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Dell. Dell. Dell. When anyone is asked who is the leader in the personal-computer business, the answer is, of course, almost always Dell Computer Corp. (www.dell.com). Although Dell certainly deserves attention, another company does, too: CDW Computer Centers Inc. Operating in the brutally low-profit-margin business of computer retailing, CDW (www.cdw.com) has muscled its way onto the Fortune 500 list. Revenue has risen an average of 36% annually since 1996 and reached almost $4 billion in 2001. Net income has stayed steady at around 4% of revenue. As a result, shareholders have reaped returns of nearly 35% a year over the past four years. That stellar record has made CDW a New Market Leader, according to the criteria developed at the Center for Market Leadership, which uses a database of more than 5,000 companies to track changes in leadership rankings and explore how companies can become leaders. [For a description of the methodology, a list of the top 100 New Market Leaders, and a list of the 100 companies that have been the biggest gainers during the economic downturn, see “The Context 100s” in the February/March 2002 issue.] CDW has come a long way since Michael Krasny sat at his kitchen table in 1984 and took out a classified ad to sell his computer. In a story so incredible it sounds like it might have been lifted from an infomercial script, Krasny continued getting so many calls about the computer that he kept buying more, resold them, and founded a business. These days, CDW fills more than 15,000 orders daily, about 1,300 of which need to be customized. The company has more than 300,000 customers and sells more than 70,000 items, ranging from personal computers and accessories to services. CDW manages the complexity through state-of-the-art information systems that, for instance, let it turn over inventory faster than any competitor, with very few errors. As a result, CDW minimizes the money it has tied up in inventory and limits the chance that products will become obsolete while sitting on the shelf—a real risk in the fast-changing computer business. An advanced call center helps make CDW’s sales force the most productive in the sector, despite having smaller average orders than at competitors. Relations with partners are so automated and efficient that CDW gets discounts steep enough to let it compete profitably with Dell. The other key to CDW’s success is that it is unusually flexible about dealing with customers. CDW has struck a strategic nerve among customers by redesigning the purchasing process from their perspective. Customers—mostly small and medium-size businesses, which other companies find hard to deal with—can buy from CDW through any channel (phone, fax, or online) while dealing with a single account manager, who makes sure the customer gets the right discount, that orders conform to the customer’s corporate standards, and that any problems are resolved promptly. The account manager gets the same compensation no matter what the channel, so he has no incentive to push the customer in any unnatural direction. The managers, hired for their ability to “smile over the phone,” are given three to five months of full-time training, which makes them stand out in a market where service is usually an afterthought. While many companies talk about putting the customer first, CDW has used technology, changed incentives, and realigned its organization to make that promise a reality. Customers are saying thank you in the most important way—by spending more and more money with CDW. CDW Chairman and Chief Executive John Edwardson says the company holds only a 2% to 2.5% share of the market for services such as CDW’s. He sees the company’s potential market at $150 billion a year and thinks he can capture a much bigger share of that market, partly by doing better in large corporate accounts. If he can, there will be another name that immediately springs to mind in the PC arena: CDW. CDW. CDW.
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