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A Top Dell Exec On Why His Company Didn't Invent The iPad

During a candid discussion about Dell's future in the PC market, David Johnson, SVP of corporate strategy, explains Dell's approach to innovation.

"Apple has a different business model than the Dell business model," David Johnson says. "The reason we didn't come up with [the iPad] is because there wasn't an OS provider that could work with a tablet."

Over a fruit plate and diet Coke at Locanda Verde, a TriBeCa restaurant, I had just asked Johnson, Dell's SVP of corporate strategy, why Apple (and not Dell) was able to create the iPad. It was part of a larger conversation about Dell's approach to innovation.

Struggling To Adapt

Dell, once the world's top PC maker, has struggled to adapt to dramatic industry changes, as Asian rivals such as Lenovo continue to squeeze its PC market share and consumers increasingly turn to mobile devices such as Apple's iPad for their computing. Last quarter, as the company cut its full-year outlook due to challenges to its PC business, Dell's earnings dropped 18%, and revenue missed analysts' expectations; its market cap has roughly sliced in half since February. But this week, Microsoft will release Windows 8, the most radical redesign of its operating system, which will give Dell a second shot at capturing some of the tablet market and reviving part of its decelerating PC business.

David Johnson

Johnson says Dell did not produce the iPad because of its reliance on Windows. Traditionally, hardware makers like Dell and HP have licensed Microsoft's operating system for its PCs. But due to the unprecedented success that Apple, which controls both its hardware and software, saw with the iPhone and iPad, Microsoft and Google were forced to focus on creating mobile OS solutions for its hardware partners. "In order to come out with a tablet, you had to have the ability at that time to influence and manage the power architecture, as well as a software layer," Johnson says. "The reason why Apple has had so much success is because they've vertically integrated all of that into their environment. If you step back and look, that's not been Dell's historical model. We leverage and integrate others' technologies."

"But in this particular case, those other technologies didn't exist until now," Johnson continues. "I can simplify it to say that the Android system didn't work in a tablet form factor, Microsoft wasn't ready, and we're not an OS provider—we had a dependency on the OS providers."

Allowing For Innovation

To avoid the downsides of dependency between software and hardware makers, some players in the space have started to move toward Apple's verticalized model, which many believe allows for more innovation and polished products. As Johnson explains, "We've had this long-standing, extremely successful Dell model, and that model has shifted." Google, for example, recently bought Motorola Mobility, signaling an interest in the hardware space; Microsoft, too, will soon release its Surface tablet, which will compete with many of its own partners' products.

But why didn't Dell foresee such radical industry changes and try to adapt earlier? HP, for example, acquired Palm for its WebOS software, which would power new HP smartphones and tablets. Though ultimately unsuccessful (Apple now sells more iPads than HP does PCs), HP saw the rapidly evolving landscape and tried to keep pace.

"When you say, 'Well, HP saw it and bought Palm,' you're correct, but having the OS layer is only a piece," Johnson says. "When it comes to the application layer, you have to make sure you have enough velocity to attract the application layer to your platform. And that's a bridge too far for most companies. That's not Dell's strategy. That's clearly Apple's strategy. It is working for Apple, but that is not Dell's strategy. There is clearly a fundamental difference in the model in terms of the skill sets [needed], and we didn't have an OS layer."

The Innovator's Dilemma

I couldn't help but ask whether Dell was experiencing the innovator's dilemma. The company is being squeezed from all sides: from overseas competitors and suppliers as margins decline; from new mobile markets created by Apple and Google that Dell has yet to make an impact in; and even from its main ally Microsoft, which is stepping on Dell's toes with its hardware entry. Has Dell reached an inflection point?

"First of all, I acknowledge all the points you make, and if we were approaching the market to just be another purveyor of devices, we'd be feeling exactly what you're articulating," Johnson says. "I hear what you're saying, but I think of the innovator's dilemma as somebody having a huge profit pool and then they don't want to catapult to the next generation because it attacks that profit pool. I don't consider this the innovator's dilemma at all. There are a lot of places where I do agree with you but not here."

As Johnson explains, the biggest disruption in the last several decades has been the convergence of the consumer and enterprise spaces, part of the reason for Dell's sharpened focus on corporate clients. In such heterogeneous environments, filled with PCs and mobile devices, Johnson says Dell can provide unique value in providing management, networking, security, and data solutions. "We're really focused primarily on that," Johnson says. "Our PC business is actually very healthy. It's a different investment."

And as for Microsoft's Surface tablet, which will vie with Dell's tablet products, Johnson says, "This is not a catastrophic event from our perspective. I mean, how many purveyors of the Windows operating system exist today? They're just another purveyor."

Because of the fast-approaching launch of Windows 8, Johnson is bullish about Dell's product line, which includes laptops, tablets, and hybrid PC-tablets. I ask what Windows 8, with its novel interface and mobile-centric applications, could mean for Dell in the coming future.

"You know, I'm not the expert on Windows 8," Johnson says. "But the people in Dell that are using it are pretty excited about it."

[Image: Flickr user Leon Rice-Whetton]

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  • Soaringrocks

    Dell 'inventing' a whole new product category was a non-starter. It was never even a faint option.

    They have excellent validation and manufacturing capabilities, they have some smart people too. However, their original engineering capabilities (as measured by % they spend on R&D) is just too small to take on a task of that size from a HW perspective. 

    That and they have no practical capabilities to create an entirely new and highly integrated device/OS stack targeted at tablets.

    You need core competencies in both areas to create breakthrough products. Maybe Dell could have partnered with a smaller company that had that capability but not enough $$ to make it happen. But not on their own. 

  • YOG

     Dell has been acquiring bright new companies to fill in that cranial gray matter that it does not have, as far as its capacity to innovate.  

  • Frank Ramirez

    Why did we see a decade of grey and black boxes? Was a
    color box such a huge leap of innovation? The net here is Dell decided to compete
    on cost management because most customers want value which most equate with a
    price tag when dealing with a commodity.

    Innovation is speculative and risky and you can fail (
    Newton), but you learn and adjust and evolve and you get a (IPad). Innovation
    is not purely a cost management exercise of known quantities. But when you get
    it right you get margin and brand equity and lots more.

    Microsoft’s partner model has been great for consumers
    and developers and OEMS – and yes for Microsoft too. The closed model appears
    to have to evolve in large part because the OEMs have not stepped up to innovate
    and drive great customer experience. They are looking fro the quick buck with
    little to no investment so they source from Asia , build in Asia, and then
    leverage their platform too preinstall a ton of bloatware. Why is it that Microsoft
    Store signature product exists?  I think
    OEM's bought into the Microsoft model ought to consider their role in
    innovation within the context of that model and why it is Microsoft felt compelled
    to jump into the space.

    OEM’s of Dell’s scale ought to push Microsoft harder with
    data and statistics about consumer needs wants and desires and to make evident what
    customers really want. Drive innovation with customer insights and BI data and
    a pipeline of insights from the field and customer care. OEm’s cannot rely on
    Microsoft or any OS provider to the extent that their entire business will be
    undermined by performance issues ( providing a OS quickly). Partnering is a two
    way street and both Microsoft and the OEMs and all partners party to a customer
    solution/experience should recognize and embrace their codependence, leverage
    each other and work intimately together for mutual success.

    The whole should be greater than the sum of the parts. It
    only happens though through cooperation. Apple wins because the friction of
    trust between Microsoft and its partners has resulted in OEMS that do not feel
    empowered to innovate. Can they layer on services and make a TCO argument to
    win enterprise  and SMB – for awhile
    probably. But Apple is smart and they get TCO and LTV and while they are happy
    today – If I was Apple I would be reading articles like this and looking at the
    consumerization of IT, cloud subscription services and I would be feeling that the
    future holds great promise.

    So is it all doom and gloom for OEMs? For Chipmakers? Are
    there strategies to win against vertical integration? Yes there are.


  • Zafar Kazmi

    I was surprised at the question. Dell was never in the running for producing the most innovative device. Dell's success came from its genius in manufacturing and supply chain optimization.

      Apple's culture does not reward innovation and creativity either. The innovation at Apple does not come from within, but from top. The iPad was not an invention or innovation. It was realizing the market opportunity for a device optimized for content consumption.

  • That Guy

    It is what happens when you stand on the shoulders of giants. You will never create the next great thing sitting in a Tribeca restaurant enjoying fruit plates and diet cokes hoping to one day run into DeNiro. Take a break from your poshy lifestyle, head down to Sal's Pizza, grab you a greasy slice and listen to some of the people that arent wrapped up in themselves. You may learn something about your consumers. Which may lead you to the next great thing. Dell + Innovation = Weak. Dude is eating $100 fruit plates in Tribeca man, FRUIT PLATES!  

  • InigoMontoya

    Isaac Newton popularised the 'standing on the shoulders of giants' quote you mentioned. He used it as a metaphor for building on the great works of those who had gone before him.

    Apple's real genius is not in inventing things - it is in taking existing ideas or concepts and applying incredible foresight, design, brand knowledge and marketing to them. They are standing on the shoulders of giants themselves, and one day, someone will stand on theirs.

  • Gerald Irish

    Dell's problem is that their business model is built on putting together commodity hardware so that they can offer cheap PC's.  In other words, they're built to win a race to the bottom.  Unfortunately for them in the smartphone/tablet PC era, that strategy simply won't work.  Customers are not looking for the cheapest cut-rate option, they're looking for a balance of physical design, performance, functionality, and price.  That is a competition Dell is ill-equipped to compete in.

    "You know, I'm not the expert on Windows 8," Johnson says. "But the people in Dell that are using it are pretty excited about it." 

    It's quite troubling for Dell's prospects that the VP in charge of corporate strategy doesn't know much about Windows 8.  Your company's fortunes hinge on Windows 8's success, you should be the expert on it.

  • michaelstrawn

    "The reason we didn't come up with [the iPad] is because there wasn't an OS provider that could work with a tablet."
    NO...the reason is your culture does not reward innovation and creativity.  If there had been an OS provider that could have worked with a tablet I'm 100% certain that Dell's version would have flopped.  There's absolutely no way they would have thought of all the user-friendly features Apple is famous for.  

    Typical...instead of manning up and admitting weakness, this "leader" blames someone else.  Pathetic.

  • YOG

    I wonder if he got pre-approval to talk in the first place?  His answers should have run the corporate gauntlet, first, I would think. Don't you think, Michael?
    (Incidentally, my mind is a gaping chasm of vapidity and delirium).

  • YOG

    Dell does not have the caliber of intellect found at Apple.  It never will.

    Neither does Samsung, which is why it ripped off Apple's patents.

  • Goober

    Dell was nothing more than the distribution arm of Intel.  Intel needed someone to use their processors and implement their "technology" so Micheal Dell was the chosen one to create the front.  Intel was too busy pushing Itanium, lolol.

  • YOG

    Dell does not have smart enough people, compared to Apple.  Neither does Samsung, which is why it ripped off Apple's inventions. 

      Dell is the vision of a garage-constrained inventor whose ideas died with the boom;  Samsung represents patent rip-off in Asia's best tradition.   Apple is the tradition of Thomas Edison, exponentially magnified.