Posted on Friday, October 16, 2009
Having failed in the markets for MP3 music players and for high-definition televisions, Dell now says that is going to try its hand at smartphones. We hope that Dell’s board and management are asking how this foray into consumer electronics will be different than Dell’s previous efforts. Otherwise, it won’t be.
Unless it asks itself tough questions, Dell will again fall victim to what’s known as the Red Queen Syndrome, so named for the queen in “Through the Looking Glass,” who says, “It takes all the running you can do to keep in the same place.” The idea is that a company works super hard to optimize some aspect of its operations to gain an edge on competitors. The company thinks that the fact that it’s good at that one thing means it has great people and thus will be good at something else. In fact, being good at the first thing often means it’s less likely that the company will be good at whatever the something else is.
To apply the Red Queen Syndrome to Dell: It has been a super-efficient manufacturer of personal computers. But those manufacturing skills don’t carry much weight in the consumer electronics world, especially with small, trendy devices like music players and smartphones. Those devices are all about capturing the consumer’s imagination through slick design. So, no matter how accomplished Dell’s people are, their manufacturing skills don’t carry the strength into consumer electronics that Dell thinks they do.
The situation gets worse: Dell’s manufacturing skills actually get in the way of its design skills. Dell has learned how to design things so that they’re easy to manufacture–but that doesn’t carry much weight with the teen-aged girl who’s shopping for a phone. Sure, she’s somewhat sensitive to price, but she’s not going to do the price/performance calculations that Dell’s engineers live on. She’s going to buy what’s cool.
For good measure, Dell is going to face the sorts of difficulties that come with moving into a market that isn’t nearly as adjacent as a company thinks it is. (We’ve already written about how Dell is making this mistake with its acquisition of Perot Systems. link) Dell is focusing on the fact that smartphones are taking on many of the functions of laptop computers, creating a broad category of mobile devices that also include netbooks and tablets. The problem for Dell is that, no matter how much those devices are coming to resemble each other conceptually, phones are sold through a different channel. They go through phone stores, not through Dell’s direct channel or even the mass-market retailers where Dell is building a presence.
In other words, Dell might well fumble its way through many new sales relationships while trying to promote a product it doesn’t know how to design.

