Product Development At Dell Computer example essay topic

Abstract Dell's Portable Division, headed by Mark Holliday, had reached a decision point in the development of its new laptop computer. Holliday had to decide, or reach consensus on, what kind of battery Dell would put into its new line of laptop computers. It was the second try for Dell in the laptop market. The first attempt had failed due to technical problems, costing the company $20 million in development expenses alone. After the failed earlier attempt, Dell structured the development process, requiring decision points to be added.

In addition, cross-functional teams were required to ensure communication among disciplines. In spite of the new development approach, the teams usually did not embrace the new process. As part of the laptop development, market research revealed a list of features that were important to customers. One of those features was battery life, which as it turns out, ranked #3 only behind price and microprocessor choice. Earlier that year, Michael Dell was meeting with a supplier when a "soon to be" battery technology known as "LiOn" was introduced to him.

LiOn was chosen as the name due to the use of a lithium ion as opposed to the traditional metal hydride in the battery. The LiOn battery was expected to significantly extend the battery life between charges. The Michael Dell saw it as an opportunity to set their laptop apart from the competition by being the first to capitalize on the technology. As good as it sounded, the LiOn battery was not a sure thing. This paper discusses the decision faced by Holliday and the laptop development team.

In addition to outlining alternatives for the choice of battery technology, the paper provides analysis for each option and closes by providing a recommendation on which option the Dell team should choose. Problems and Alternatives The heart of the problem in the case of the laptop development decision was that a LiOn battery powerful enough to operate a laptop computer was still in development and faced some safety problems due to the tendency of larger lithium batteries to separate or explode. Sony, the Dell supplier mentioned earlier, was believed to be in the lead in bringing the LiOn battery to the market. For Dell, committing to the LiOn battery would carry a certain amount of risk. However, Dell's marketing team felt that introducing a good Dell product might enable them to recapture its previous market share of 2.5% or even increase market share to 3%. The other solution introduced by the team, which would allow increased computer use between charges, was to design the laptop so that a second battery could be added by removing the disk drive in the case that the primary battery was depleted.

Either solution provided the additional time between charges, so the requirement could be met regardless of whether the new technology was used. The only unanswered question was how to proceed. Alternatives Option 1 - Continue with the current metal hydride battery. From a marketing standpoint, this option is less attractive because it does not provide a distinctive feature that separates the Dell product from the competition. From a product development standpoint, it provides a virtually risk free option with a sure outcome in terms of getting the product to the market. The option would allow for the second solution mentioned above where a second battery is used on an "as-needed" basis by adding a removable disk drive.

Option 2 - Choose the LiOn batteries exclusively. This option is preferred from a marketing standpoint since it creates a competitive edge in terms of unique features, but is risky since it depends completely on the success of an outside vendor and would continue to depend on the vendor's success over the next few years. Another drawback is the fact that other desirable features must be forfeited due to the space requirements of the LiOn battery. Option 3 - Defer commitment to either battery in the interim. Under this option, two plans are considered.

One plan would be to "overdesign" the battery space so that either battery would be compatible. This plan would require that all systems external to the battery would have to be usable with either battery. The second plan involved maintaining dual designs for the laptop... one for the existing battery technology and another for the new LiOn technology. This choice keeps the option available for the more advanced technology, without the risk, but also costs more in the development phase because of the additional resources and redundant design efforts. The overdesign option is less attractive to the marketer, since it creates a larger laptop spatially. Decision Analysis Based on the decision tree analysis, which provides a cost / risk based preferred solution, is shown in Figure 1 below.

Based on this method, Option 3 is the preferred plan of action. It illustrates the advantage of the "no risk" approach. It does not, however, take into account the intangible value of beating the competition to the market with a unique product attribute, which often is a turning point in penetrating further into a market in which you competition is the primary shareholder. The decision tree analysis does not take into account the opportunity cost of taking resources away from other projects. Figure 1 (Note: the respective cost of each option is calculated by comparing against the return of the LiOn option in each case) Recommendation In order to minimize risk, yet maintain the opportunity to exploit a potential competitive advantage, Option 3 is the preferred choice. Even though Option 1 provides a no risk, safe investment, Option 3 preserves that option at a total cost of less than $10 M (15.47 0.6 = 9.3) The calculation considers the fixed and variable cost of both options.

If the opportunity cost of taking additional resources away from other product developments is considered to be $100 M or more, then option 1 would be the preferred choice, not withstanding the fact that beating the competition to the market with the LiOn battery would restore lost consumer confidence and allow future penetration into the laptop market beyond 3%. My recommendation is to pursue Option 3. I would choose this alternative to reduce risk, yet maintain competitive market opportunities. Conclusion Many times when situations present uncertainty, analysts try to quantify choices so as to make the decision easier. In this case, not all aspects of the options are easily quantified. In addition, the probabilities of certain events are estimated since there isn't enough information available to accurately predict their probability.

In cases like these, the best answer is usually to maintain multiple options as long as possible, using the lower risk options as a contingency if the preferred outcome becomes unavailable.