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our years ago, Lei Jun, a renowned Chinese entrepreneur and investor, gathered a dream team of engineers to pursue one audacious goal: “establish a bright new mobile phone company” . In just that time, their company, Xiaomi (pronounced “chow me”) has boldly usurped the Chinese cell phone market, becoming its largest phone provider, ahead of Apple, Samsung and Lenovo.
Xiaomi’s ability to outdo these corporate giants seems to stem largely from their nearly obsessive concentration on their customers. Xiaomi’s slogan is “Just For The Fans” and they clearly take it seriously. So seriously, in fact, that the phrase seems to influence all of the company’s decisions from manufacturing to sales.
This odd overarching philosophy is why Xiaomi’s story of nearly instantaneous success is not just about its great visionary or its brilliant marketing schemes. Instead, its an unfinished and intriguing epic about how an entire company has aligned to accomplish what was thought to be an impossible mission.
Chapter 1: The Underdog is born
Xiaomi was born on June 6th, 2010, co-founded by a group of eight partner’s hoping to create custom Android software. They dubbed their company, Xiaomi, which means little rice.
According to Jun, though, the name has deeper meanings than simply millet. He explains that the second syllable, “mi”, signifies both mobile internet, referring to their core business and mission impossible, referring to the precariousness of their situation. He suggests that the “xiao” relates to the Buddhist concept that a single grain of rice is as a great as a mountain, emphasizing the company’s concentration on the little things. And he says it’s cute.
The company’s logo keeps with the name’s simplicity and “cuteness,” evoking feelings of friendliness and confidence. A modernist symbol that, on first glance, appears abstract with angular blocks of white contrasting against a bold orange; something akin to Silicon Valley brands like Adobe, Nvidia, and NetApp. Upon further examination, the letters M and I become apparent, reinforcing the company’s selfless philosophy and purposeful moniker in one clean image. In this way, the founding team was able to craft a name and logo indicative of their brand philosophy: getting a lot out of a little.
So, with a significant name and logo pairing, the company could concentrate on its first product. And one year and two months after their founding, Xiaomi officially launched its first Android firmware, MIUI (pronounced Me You I). The mobile OS essentially brings the functionality and ease, generally attributed to Apple’s IOS, to the Android platform.
MIUI brings a massive visual upgrade to Android and includes a cloud storage solution, a voice controlled AI and a MIUI specific messaging system. Unlike Apple, though, MIUI can be downloaded on non-Xiaomi devices and it updates over the air every Friday, often, incorporating the newest consumer feedback. Xiaomi brags that a well-received criticism can actually be on an engineer’s desks in hours and within that week’s update.
With a fresh and clean new look to Android and the determination to make it better week in and week out, Xiaomi began to quickly make a name for itself.
Chapter 2: We’ll make the phone, too
After releasing MIUI, the company quickly turned to building phones to employ the software. And in just a year’s time, Xiaomi had designed and launched their first smartphone, the Mi1.
The Mi1 emphatically set the tone of what would be a large product line. It was packed with the industries top hardware, but sold at rock bottom prices. So, consumers could get Apple quality software and hardware in one phone at half the price.
Xiaomi can do this because their strategy is to sell hardware at nearly cost, intending to make money on the services they offer. To keep costs low, Xiaomi all but eliminates the middleman, selling directly to the consumer on its own site or 3rd party sites like Flipcart and the Chinese social media site, Qzone.
From the outset, the founding team had one major problem: manufacturing. As their VP, Hugo Barra, points out: dozens of cell phone companies order products from the same plants and it’s hard to imagine them prioritizing a startup’s hardware over an established firm like Samsungs’s. But, the founding team quickly realized that their limited production capability could be a strength.
How? Flash sales. