IN 2005, I wrote a piece singing the praises of the computer company Dell, along the lines that although Apple's far sexier machines garnered all the hype, the real thing of beauty was Dell's 'direct business model'. By cutting out the retailer and delivering direct to the customer, this refined supply chain seemed destined to pull the company steadily away from its rivals. In the long term, therefore, the better bet was Dell.
How do those predictions look now? Far from sweeping all before it, Dell has lost market share and been overtaken as the world's largest computer maker by a revived HP. After a run of missed targets, CEO Kevin Rollins, who had dwelt dreamily on the prospect of Dell becoming a $100bn company, has been swept away too, and founder Michael Dell has taken back the operational reins.
Meanwhile, Apple has gone from strength to strength on the back of the ubiquitous iPod and a strategic decision to aim its hardware at the home entertainment market. Even its computer market share has begun to pick up - the 'halo effect' from the iPod - although it still remains tiny compared with HP and Dell. And the launch of the hysterically ballyhooed Apple iPhone is still to come.
At the time, several readers responded sharply to the favourable portrayal of Dell. They accepted its supply chain was, and still is, a logistics marvel. But that didn't mean that the customer service was the same. Dell had become so entranced with its own processes, they suggested, that it had lost sight of the fact that customers don't buy supply chains, they buy computers. They couldn't care less that Dell can assemble a computer in five minutes and dispatch it two hours later. They do care, however, about getting the right computer with the right parts and if they don't, they do care, very much, about being able to talk to a real person about it - something that Dell, with its maddening automated phone menus and inscrutable website (two of its sources of pride), got badly wrong.
Dell made the classic nerd's mistake of underestimating the human factor - the first and last link in the supply chain - and trying to fill it with IT. As most companies do, it put computers in charge of the thing humans do best and vice versa, thus making everyone unhappy.
Apple, on the other hand, has been much more successful with the way it relates to the customer. Wrong-footing the pundits, it has proved retail stores are the right way to sell devices that demand to be touched and seen. Its products' ease of use and Apple's seamless integration of software and hardware go some way to justifying the closed proprietary system the company has maintained. iTunes and iPod tantalisingly foreshadow a future where customers can 'pull' with minimum effort just the elements they need rather than having products bristling with features they don't want foisted on them by costly marketing and increasingly intrusive ads.
But - a very big but - Apple has come a cropper at the opposite end of its operations. The murkiness surrounding the backdating of Apple stock options, including, allegedly, a batch to CEO Steve Jobs himself, betrays an equally significant flaw (in fact, Dell may have to restate its earnings too, although the issue is reportedly not stock options).
Interestingly, each company reflects the strengths and weaknesses of its founder - both now firmly in control - as if they were imprinted in their genes. Jobs's 'reality distortion field' sets the high expectations that drive Apple's brilliant innovation cycle but it may also have persuaded the company that it wasn't subject to the normal rules of governance. Michael Dell's obsession with low costs and perfecting the supply chain have fuelled impressive profit and revenue growth, but ultimately caused the company to disregard the rules of customer service. Both are forms of arrogance that ought to give shareholders serious pause for thought.
In Apple's case, the seriousness is not just that the company is in Jobs's image the company is Jobs. If he were forced to resign, it's hard to see how it could survive the loss of its driving force. For Dell, the issue is the reverse: it's not clear how putting the founder back in control will remedy a problem that he as chairman failed to see, and which the system that he designed so clearly ignored.
Either way, the moral of the story is that strong differentiation and character is necessary, but not sufficient, to keep a company successful. The genius and charisma of a founder in one domain shouldn't blind either them or the company to the need to complement them in others where they are weak. It's a reminder and a warning that, in the long run, the company that thrives is the one that satisfies all its stakeholders, from customers and employers to society as a whole in the shape of its regulators. They are the ones that decide its fate, not Steve Jobs or Michael Dell.
The Observer, 18 February 2007