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Dell versus Apple

After years of disappointing growth, failed innovation and diminished profits, Dell became a private company this past month, moving out of the glare of public scrutiny. It's a reminder that Dell has failed to turn itself around in spite of its numerous attempts.

Over the same time span, Apple's resurgence has been nothing short of spectacular and continues to outpace its competitors. While analysts focus on Apple’s ¼-empty glass, it’s still the envy of every other high-tech hardware company.

Dell's withering and Apple’s blossoming is quite ironic, taken together. When asked in 1997 about what he’d recommend that Apple do in the face of near bankruptcy, Michael Dell said, "I'd shut it down and give the money back to the shareholders." That’s a statement that I’m sure Dell regrets making, and one that will follow him forever.

So, what caused the fall of Dell the company, one of the country's most admired high-tech companies? While many analysts attribute it to the slowdown of PC sales and the rise of tablets, I have a different take.

I attribute Dell's troubles to two factors: poor customer service and an inability to innovate, the two qualities that have fueled Apple’s surge.
Customer service

Five years ago I began hearing of customer complaints about Dell's deteriorating customer support and service. I sensed then that this might be its turning point.

From its inception, Dell was known for selling computers directly to businesses and consumers. It had little retail distribution, and you couldn't even see the product before you bought it. But it offered the best customer service in the industry.

Buy a Dell and you could count on getting your computer fixed promptly. Dell offered several levels of service, one of which was on-site service that it pioneered. For a few hundred dollars more a year, you'd never have to worry about having to send your computer in for service and being left without a working computer while repairs were made. With this plan, service would come to you.

I remember being on a business trip in Taipei with a co-worker. When his Dell notebook failed, he called Dell's local support number, and the company sent a technician to the hotel a few hours later. That story, and others like it, spread quickly.

But the problems with poor service continued and customers grew more vocal. To save money, Dell had shut down some of its U.S. support centers and moved them to India. That led to widespread complaints of poorly trained agents, unequipped to solve problems. Call wait times went from two to five minutes, to 20 to 40.

When you did get through, the standard response was, “Reinstall Windows and call us back.” Agents no longer were able to communicate to customers by email or phone. The option for home service became more difficult to access.

Dell's reputation for service and support plummeted, losing the one big advantage it had over its competition. PC Magazine’s surveys showed the company going from the top to dropping to among the worst in a span of two years.

Meanwhile, Apple was focused on improving its customer service, while it put its efforts into innovating new products.

Apple developed the best customer service of any technology company and has remained number one for nearly a decade. Its call-in customer support connects you almost instantly to knowledgeable, helpful personnel who will likely solve your problem, usually on the first call. Apple also opened stores where you could resolve your issues easily and on the spot.
The innovation factor

Dell was never a product design company, but primarily a marketing company. Dell never had a passion for good product design. Its attempts to develop a music player, PDAs and phones failed time after time. The company never understood what makes a good product.

What about its notebook computers? Little of the development of Dell's notebooks was done in-house; much of it was subcontracted to its Taiwanese suppliers.

In contrast, Apple has always developed its own products. As customers began to show greater appreciation for well-designed products, Apple's development skills stood out.
The future

However, Apple is now becoming more vulnerable from a new set of competitors much more formidable than Dell. It cannot afford to be complacent, and needs to develop new product categories that allow it to continue to grow.

But as companies become successful, there's a tendency for them to be cautious and complacent. I sense some of this at Apple. Its intervals between product releases are longer than Samsung, and some of its products, such as its phones, have had some embarrassing design and performance issues.

So, while Apple no longer has Dell to worry about, it faces a challenging future.

Baker is the author of "From Concept to Consumer" published by Financial Times Press and available at Barnes and Noble, Amazon, and other booksellers. He has developed and marketed consumer and computer products for Polaroid, Apple, Seiko and others, holds 30 patents and is an Ernst & Young Entrepreneur of the Year. Phil can be heard on KOGO AM the first Sunday of each month. Send comments to phil.baker@sddt.com. Comments may be published as Letters to the Editor. Phil's blog is http://blog.philipgbaker.com and his Web site is philipgbaker.com

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