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Structure the Organization Around the Customer (How Dell Acts Small While Getting Bigger)

In the late 1990s, Michael Dell took customer focus one step further by structuring the organization around the customer. He had become convinced that organizing by product alone would not ensure the high-quality customer relationships he hoped to achieve. (If the company organizes only by product, says Dell, there is an assumption that the leaders of those divisions know everything about their target customers—not only domestically, but also around the globe.) Instead, he decided to segment by both product and customer. This way, product teams would have the information they need in order to satisfy specific customer segments.

First, Dell created several distinct sales organizations, each focused on serving the needs of a particular customer segment. As the company got bigger, he split the segments even further:

  • Large and medium-sized companies

  • Educational and government organizations

  • Small businesses and consumers

This degree of segmentation not only reinforces Dell's commitment to satisfying customer's needs, but also ensures that the accountability for satisfying customers is shared throughout Dell's ranks. But Dell didn't stop there. He further extended the customer segmentation model, creating complete business units organized around different customer types, each with its own sales, service, finance, IT, technical support, and manufacturing pieces. He credits the company's segmentation with supporting and reinforcing the direct approach:

Segmentation takes the closed feedback loop and makes it even smaller and more intimate. It refines our relationship with our customers.

As the company has grown, it has spun off some of these groups focused on customer segments into de facto small companies, each with its own organization team. That model enables Dell—today a huge company by almost any measure—to act with the spirit and responsiveness of dozens of small companies. Without a doubt, it gives Dell a decided edge in the marketplace.

What can other companies learn from the way Dell is organized? Here are some ideas that can prove useful in almost any organization:

  • ORGANIZE AROUND THE CUSTOMER. The key is to get as many people in your organization as possible involved in satisfying the customer. Review the organizational chart with a fresh eye, and determine whether the way you are organized achieves this important goal.

  • IF POSSIBLE, SEGMENT THE FIRM BY BOTH PRODUCT AND CUSTOMER, OR CREATE CROSS-FUNCTIONAL TEAMS THAT CAN DO SO. The key is to make sure that as many people in your organization as possible know the customers—their needs, desires, preferences, and so on. If you can't organize the company in that manner for some reason, consider creating ad hoc cross-functional teams or task forces designed around specific customer groups or clusters.

  • GET YOUR COMPANY TO MOVE WITH THE RESPONSIVENESS OF A SMALL COMPANY. Most large companies eventually get mired in bureaucracy, and when they do, it is the customer who suffers. One key to winning in the marketplace is to make sure that your firm is streamlined in a way that does not penalize the customer for your mistakes. In other words, get the people in your organization to adopt a small-company mind-set. Get them to move faster, respond more quickly, and anticipate customer needs more effectively. Get them to be more proactive, so that they won't have to play catchup later.

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