11: Dell - Product Development
11: Dell - Product Development
Review “The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell” (HBR #98208) and The Business Model Canvas, which were originally prepared for the previous class. We will do a quick in-class review of Dell's BMC to reveal the unique advantage of Dell's business model.
Read “Product Development at Dell Computer Corporation” (HBS Case #9-699-010). Consider the following study questions in preparation for class discussion:
- Dell has a 6-phase product development process. How do these 6 phases correlate to the “innovation funnel” as described in the reading “Innovation: A Customer-Driven Approach” which was assigned earlier in the course?
- What about the Dell business model is particularly advantageous for their product development process?
- Why did Dell’s earlier entry into the portable computer business fail? What are they doing differently this time around?
- List the stakeholders in the development of Dell’s new portable computer.
- What market segment(s) is Dell targeting for their new portable computer? What product attributes are wanted by this (these) segment(s)? How does Dell know this?
- What is Dell considering to differentiate their new product in the portable computer market? Why?
- At the end of the case, Mark Holliday and his portable computer product development team are facing four design options as described on page 11 of the case. If you are a member of that team, which option would you choose? Defend your choice in terms of information provided in the case.
DUE:
There will be a short 12-15-minute closed-book, closed-notes quiz on one or more of today’s readings at the beginning of class. The quiz will be available via Canvas, so be sure to bring a laptop or tablet to class to take the quiz. Make sure your laptop/iPad is configured for Respondus Lockdown Browser.
Quiz questions are typically derived from the study questions provided above as part of the day’s assignment. While the quiz question may not exactly duplicate a study question, it usually will relate to the substance of one or more of the study questions. To prepare for a closed-book quiz, be sure you are prepared to address each of the posted study questions.
NOTE: Days on which we have quizzes, no essays will be due.
1) How do Dell’s 6 phases of product development correlate to the “innovation funnel” from “Innovation: A Customer-Driven Approach”?
In “Innovation: A Customer-Driven Approach,” the innovation funnel guides products from broad ideas to launch through staged gates. Dell’s six phases—Profile, Planning, Implementation, Qualification, Launch, and Acceptance—map neatly onto this funnel:
- Profile Phase
Aligns with the funnel’s early “Concept generation” step. Dell defines the product vision and scope, mirroring the funnel’s goal of gathering customer needs before committing resources. - Planning Phase
Resembles the “preliminary investigation/build the business case.” Dell refines market assumptions and budgets, just as the funnel calls for evaluating feasibility before heavy investment. - Implementation Phase
Reflects the “concept development and prototyping” stage. Dell’s team designs functional prototypes, ensuring technical viability aligns with market goals. - Qualification Phase
Mirrors “testing and validation,” where prototypes are tested with customers to confirm performance. This narrows the funnel further, ensuring only robust products move forward. - Launch Phase
Matches “manufacturing ramp-up and market introduction.” Dell finalizes production, trains the sales force, and releases the product to customers. - Acceptance Phase
Parallels the funnel’s “post-implementation review.” Dell gathers real-world feedback and compares actual results to targets for ongoing improvements.
Together, these phases reflect the funnel’s structured approach—gradually filtering concepts, validating them with real data, and ending with a smooth product launch.
2) What about the Dell business model is particularly advantageous for their product development process?
Several unique elements of Dell’s model help streamline and de-risk product development:
- Direct Sales and Build-to-Order: Dell eliminates intermediaries and carries minimal finished goods inventory. This structure reduces the time between design changes and real customer feedback. It also lowers the risk of holding obsolete inventory if new technology emerges rapidly.
- Supplier Partnerships: Through “virtual integration,” Dell collaborates closely with a small set of suppliers. They share real-time information (e.g., demand forecasts, daily production requirements), which leads to faster innovation, less rework, and more stable component supply.
- Customer Intimacy: By selling directly, Dell stays close to customer needs (enterprise and individual). Their segmentation approach and tight feedback loops improve forecasting accuracy, speed up new product launches, and guide relevant R&D priorities.
In essence, virtual integration + real-time data sharing with customers and suppliers makes product development both faster and more responsive.
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3) Why did Dell’s earlier entry into the portable computer business fail? What are they doing differently this time?
Dell’s first portable line (early 1990s) suffered from:
- Technical/Quality Issues: The initial notebooks had reliability problems (battery failures, broken hinges, power issues), and they used older 386 processors while competitors had moved on to 486 chips.
