Mastery of supply chain will not give Dell the edge forever

The news last week that Dell will cease competing at the lower end in China should not have come as a great surprise, even if its new chief executive officer, Kevin Rollins, denied the story was true the following day. Sooner or later, Dell will have to face the likes of Lenovo.

There are three ways technology companies can succeed: by owning a monopoly, by innovating faster than the competition or by doing what they do better than anybody else.

There are two monopolists, of course - Microsoft and Intel. Microsoft's market share is usually put at about 95 per cent and Intel's at just over 80 per cent.

Innovation is difficult to define in general but even more so in business terms. A few years ago when there was great speculation about IBM or Sun buying Apple, the price was determined by typical Wall Street bean counters unable to evaluate Apple's ability to innovate. Not only did Apple avoid being bought, it brought out the iMac and, more recently, the iPod - two items that have completely reversed its fortunes.

Dell, a close partner with the above-mentioned monopolies, may not have a monopoly itself and does little in the way of innovation but it falls clearly in the category of doing things better than the competition.

Over its 20-year history, it has grown to be a dynamite delivery mechanism, a supply-chain monster on steroids. It not only sells technology, it actually uses it extremely well. For many years, no other company has been able to rival Dell in terms of putting boxes together and shipping them to customers.