Michael Dell, 26-year-old founder and chief executive of one of America's big seven personal computer companies, Dell Computer, is used to thinking in terms of circuits. At 15 he tore apart and put back together his first computer. As a freshman at the University of Texas he was selling computers out of his car boot, hiding his merchandise in the bathtub, when his parents came to visit. At 19, with only $1,000 in capital, he founded his own company.
Now, when he thinks in terms of circuits, it is with two aims: to shortcircuit the route between computer manufacturer and the customer; and to use swift-moving feedback from individual clients to give the best possible service to all.
When his Dell UK subsidiary was first set up in Bracknell in 1987, the young businessman's idea of selling direct to the customer and bypassing the high street computer dealers was treated with great scepticism. Now, with total Dell revenues of $546 million coming in from the United States, Canada, Britain, Germany, France, Sweden and Italy, his "direct relationship" philosophy is fast winner converts.
Dell's backbone is in IBM-compatible personal computers, sold direct to businesses. Through centralisation of the manufacturing, distribution and support service, Dell wins the hearts of customers who have tired of the frustrations involved in buying from shop-based computer dealers who often are not 100% au fait with their wares, or, more importantly, with the servicing of them.
Dell's ace card is that each of its representatives devotes his time totally to sales and service. Once a customer's requirements are known, a phone call to the Austin, Texas, central office sets off a built-to-order manufacturing, purchasing and delivery process. If a customer has a problem with a computer, the Dell man has on-screen access to a bank of solutions, aggregated from seven years' worth of international feedback from customers. Every problem and its solution - determined by local specialists or a 40-man support team in Austin - is collected on Dell's central computer. Added to this are details of every customer's purchase and, by the use of serial numbers, each individual machine's history.
The instant availability of this information, says Dell, means that "we can solve 90% of problems on the telephone in six minutes. Most customers say that with dealers only 20 to 30% of their problems are solved on the phone." A freephone hotline also provides help for the lifetime of the computer.
The benefit to Dell of this highly focused sales team is considerable. With no one standing idly in a shop waiting for customers (and slapping on a 20% retail margin), Dell finds that each one of its reps sells as much as three average computer shops would do. The fast-changing needs and tastes of customers are met by an ongoing process of redesign. Of 16 products now on the market, 10 have been launched in the past eight months. This is practical both because of Dell's sophisticated R and D and because the company builds computers to order. Thus there are no large stocks of older designs to move.
Dell now gains nearly 20% of its revenue from the UK, though it has only 4% of the UK personal computer market. Customers include BP, the RAF and the prison service. With Europe now high on his list of priorities, Dell is opening two new subsidiaries, in Benelux and Finland, and a European Support Centre in The Netherlands. Volume production from Dell's new Limerick factory in Ireland will begin in June.
The highly motivated teenager who first set up Dell with the aim of challenging IBM and Compaq has not done poorly to date. This year he expects revenues to jump 70% to £750 million. But it is the coming decade, as computer costs shrink and consumer demands grow, which will show just who is more clever - the young Texan or the embattled Big Blue.