Innovation in the Dell business model

One example of how companies can review and revise their business model is provided by Dell Computer. Dell gained early-mover advantage in the mid-1990s when it became one of the first companies to offer PCs for sale online. Its sales of PCs and peripherals grew from the mid-1990s with online sales of $1 million per day to 2000 sales of $50 million per day. Based on this success it has looked at new business models it can use in combination with its powerful brand to provide new services to its existing customer base and also to generate revenue through new customers. In September 2000, Dell announced plans to become a supplier of IT consulting services through linking with enterprise resource planning specialists such as software suppliers, systems integrators and business consulting firms. This venture will enable the facility of Dell's PremierPages to be integrated into the procurement component of ERP systems such as SAP and Baan, thus avoiding the need for rekeying and reducing costs.

In a separate initiative, Dell launched a B2B marketplace (formerly www.dellmarketplace.com) aimed at discounted office goods and services procurements including PCs, peripherals, software, stationery and travel. This strategic option did not prove sustainable.

To sound a note of caution, flexibility in the business model should not be to the company's detriment through losing focus on the core business. A 2000 survey of CEOs of leading UK Internet companies such as Autonomy, Freeserve, NetBenefit and QXL (Durlacher, 2000) indicates that although flexibility is useful this may not apply to business models. The report states:

A widely held belief in the new economy in the past, has been that change and flexibility is good, but these interviews suggest that it is actually those companies who have stuck to a single business model that have been to date more successful . . . CEOs were not moving far from their starting vision, but that it was in the marketing, scope and partnerships where new economy companies had to be flexible.

So with all strategy options, managers should also consider the 'do-nothing option'. Here, a company will not risk a new business model, but adopt a 'wait-and-see' or 'fast-follower' approach to see how competitors perform and respond rapidly if the new business model proves sustainable.

Finally, we can note that companies can make less radical changes to their revenue models through the Internet which are less far-reaching, but may nevertheless be worthwhile. For example:

• Transactional e-commerce sites (e.g. Tesco.com and Lastminute.com) can sell advertising space or run co-branded promotions on site or through their e-mail newsletters or lists to sell access to their audience to third parties.

• Retailers or media owners can sell-on white-labelled services through their online presence such as ISP, e-mail services or photo-sharing services.

• Companies can gain commission through selling products which are complementary (but not competitive to their own). For example, a publisher can sell its books through an affiliate arrangement through an e-retailer.

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