moving from my old job in Atlanta back up to Nashville. I was feeling Dell out to see if this was a company I wanted to work for. I started out working a part-time night shift to get the lay of the land. I enjoyed it.
I forget the number, but I had probably ten different managers that I worked for inside of the four years I worked at Dell. My first boss was one of the best. His name was Joey. If you were to visit Nashville, Joey would be one of the folks I’d recommend showing you around town on a Saturday, or a Saturday night. He was a great leader, extremely likeable, and a lot of fun to be around.
I worked on his evening team for a few months before I decided to go full-time with Dell. That team was made up of a mix of college students and early 20-somethings. In between ripping off sales on the phone, you could find me ripping off tight spirals as we threw footballs back and forth over rows of salespeople on the phone. Those were good nights. I enjoyed the work and got noticed quickly for how strong my sales numbers were. I was given the opportunity to go to work full-time on an early morning sales team. I took it.
The Origins of TnRevolution
I quickly learned that the work environment at Dell was a fast-paced, non-stop sweatshop. If I ever worked a 40-hour week in my time there, I can’t remember it. It was the norm to have 2-3 hours of mandatory “overtime” built into your schedule. It was also the norm never to have back-to-back days off. This meant I never had a true 2-day weekend the entire time I worked for the company. Between me showing up early for work daily to get prepared, enduring extra meetings, and a 45-minute commute each way, I was working constant 60+ hour weeks. My evening ritual was usually eating a double quarter pounder with cheese in bed, while watching David Letterman, then falling asleep to do it all over again the next day. Dell was my life for four years.
On my first day of working on this new morning team I was certain of two things. One, I would hate my new boss. Second, I would love the guy who sat down next to me.
About five minutes before my shift started, a young, fast-talking New Yorker sat down at the desk next to me. He was a recent transplant to Nashville from New York. As he sat down, he reached into his desk drawer to grab a bottle of Tylenol. I couldn’t tell if he was still drunk or just hungover from the night before. He popped a few Tylenol, put on his headset, and took the first sales call without missing a beat. He was short, skinny, and had a mouth like Mohammed Ali. He and I would become fast friends.
He had many self-proclaimed nicknames. The Rabbi, the Orange Prophet, and many more not politically-correct enough to put in print on the internet. He was born Jewish, proudly claimed it as his heritage, but not his religion. During those years he was the heaviest drinker I ever knew, and later I understood it was for good reason.
The Rabbi was a great dad, a gifted chef, extremely social, wildly entertaining in whatever room he found himself, and also the leader of a small, little-known Dell fraternity. The Balco Boys fantasy sports league. It would become my sanity’s salvation during those years.
I excelled on this new team right out of the gate, and thankfully was quickly promoted to one of Dell’s elite sales teams that focused on high net worth zip codes. Before I left, the Orange Prophet approached me, and offered me to join the league. It was a unique, and diverse blend of salesmen at Dell that were united by two great loves. Football and talking smack. How could I refuse? I didn’t. I just needed a name for my new fantasy team. TnRevolution was born.
Circles of Excellence
When I joined my third team at Dell, the company gave me what I wanted, and they got the best out of me. This team was located at the end of the hall. It was a quieter niche of the building, directly next to the elevator, snack machines, and bathrooms. It was also directly above the cafeteria, training rooms, and easy parking. Dell gave me what I wanted, and I gave them what they wanted. For the next two years I would remain on that team. Four different managers would pass through, but I would remain.
During those years Dell had a quarterly awards ceremony called Circle of Excellence. Each quarter Dell would rent out a location around Nashville for a catered awards ceremony to celebrate the top performers of the division. The top prize was honoring the top three sales representatives of the quarter. Inside of two years, I won the award four times.
The first time I attended the event it was held at a social club at Vanderbilt University, overlooking their football stadium. It was a well-to-do event that everyone had to get dressed up for. Probably close to two hundred people were there that night. There was entertainment, a catered meal, and then the award winners were called up on stage. Each accepted a plaque and shook hands with the leadership of the division.
Times were good at the beginning. I was enjoying myself, meeting new people, and finding easy success. Using Circle of Excellence as a marker though, times were about to change. By the time my last Circle of Excellence invite came along, the event was held in a side room of a local golf course clubhouse. There were maybe twenty people there that night, and everyone left early.
