Dell urges Kellogg students to dare to risk failure

Jodi Genshaft

Dude, you’re gettin’ a Dell.

After taking a single macroeconomics course and selling computer parts from his dorm room, Michael Dell dropped out of college and used $1,000 in startup funds to launch what became a $30 billion per year technology company.

“When I was 19, I found what I wanted to do, and it was the right time for me to go and do it,” said Dell, founder and chief executive officer of Dell Computer Corp.

Dell explained Wednesday morning to about 600 students and faculty in the Kellogg Graduate School of Management how his small niche in the personal computer industry transcended its Texas-based boundaries to become a strong national company in 18 years.

But Dell said startup companies can reap huge success, even with little initial funding.

“You have to be willing to fail,” he said. “We made a lot of mistakes, but they were small, and we were a young company.”

By selling custom-ordered PCs directly to customers, Dell reduces inventory costs and increases profits while drawing a consistent wave of buyers.

“Yesterday we sold about 80,000 computers,” he said. “The price war will be over when our competitors decide they want to make money.”

Dell said the planned $19 billion merger between Hewlett-Packard Co. and Compaq Computer Corp. would open the door for Dell’s expansion around the world. Hewlett-Packard’s plan to merge with the No. 2 personal computer maker would create a spot for an approved supplier – in this case, Dell – among foreign countries, Dell said.

“I light a candle each night hoping the merger goes through,” Dell said. “It’s a market share opportunity for us.”

Dell also said the merger is “code word for ‘we’re going to fire 30,000 employees.'”

And Dell’s 38,000-employee setup has knocked out competitors with lower prices and faster service, Dell said. Gateway Inc.’s exit from many of its international markets illustrates the company’s struggle to maintain market stability, Dell said.

“You get your advice from a cow, this is what happens,” Dell said, referring to the black and white cow that was Gateway’s mascot. “Coming from Texas, I know that it’s a female cow with a male voice. There’s something weird about that.”

Dell said that while new technology capital will continue to drop lower than the explosive levels during the late 1990s, consumers will pump money into technology when they need to replace outdated computers.

Currently, 170 million computers around the world are at least three years old, Dell said.

Kellogg Dean Dipak Jain said Dell provided a lesson of success that can’t be learned, even at the elite schools.

“I don’t think that at business schools we can teach that kind of growth,” Jain said.