Part 5/14:
Dell’s knowledge of component costs, combined with his understanding of market pricing, gave him a structural cost advantage—more than 40 years later, the core of his business remains predicated on this principle of cost efficiency and close-to-source sourcing.
Cost Discipline and the Art of Self-Knowledge
The importance of understanding costs was exemplified by the story of how Dell outperformed competitors like Compaq. Dell’s operating costs—18% of revenue compared to Compaq’s 36%—illustrate how rigorous cost control and detailed knowledge of the business empower a company to outmaneuver larger rivals.