What changed? Steve Jobs and Apple were coming…that’s what.
A Psycho, A Good Boss, & Almost Getting Fired
During my prime years of working at Dell, the company did a number of things well. Dell was good at segmenting duties to take advantage of each employee’s strengths. For instance, I was great at sales, but didn’t enjoy dealing with customer service after the fact. Dell created a position on each sales team dedicated to only providing customer service after the fact. I would sell the computers, and then one of my teammates would take care of everything else after I hung up the phone.
On one occasion, I had a highly emotional female customer who I sold a computer to. Somehow, she managed to get ahold of my direct extension, and was lighting up my voicemail like a Christmas tree. I forwarded the messages to my co-worker and went on with my day. This went on for a few hours, and then she managed to get ahold of my email address. She promptly started to light up my email as well.
Near the end of my 10–11-hour shift, I forwarded one of her lunacy-laced emails to my co-worker who handled the customer service. I wrote in the email something to the effect of, “I know you’ve been dealing with this, but can you please take care of this psycho? She is going insane.” Only I didn’t hit forward… I hit reply.
As I was walking out of the building that night, it occurred to me what I had just done. I couldn’t take it back. I had never been fired from a job in my life, but as I drove home that night, I was fairly certain I might get fired the next day.
The next morning, I sat down at my desk full of dread. Thankfully, I had a good boss at that time. She was about my age, and was a solid, balanced leader. She was already in her cubicle when I sat down at my desk. She saw me, and said “Uh, Jeff can you come over here for a minute.” I felt like the kid on “A Christmas Story” when he got busted. Yep, this was it. They got me. I was surely about to get fired. How would she do it?
I sat down in her cubicle to take the hit. She said something like, “Uh, I’ve got a few voicemails here about a customer you had yesterday. Evidently, she got high up the food chain, and voiced her displeasure to many managers above me. Did you call her a psycho?”
“Yes, yes I did.”
Before I could say another word, or even apologize, she said “Please don’t ever do that again.” She gave me a pass and sent me back to work. If I had been just about anyone else, I would have spent the rest of that day looking for a new job.
The iPod, Apple, and the Destruction of Dell
During those years, I was given multiple opportunities throughout the consumer sales division. I coached, mentored, and helped train new hires and experienced agents. From time to time, I also got called into “idea meetings” where different leaders across the division would get together to talk about the business and throw out ideas to consider.
Around this time Apple introduced the iPod. Dell responded with its own version of an mp3 player, the Dell DJ. The iPod was lighter, more beautifully designed, and required you to pay for every song/album that you wanted to have on the device. The Dell DJ was a bit more clunky but included the ability to attach a subscription service to Napster. This allowed a music-lover such as me to have an unlimited source of free music in his pocket for the first time.
This was a revolutionary deal at the time. I had spent much of the past decade amassing a huge, and expensive collection of CDs. Now, during my long workdays at Dell, I would have an ear bud with music in one ear and a sales call in the other. It was a game-changer I thought.
I remember having a conversation at the time with a good friend of mine in Atlanta. He and I had shared an office at my previous job in Atlanta and were both music connoisseurs. Before I could even get out of my mouth all the many benefits of a Dell DJ/Napster purchase, he was ablaze with his deep love affair with the iPod. He went on and on about it, not giving two seconds of interest to my skilled sales pitch of Dell’s new gadget. “Uh oh.” I thought… “We might have a problem here.”
At the first idea meeting I attended, I sat around a conference table with many of the leaders of Dell’s consumer division. The people around that table had the ability to affect the direction of Dell Computers. I don’t remember any of the ideas that they discussed at that first meeting, but I do remember what I discussed. The iPod.
At the time, Apple had introduced what I consider one of the greatest advertising campaigns in its history, second only to their 1984 ad. U2 was selling the iPod, and re-branding Apple. You may remember this ad.
If you recall my article, the Psychology of Trading, part 1. Remember that it is impossible to make a decision without engaging your emotions. Steve Jobs was a genius, and he understood this. He skillfully partnered with U2 to develop an emotional connection between the consumer, the iPod, and Apple itself. That connection is still bearing fruit to this day.
