Daily Archives: November 22, 2003

Michael Dell Interview

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Exceprts from a News.com interview:

Our strategy for development is different than Microsoft’s or Intel’s. Those are ingredient companies. We’re a computer systems company. We have a higher return on R&D than any other computer systems company, about five times the profit for every R&D dollar spent…We only do the kind (of R&D) that benefits the customer. We don’t try to reinvent things that other companies have (invented).

If you look at innovation, it doesn’t just occur in the lab. Comdex is the place you go to show things that nobody knows what to do with, because they haven’t found a market yet. We don’t develop things nobody knows what to do with. We develop things people want to buy and buy in volume. Innovation can occur in supply chain and logistics, manufacturing and distribution, and sales and service. We’ve made computing products far more affordable. If you look at the cost of computers 20 years ago versus now, we’ve caused the whole industry to get more efficient.

Increasingly they’re the same companies in both categories. In the digital home, people want to hook things together. I’ll give an example: If you look at digital cameras two years ago, most had proprietary methods to connect with the PC–special cables, special interfaces. The user said, “Forget that, I want USB.” What’s really winning here is the PC. It continues to be the major point of influence in the use of this information in the home, whether it’s music or pictures. I think you’ll see the same thing happen with video. I’m not suggesting that consumer electronics companies will go away. I’m just suggesting that all companies in this digital home are going to be forced to fit into this framework where consumers want things to hook together.

When you talk to users, you continue to hear the focus move away from memory-processor into other things–video, media, networking. We as an industry have to make our products more reliable, safer, more productive, more entertaining. If we don’t they won’t buy it.

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Retailing’s Future

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The Economist.com writes about two new emerging models:

The first is what Joshua Chernoff of A.T. Kearney, a firm of consultants, describes as the strong retail brand approach. This is a store in which in-house brands feature strongly and managers take an active role in choosing inventory. Such a store is far more interested in promoting itself as a brand than any individual brand within it. In Britain, Marks & Spencer is the classic example of this approach; in America, Kohl’s fits the bill. Such stores tend to have high operating costs, but they can command high margins, assuming that their in-house brands are both fashionable and popular. Marks & Spencer is still struggling to recover after getting that part of its equation wrong.

The second model for success is the showcase. This sort of department store not only sells other people’s brands, but often gets the vendors of those brands to take responsibility for stock, staff and even selling-space, handing over a percentage of their sales to the department-store owner in return for their concession. For a store-owner, this can mean lower gross margins overall. But the compensation should be low operating costs.

The trick for a showcase, typically a flagship store in a big city centre, is to keep the customers rolling in. That means being an attraction in its own right, and a place where interesting things are always happening.

Wal-mart’s EDI Use

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WSJ writes about how Wal-mart’s customers interact with it:

more than 98% of Wal-Mart’s EDI exchanges with suppliers are done over the Internet using AS2, a software package from Isoft Corp., Dallas, that suppliers must purchase and install if they wish to continue selling to the chain. (The package can cost as little as $300 if the supplier wishes to connect with only Wal-Mart but can cost six figures for links to more than 100 companies.)

“The purpose of the conversion was to provide a cheaper, faster and more accurate method for our current suppliers to connect with us,” Wal-Mart said. AS2 also secures the EDI exchanges over the Internet.

Isoft says sales for its AS2 software have increased 900% in the past year, and it now has more than 1,000 custo..Isoft’s competitors include Cyclone Commerce Inc., Scottsdale, Ariz. The rise of these companies and their business-to-business Internet technologies threatens the traditional EDI heavyweights, which provide third-party transmission network.

Perhaps, similar ideas could be used to build the SME Trade Information Marketplace.

The Next PC Era

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Newsweek asks if we are in the twilight of the PC era, and concludes that “more chip power and connectivity might produce the biggest changes yet.”

what are the emerging innovations? Some of them dont really sound earth-shattering, but they get CIOs excited: Web services that promise to speed the information flow through a company and eliminate delays in the supply chain. (Well leave the details to CIO magazine.) One new technology promises to send shock waves through corporate America and eventually alter the lives of consumers: radio-frequency identification, or RFID. The ability to put very cheap sensors on products and track them from manufacture to the consumerand eventually tag all items so people can keep track of their stuffwill cause a lot of changes.

Another compelling development is search technologythe success of Google shows that a business can be built on the ability to instantly locate information. As more and more data are warehoused in cheap storage devices, software to mine them will change not only the way businesses work, but the way we learn, archive and remember.

Another article which completely ignores the world outside the developed countries. The emerging markets are the next opportunities for the PCs – but at very different price points.