Companies that continue to build their operations during hard economic times likely have a better shot of surviving and succeeding than those who retrench and wait for markets to improve, says the founder and chief executive of Texas-based Dell Computer Corp.

Michael Dell outlined the basics of his own successful corporate strategy to a sold-out business crowd in Calgary last week, and the self-made billionaire didn’t fail to take a few shots at his competition on the topic of operational efficiency.

Dell, who as an entrepreneurial university student launched his business 19 years ago with just 1,000 US greenbacks and dreams of building a computer empire, says growing up lean – as opposed to recent trends of over-capitalization of new companies – was an important lesson.

“When a firm is forced to innovate and forced to come up with something that is truly valuable, and capital is much more scarce, you probably get very different results,” Dell told an audience of more than 850 business people at the Telus Convention Centre.

Michael Dell

“It certainly was the case in our business, because we started with only $1,000 . . . so we had to think very carefully how we were going spend each dollar, as opposed to if we had started with $25 million. One of our competitors had $100 million of funding in their first year,” he added, “and it’s a very different kind of philosophy to start a company with.”

While businesses might be tempted to cut spending and retract operations or staff during tough economic times, Dell has taken exactly the opposite tack.

“From these times of adversity and when there are challenges, many companies go into a defensive posture . . . I think that’s the wrong approach,” he said. “This is the time to think how you can advance your strategy, how you can go into new markets, deliver more value and create breakthroughs that are going to change the industry. And we set our sights on that all the time.”

Instead of working on developing the latest high-tech gadgets in a fast-shifting market, Dell says his company’s success story – revenue last year topped $31 billion – has focused on three fundamentals: operational efficiencies, providing relevant high-value products and services, and worldwide expansion.

While the competition has looked to sell or outsource manufacturing operations, Dell has instead looked to build in-house expertise, and now boasts the largest build-to-order computer operation in the world with typical orders actually assembled and delivered in less than five days.

“We’ve learned from the Toyota production system,” Dell added, by keeping just 90 hours of total inventory in a business that now includes not just desktop computers but notebooks, storage, networking, projectors, printers and related computer services. Suppliers deliver materials to Dell every two hours, based on the orders just taken.

“Yesterday we sold 109,000 computers,” Dell said.

“Those orders come into our six different factories around the world, and translate into signals that go to our suppliers in real time.”

This high-velocity system helped Dell carve out $1.2 billion in cost-savings last year, a number expected to rise to $1.8 billion this year, savings that will be pumped back into lowering prices for consumers, Dell promised. He added that Dell’s cost structure is about one-half that of its rivals, which include IBM and Hewlett-Packard. “Their revenues are dropping faster than they can lower their costs,” he noted.

Looking ahead, Dell said he sees huge opportunity in international markets, including Germany, France, China and Japan – a market which collectively grew 39 per cent last year for Dell. “Our concept is an economic one, not an Anglo-Saxon one,” he pointed out. “It has appeal to any people in any culture and any society. Now we have to adopt and tune it to be appropriate to each market, but we’ve seen our business grow dramatically around the world.”

Last Wednesday, Dell confirmed its earlier outlook for an 18-per-cent rise in revenue in the first quarter, citing strong demand for its computer products. The company said it expects revenue for the quarter ending in April of $9.5 billion, up from last year’s $8.07 billion.