I brought up this fact in the idea meeting, as well as how little Dell was doing to market what I considered in some ways a superior product. No, the DJ wasn’t as beautiful as the iPod. However, I was now getting unlimited free music, whereas my friends were paying out their nose for the privilege of purchasing music from the iTunes store.
Dell had largely stopped advertising on television at this time, in favor of slick marketing catalogs being sent directly to mailboxes. The Dell DJ was being positioned as an afterthought on the inside back cover. No one ever noticed it. I discussed the idea that this emotional connection to Apple could become a serious threat to Dell, and we need to take more seriously our marketing of the Dell DJ.
The idea was immediately dismissed, and never brought back up again.
Steve Jobs Rolling Stones 2003 Interview
Q: “Apple has had a head start in the digital-music business, but obviously lots of other companies are getting into it now, too. Last week, for example, Dell came out with its rival to the iPod, the Dell DJ.”
A: “We will ship way more digital-music players than Dell this quarter. Way more. In the long run, we’re going to be very competitive. Our online store is better than Dell’s. And we have retail channels. Most people don’t want to buy one of these things through the mail. Dell’s distribution model works against them when they get into consumer electronics. Like, they’re going to be selling plasma TVs online. Would you ever buy a plasma TV without seeing it? No way.”
– Rolling Stone interview
QVC | The End Begins
Dell’s great advantage during its prime was its ability to sell directly to the consumer, without retail channels, custom build a computer to a customer’s exact specifications, and ship directly. There was no middleman, and everything was built on a just in time philosophy to maximize efficiency.
When did I first notice something was changing for the worse? When I started to see Dell selling pre-made computers on QVC. In those years, there was a young, hyper guy selling computers on QVC as the face of Dell. I remember him stopping by Nashville one day. Dell had a demo room with all the newest tech on display for us to try out. He was set up in there, as each sales team was filtered through to meet him and hear his sales pitch.
At Georgia Tech, there weren’t many girls. I think the female to male ratio was about 20% female to 80% male. There weren’t many sororities. The one I remember was called Phi Mu. It was basically the “pretty girls” sorority. I never visited. Dell’s QVC salesman was probably 5’6”, skinny, and seemed like someone the girls from Phi Mu would have hired to be their party planner.
Apple had Bono selling iPods, and their brand to the world. Dell had this guy representing our company to the world on QVC, hocking our wares like a blue light special at K-Mart. It was the beginning of the end.
Soon thereafter, Dell’s entire business model would be broken by Apple. Dell computers would soon be for sale in every Walmart and Best Buy near you. Their edge was gone, and soon their market share would be as well.
Leave the Gun, Take the Cannoli
It was like the scene straight out of the Godfather. You know the one. The Italian restaurant, where Michael Corleone becomes Michael Corleone. It was a hit. A financial hit, and it was straight gangster.
Dell had a tiered pay scale for their salespeople. It was known and had remained the same during my entire tenure. Each tier gave a bump in salary and commission. The final tier was the largest. There was an enormous bump in both salary and commission. In order to achieve it you had to have the combination of both elite performance and long tenure.
In 2007 I was scheduled to receive this final bump in pay. Myself and about ten others were invited into a meeting with the division leadership. We all knew each other by this time and had talked. We all assumed that this would be a congratulatory meeting to pat us on the back for our years of hard work and give us the final promotion.
We took our seats, and the director of the division began to speak. My heart immediately fell, as I realized what was happening. I wasn’t getting a raise that day. We were informed that due to struggling business conditions, Dell was eliminating the tiered pay scale. All salespeople in the division, whether new-hires or tenured, would be placed on the same pay scale.
At a meeting I expected to be my greatest financial achievement with the company, I was instead given the choice of taking a large pay cut, or starting a new career at the bottom of Dell’s business sales division. It was hard to listen to. I decided not to take either option. I decided to leave.
I remember my last day, and walking out of the building for the last time. A friend was standing outside taking a smoke break. He stopped and talked to me for a few minutes, and was interested to hear about my plans to focus on investing in the future. It was a huge relief leaving the environment of Dell that final day. I don’t ever remember feeling a sense of relief like that when leaving a job. In hindsight I remain thankful for all the friendships and relationships that developed during those years, thankful for the lessons learned and skills developed, but mostly just glad that it is over.
Well played Steve Jobs. Well played indeed.