- Rushed Development & Insufficient Structure: Their informal, ad-hoc product development lacked rigorous phase gates, leading to late design changes and high costs.
- Brand Damage & Recalls: Dell had to recall thousands of units, tarnishing its reputation in portables.
For the new portable line (Latitude series), Dell:
- Introduced structured 6-phase development (core teams, formal reviews).
- Focused on reliable, differentiated features (e.g., improved battery life, stable designs).
- Leveraged partnerships with suppliers (such as Sony for lithium-ion battery technology) but kept a clear process to manage technology risk.
- Used customer-driven insights to avoid repeating past mistakes.
4) List the stakeholders in the development of Dell’s new portable computer.
Key stakeholders include:
- Core Product Team: Mechanical, electrical, software engineers (e.g., Taylor, Parker, Cody), industrial designers (Oakley), product marketers (McCarty), and leadership (Holliday).
- Executives/Senior Management: Michael Dell and top leadership who fund, review, and guide strategic decisions.
- Suppliers/Manufacturing Partners: Especially Sony (for lithium-ion batteries) and other vendors for displays, processors, and components.
- Customers: Large enterprise buyers, small/medium businesses, consumer users (focus groups, early adopters providing feedback).
- Sales & Support Teams: They help refine product requirements and handle after-sales service.
- Third-Party Service Providers: Involved with maintenance and repairs, reflecting Dell’s “virtual integration” approach.
5) What market segment(s) is Dell targeting for the new portable computer? What product attributes are wanted? How does Dell know?
From the case, Dell primarily targets business users (corporate and small/medium businesses) who need:
- Improved battery life (road warriors, mobile workforce).
- Up-to-date processors (to remain competitive in performance).
- Reliability/durability (corporate environments value low failure rates and service costs).
- Lightweight, easy-to-carry machines (though weight can sometimes be traded off for battery life).
Dell knows this primarily by:
- Direct customer contact: They interview enterprise customers, do focus groups, and track technical support feedback.
- Past failures and market research: They learned from the older portable fiasco and from focusing on “savvy” customers who want cutting-edge features.
6) What is Dell considering to differentiate its new product in the portable market? Why?
They see battery life as a potential game-changer for differentiation:
- Lithium-ion batteries (LiOn) from Sony promise a longer run-time and no “memory effect,” addressing a big pain point (low battery capacity) for users on the move.
- Emphasis on reliability: Coupled with the direct model’s build-to-order approach, the new laptop line could stand out by offering high performance and long, dependable run-times.
The motivation is to quickly regain credibility in portables, capture market share, and “lock in” key suppliers (like Sony) before competitors adopt the same technology.
7) Which of the four design options do you choose and why?
By the end of the case, the team must decide among:
- Use proven NiHi battery (safe, no delays but less differentiation).
- Adopt LiOn battery (significant differentiation but higher technical risk).
- Defer commitment by overdesigning so the chassis/circuitry can fit either battery (added variable cost, larger product).
- Dual-path development (costly in parallel engineering time/tooling but maximally flexible).
A plausible choice often favored in class discussions is to pursue LiOn but with the safeguards of minimal schedule slip—effectively option (2) if the team trusts Sony’s progress. Dell’s new structured process reduces the risk of past mistakes, and capturing a big technical advantage could re-establish Dell in portables. However, each choice has trade-offs:
- If you value time-to-market and guaranteed reliability, you might stick with NiHi (option 1).
- If you believe the potential upside in differentiation is crucial, you might lean LiOn (option 2).
- If you want flexibility and can manage higher costs, you might push a short-term dual path and finalize around the Qualification Phase.
From the information in the case—especially Dell’s desire to “wow” the market and stand out on battery life—option (2) LiOn is often the recommended path, assuming due diligence on Sony’s readiness. Still, thoughtful arguments can be made for the other strategies based on risk tolerance and timing.
Additional Tips for Quiz Preparation
- Focus on how Dell’s direct model lowers inventory risk, speeds customer feedback, and leverages supplier relationships.
- Review the sequence and purpose of each product development phase, noting how it prevents the pitfalls that led to Dell’s earlier failures in portable computing.
- Remember the importance of battery technology and the different trade-offs among NiHi vs. LiOn vs. dual-path or overdesign approaches.
Most quiz questions will likely tie back to the rationale behind each of Dell’s development phases, the risks/benefits of the LiOn decision, and how Dell’s unique business model underpins its product development success. Good luck!
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