Dell story: the draft

[Original draft of Business Week Dell story]

In the era of blogs and social media, Dell has leapt from worst to first.

Start with the worst. In June, 2005, I unwittingly unleashed a blog storm around the company. Terminally frustrated with a lemony laptop and torturous service, I vented steam on my blog, Buzzmachine.com, under the headline: “Dell sucks.” That’s not quite as juvenile as it sounds, for a Google search on any brand followed by the word “sucks” reveals the true Consumer Reports. Thousands of consumers eventually commented on and linked to my blog, saying, “me, too.” And they wondered whether Dell was listening. So Houston Chronicle tech columnist Dwight Silverman asked the company and learned that its policy toward blogs was “look, don’t touch.” Finally, in August, 2005, Business Week recounted my saga, now dubbed “Dell Hell,” as a sign of the company’s troubles: its declining customer satisfaction, disappointing revenue, and falling stock. That wasn’t all my fault. Really. But the people gathered around me were a leading indicator of Dell’s problems, which the company – and the analysts and reporters covering it – should have heeded. That August, I blogged an open letter to Michael Dell suggesting that the company read blogs, write blogs, “ask your customers what they think you should do,” and “join the conversation your customers are having without you.” And along the way, I returned my laptop and bought a Mac.

The following April, Dell did what some commenters on my blog thought would have been impractical or impossible: It dispatched technicians to reach out to complaining bloggers and solve their problems, earning pleasantly surprised buzz in return. That July, they started a blog called Direct2Dell, where it quickly had to deal with a burning battery issue. Chief Dell blogger Lionel Menchaca’s frank and direct talk gave the company a new and credible human voice. Then, last February, Michael Dell launched IdeaStorm.com, asking customers to tell the company what to do. Dell is following their advice, selling sell Linux computers and reducing the promotional “bloatware” that clogs new machines. Recently, Dell even enabled its customers to rate its own products on its own site.

So Dell has joined the conversation. Indeed, Dell may well be a leader in living the precepts of the bible of internet customer culture, “The Cluetrain Manifesto,” which decrees that markets are conversations and those conversations take place in a human voice. Could Dell, once the butt of bloggers’ barbs, now be a Cluetrain company?

I went to Dell’s headquarters to find out. The company’s founder acknowledges its problems – “We screwed up, right?” – and issues the expected CEO bromides – “You gotta go back to the root cause and how to solve these things so they don’t occur.” But then Michael Dell starts to sound like a Cluetrain convert himself: “There are lots of lessons here for companies,” he says. “The simple way to think about it is, these conversations are going to occur whether you like it or not. Ok? Well, do you want to be part of that or not? My argument is you absolutely do. You can learn from that. You can improve your reaction time. And you can be a better company by listening and being involved in that conversation.”

One could argue that Dell’s worst problem was customers having too many of the wrong conversations with too many techs in too many countries handling too many problems. “It was a real mess,” confesses Dick Hunter, former head of manufacturing and now head of customer service, whom Dell lured back from retirement when he returned as CEO in January. Hunter explains that small dial-downs of cost added up until “they broke the knob.” Dell’s DNA of cost-cutting “got in the way,” he says. “In order to become very efficient, I think we become ineffective.” Hunter has now increased service spending 35 percent, cut outsourcing partners from 14 to six (headed to three), and retrained staff to handle more problems and take more responsibility (higher-end techs can scrap their phone scripts; techs in other countries learn empathy). Crucially, Hunter also stopped counting the “handle time” per call that rushed representatives and motivated them to transfer customers so they would be someone else’s problem. At its worst, more than 7,000 of the 400,000 customers calling per week suffered transfers more than seven times. Today, the transfer rate has fallen from 45 to 18 percent and Hunter vows to halve it again. Now he tracks the minutes per resolution of a problem, which runs in the 40s. His favorite acronymed mantra (among many) is RI1: resolve in one. “It’s a no-brainer, but if we solve the call in the first call, no matter how long it takes, it’s cheaper. And, of course, it’s a better customer experience.”

