You Can Learn From “Dell Hell.” Dell Did

In 2007, Dell’s CEO was replaced by founder Michael Dell. The warning alarm had sounded two years earlier on the Internet, when a blogger lamented:

I just got a new Dell laptop and paid a fortune for the four-year, in-home service. The machine is a lemon and the service is a lie. I’m having all kinds of trouble with the hardware: overheats, network doesn’t work, maxes out on CPU usage. It’s a lemon.

In the olden days before blogs were big, Dell management could have addressed these issues at a time of its choosing. And executives would have needed time because this comment strikes at the heart of the company: the product, the service, marketing, pricing and, most critically, the Dell brand. Millions of customers were not won and kept by selling lemons. With Jeff Jarvis’ use of a catchy phrase “Dell Hell” in his blog, The Buzz Machine in June 2005, Dell’s customer issues were publicized by The New York Times within two days of the blog post, and in discussed in the next issue of Business Week.

I’m writing this on a Dell laptop, and my last half-dozen PCs were purchased from Dell, so as a loyal customer I was amazed and shocked to hear about issues I had never experienced myself. So I asked around, and started to talk to other customer relationship management scholars about what was going wrong inside this company that once had such a sterling reputation for customer satisfaction and customer delight.

What we arrived at was that what had changed was outside, not inside, the company.

What from the outside looks like a well-oiled machine is, from the inside, lots of people working really hard to keep up that impression and make it truer each day. I worked for five years each at Intel and Oracle, both enormously successful companies. Both were similar in this aspect: It was exciting to come to work each day because of the multitude and magnitude of issues to be resolved, insurmountable obstacles to be overcome, unavoidable disasters to be prevented and imminent crisis to be averted.

Such is the life of those of us who are adapting technology, changing processes and improving customer experiences and relationships. We know that inside, it’s a lot like a sausage factory. It would astound the customers to watch the sausage being made.

Dell weathered the storm because Michael Dell has been personally involved in Dell’s efforts to listen to its customers. One of those moves was to create a dedicated corporate blogger. Dell tapped Lionel Menchaca, an employee of 14 years. Menchaca, as blogger Jarvis, himself, said on The Buzz Machine, speaks to people “honestly and directly” (April 3, 2007). In blogs, Jarvis related, Menchaca “admitted the company’s problems. But he also answered back … . He immediately earned the respect of me and many other bloggers. According to Jarvis, Manchaca gave the company “a human voice.” In return, Jarvis said, Manchaca gave customer respect and “got respect in return. It works.”
For his part, Menchaca credits Bob Pearson, Dell’s vice president of Corporate Communications, for changing how the company adapts to the world of the Internet.

In a way, Dell was the test dummy of companies bearing the impact of one customer’s experience in the new socially-networked world. It stood up to the test, recognizing the harm to its and reputation in the marketplace. That change on the outside drove changes in the company, as it responded to the new challenge.

Something similar happened to Sony, after it disappointed PlayStation fans who wanted to play the games with their friends on the Internet. The fans responded with a series of videos posted on YouTube to express their disappointment. Just take a look below at the YouTube page for what has become the famous “PS3” (for PlayStation 3) song written to the melody of a top-selling pop song by the Fray:

Sony, you went wrong with your PS3

I’ll just keep playing my 360

Hope this song has helped you understand

Now you know, how you killed your brand

You can see not just that the video has been viewed almost 3 million times but also the over 34,000 comments the video generated and its selection as a “favorite” more than 21,000 times. The social media avalanche hurts Sony well beyond the disappointing sales of the PlayStation 3, which lagged behind Microsoft’s Xbox and Nintendo’s Wii. The PS3 song, with its haunting refrain, taints a globally respected brand known for design and innovation with one product’s shortcomings as viewed by a single customer.

Sony still hasn’t responded to this viral criticism. But as of this writing, Dell seems to have recovered from its episode. Menchaca, presenting at the Intel Global Manufacturing Summit in October 2007, explained that Michael Dell was personally involved in driving the company’s response to the new world of Social Media, and the creation of Direct2Dell. He has said that the company is just “at the beginning of the turnaround” and would be making “fundamental changes” to the tune of a $150 million investment.

Dell is in an epic struggle to adapt to the challenges of the Internet and the rise of the social media. With a team that includes Menchaca and Pearson, and with Michael Dell back at the helm, Dell is on an odyssey that will be interesting to monitor.