What Entrepreneurs Can Learn From Dell – Customer Discovery

CNBC recently published a business biography of Dell. It’s about 12.5 minutes long, so it doesn’t go into minute detail about the ups and downs of Dell but it does give an excellent thumbnail sketch of the company. Further down the post I go into how startups and existing businesses can utilize customer discovery processes that companies like Dell regularly use.

Here’s that video.

What I want to focus on, however, is Dell’s recent strategy for expansion and what entrepreneurs can learn from it, both the good and the bad.

Understanding Customers

Companies die for many reasons. Maybe they bring on too much debt and then a recession hits. Maybe there’s poor management. Often, companies that fail do so because their products and/or services don’t grow along with their customers’ evolving needs.

Providing value to customers is what companies must do and it looks like Dell is making a concentrated effort to provide value to their customers’ evolving needs. You would be forgiven if you think of Dell as primarily a hardware technology company but, as you will see in the screen grab below (taken from the CNBC video), that is no longer the case.

47.7% in the Client Solutions Group is comprised of their hardware offerings along with their software offerings. That is still a plurality of what Dell has to offer but it’s no longer a majority and that portion of their revenue is probably going to continue to shrink.

40.5% of their revenue comes from their Infrastructure Solutions Group. This section includes servers, storage, data protection, and networking. As the title suggests, these are products and services that go primarily to corporate clients. Some of it is still onsite, some of it is not.

The 10% in VMware, which is a company that Dell purchased for more than $60B in the largest tech acquisition to date, provides virtualization services for customers. (More on this later.)

In the video, Jeff Clarke, the Vice Chairman of Dell Technologies, had this to say about Dell’s transformation:

“We had started a transformation in 2008, beginning to transition from a traditional hardware provider to being a full fledged solutions provider. By the time we got to 2013, the market and the perceptions of the tech industry were changing. Certainly there was a mantra that the PC was dead and the cloud was going to be where data center workloads were going to be conducted and we were at a point where we needed to transform the company, fix a few things along the way and continue that transformation from being a traditional hardware provider to being an end-to-end solutions provider for our customers.”

Which brings us back to VMware. It is a virtualization solution that, basically, allows people to access their apps from anywhere. Instead of having hardware and software on your desktop that enables you to do the tasks that you normally do, like create a report in Excel, those programs are housed in the cloud and can be accessed anywhere.

I suspect that the primary reason Dell saw this change coming more than a decade ago was because of their sales process. Their salespeople worked with their customers to develop solutions and it was most likely through this consultative approach to creating solutions for customers that they saw how the way people work was quickly changing and that enabled them to adapt.

How Can Entrepreneurs Learn From This Example?

Consultative selling is a great way to understand your customers’ needs going forward. You can do all sorts of secondary research, find all of the charts and read all the reports, but if you’re not working directly with your customers you are going to be behind the curve.

I doubt that, especially early on, that Dell’s customers knew that what they really wanted was a virtual workspace but what they did communicate to Dell was that the way they work was quickly changing. Gone were the days when their employees could exclusively work in an office tethered to a computer and desk. If they were going to stay competitive they had to have employees that were able to work from anywhere without much of a loss in productivity.

Dell discovered this paradigm shift and acted on that by transitioning away from being solely a hardware provider to a solutions provider.

Being a solutions provider is a good way to encapsulate what it is that entrepreneurs do. Entrepreneurs provide solutions for their customers and the best way to figure out what solutions customers need now and in the future is by working in close concert with their customers to figure out what mix of solutions will work best.

An example of this with a less techie business would be Jose Calero’s LapWorks. A salesman all his life, Jose decided to launch a business selling computer accessories like a portable desk that you can put your computer and other electronics on when you are out and about at a place like an airport. Jose knew that there was demand for this product because, well, he was a salesman who had to deal with the issue of using a computer in a crowded airport. The computer was never stable on his lap and would get hot. So he created LapWorks.

But he didn’t stop there. Over time, he created more accessories for the busy professional based off of his own experiences and off of what he was hearing was needed from his customers. They would come to him with problems and he would develop solutions to those problems.

And it really is that simple. Entrepreneurs go wrong when they fall in love with concepts that don’t have any demand.

Creating A Customer Discovery Process

Figuring out how to provide value to customers can be difficult and it’s always a good idea to work with professionals that know what they are doing. This process is different depending on what life cycle your business is in and existing businesses can’t go wrong here by working with one of our CSUF Consulting teams to do this kind of customer research and startups can work with the CSUF Startup Incubator to do the same.

There are, however, some best practices that both startups and existing businesses should keep in mind when developing and implementing this process.

For starters, really get to know your customers. If possible, embed yourself or your team with your customers to see how they actually work. A quick conversation with twenty different customers is good and you will find out a lot of good information from doing that but by actually working with customers you will find out so much more actionable information.

Develop a full understanding of how your customers are deriving value from their current solution and have directed conversations with them about the positives and negatives of those solutions. From that, you can begin to craft better solutions.

Also, get to know the competitors. You can’t be everywhere and work with every customer, especially if your company is a startup or an existing business with limited resources. By researching your competitors’ solutions and, if possible, find out what new solutions they are working on, you can see where their thinking is headed. For example, your competitor might be coming out with a new product that has some markedly different features from your current roster of solutions. If you have done the work and know where your customers’ pain points are then you will be able to make the determination if your competitors’ new solutions are off the mark or make sense.

With all of this, create a repeatable system that you can train your employees on. Have a set of questions that you ask to multiple customers. This way, you can see if any trends start to appear. This can’t happen if you are asking different questions to different customers. Keep in mind that you will have to go through a process at the beginning of figuring out what the important questions are and from that discovery period you will come up with your standard questions. It also makes sense to include some different questions over time because your standard set of questions will need to evolve over time.

And get your whole company on board or at least everyone who has interactions with customers. There is no reason why, especially for smaller companies, to silo this process. Everyone from the founder on down needs to understand that the business is there to provide value for customers. Innovations can come from any person in a business and businesses that don’t embrace this are at a disadvantage.

Finally, set aside some time every so often, maybe every week or month, to have an open discussion about customer findings. Make this a part of your company’s routine. This communicates to employees the importance of understanding customers and encourages the free sharing of ideas about how your company can provide more value to your customers.

CSUF Entrepreneurship

We are dedicated to helping the next generation of entrepreneurs develop the skills that they need to compete locally and globally. The CSUF Entrepreneurship program does many things, including: consulting projects where students serve up fresh strategies to actual businesses, competitions for students from middle school to grad school, helping entrepreneurs go from concept to launch, frequent seminars and office hours for entrepreneurs and professionals, and much more. Interested in becoming a part of the CSUF Entrepreneurship community? Reach out to us at csufentrepreneurship@fullerton.edu for more information! CSUF Entrepreneurship depends on the support of the community, please go here to donate.

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