Hunter’s also running a series of pilots to learn more. He’s getting callers to identify their technical ability (10 percent are expert and, surprisingly, they call the most, 60 are intermediate, and 30 beginner). He has even created a team to reach out to 5,000 selected New Yorkers (if you can make it there…) before problems strike, trying to replace the brother-in-law as their trusted adviser. With at least half of Dell’s 20 million customers, Hunter contends he can build a deeper relationship.

That’s the crucial word you hear at Dell: relationship. Dell blogger Menchaca has led the charge in convincing bloggers that “real people are here to listen.” He sometimes makes the lawyers nervous (he bluntly said batteries were “exploding”) and diligently responds and links to critics, holding up his end of the conversation. “You can’t fake it,” he advises.

“The benefits are real,” says Manish Mehta, head of ecommerce. Thanks to this new relationship, the company learns about issues online before they do in the press or sometimes in-house. They are stanching the flow of bad buzz. By their measure, negative word of mouth in blogs has dropped from 49 to 22 percent. And my Dell Hell posts, which used to come up third on a Google search for the company, are now relegated to second-page search-engine Siberia. “That change in perception just doesn’t happen with a press release,” Menchaca says.

With Hunter’s changes in the call centers, they’ve seen a turnaround in customer satisfaction ratings. After our interview, Michael Dell returned to show off his new, thin 1330 laptop and a Technology Business Research report saying the company had retaken its No. 1 rank in customer satisfaction. In internal measurement, satisfaction hit a low last year of 58 percent among core consumers, even lower among high-end consumers. That, Hunter says, made Dell “go ballistic” (“in a sort of continuous improvement way,” the CEO adds with a grin). Today, Hunter says, satisfaction among high-end customers is over 80 percent and among core consumers 74 percent – numbers that he quickly adds must still improve. “I think what the web has brought is the voice of that 25 percent.” Two years ago, that was me. But to this day, I still hear from some of those dissatisfied customers in blog comments and emails.

But the opportunities created by the conversation go far beyond dousing fires and answering complaints from the unhappy customers you can now hear. The cant among executives trying to play the Web 2.0 game is that the customer is in charge. But if you really mean that, if you cede control to your customers, they can add tremendous value. Dell’s customers are not only making product suggestions and warning of problems, they help fellow customers fix them. In the early days of Dell.com’s forums, Mehta recalls, their “fab 100″ superusers – a pit boss and lawyer among them – were generous advisors to fellow users. Today, customers share their knowledge in so many ways that Dell’s team says the challenge is to manage that knowledge and spread it.

Another challenge is to encourage users to give more. To enable more collaboration, the company is, for example, starting wikis users can edit together. They are about to experiment with loyalty programs; various executives say they are considering giving helpful users thank-you gifts (t-shirts, mugs), opportunities to meet with Michael, service upgrades, possibly even discounts. I ask whether they’d consider compensating superusers, creating a marketplace of advice, but Mehta is uncomfortable with payment, fearing it might compromise the credibility of these customers in the community. Still, the company and its customers are beginning to create what looks like collaborative media, new forms of content and marketing. It’s not much different from what I have argued that newspapers must do, supporting bloggers to produce more news. Dell’s new head of PR, Andy Lark – a blogger himself – called organizing this knowledge in a company “corporate journalism.”

Where does this head? Mehta sees a day when “the site of the future is powered by the community.” Mark Jarvis, Dell’s new chief marketing officer, acknowledges that customers are now influenced by peers, not marketers: “The challenge is how you create a network of advocates for your business…. By listening to our customers, that is actually the most perfect form of marketing you could have.” And Michael Dell? He predicts that customer relationships will “continue to be more intimate” and response times faster. He even spoke of “cocreation of products and services,” a radical notion from a big company. “And I’m sure there’s a lot of things that I can’t even imagine but our customers can imagine,” Dell says, sounding darned near like a blogger himself. “A company this size is not going to be about a couple of people coming up with ideas. It’s going to be about millions of people and harnessing the power of those ideas.” Once you can hear them.

Jeff Jarvis heads the interactive journalism program a the City University of New York Graduate School of Journalism.