When an ailing computer company which has lost a lot of its shine teams up with one of the leading ad agency groups, WPP, to form a new marketing agency called DaVinci to spend $4.5B in marketing money, I am, naturally, more than a little skeptical.
Consolidating adspend under one roof makes sense sometimes; it made sense for IBM in the nineties when it chose my former employer, Ogilvy, also a part of WPP, to handle all its accounts. IBM was able to consolidate its image, and Lou Gerstner, then IBM’s CEO was able to make a dramatic turnaround and a nice exit for himself.
More than 10 years later though, the challenge for Dell is more complex. Dell is a company which has surpassed at squeezing costs out of the system, making cheap computers for the office masses. The problem now for Dell is that it is getting challenged on this front by Lenovo, the Chinese computer manufacturing giant and Acer, the Taiwan company which has made a dramatic comeback after a near-death experience. And then there is the US giant, HP, which is doing some very interesting stuff.
When it comes to buzz, Apple sets the bar. After switching to Intel architecture, then using the iPod as a platform to generate buzz for the iPhone globally, Apple is on a roll. Dell has been left in the dust. Add to that recent customer complaints about quality, and Dell is not in a good situation.
So can DaVinci turn things around for Dell?
My initial reaction is that it doesn’t go far enough; it is made up of Dell and WPP people, and can serve as a buffer to any agency conflicts. But the problems which afflict Dell run much deeper than just quality problems.
They are management and perception problems.
One of the big problems marketing people run into is how to turn a product which is a stinker into something which people want to buy. The Internet has made the challenge even greater, because anyone who has the time, motivation and interest can find anything about a product.
It doesn’t matter how you spin a turd, when it stops spinning, it’s still a turd.
The problem is that once a company starts thinking that it’s all about an agency, or it’s all about the creative, the ground is set to place the marketing people and agency as the fall guys, when actually the problem is with bad management decisions. Then as the management panics because of falling share price, bad buzz, and everything else, their decisions get increasingly short-sighted and the options get worse and worse. When the management starts thinking in these terms, the company is basically in a death spiral; it’s all ends when it hits the ground and bursts into flames.
The problem with Dell is that they are very good at cutting costs, but they have not shown customers how they can ADD value. So naturally, Dell attracts the customers which are at the bottom of the value chain. Dell’s management has effectively commoditized their own product line. This is never a wise thing to do. If your own products have effectively become commodities, how do you position them against anything else?
The answer is you can’t.
Cutting internal manufacturing and component costs is something every computer maker should do internally, but you never want to make it the message you tell your customers and IT departments.
For the past several months, I have been debating what I should get for my next computer. It has been a match between the Santa Rosa Macbook Pro and the HP 2710p. The 2710p is a Tablet PC and has received some excellent reviews. It was the only PC I have been seriously considering.
Why? Because I have never owned a Tablet PC, and it looked like it had reached the right balance of functionality and design. Other HP lines, Dell and the other PC makers never entered the equation.
HP obviously likes the 2710p a lot, they have made it the centerpiece of a TV ad campaign in Asia.
That is why I say that the integration of Dell and WPP do not go deep enough. Instead of trying to flog a lot of commodity products which the market has tired of, instead they should think of how to come up with new products and a product line which actually make a person excited. We’re not talking about marketing anymore; we’re talking design marketing, the kind of stuff Apple excels at.
They should start with one product, then take it to a product line, then expand it, then kill all the boring stuff. Just like Apple did with the iPod, which expanded into the iPhone line.
Of course, in order to do all that, you need to be a dictator like Steve Jobs. The question is whether Michael Dell can be that kind of dictator, even if his own name is on the line.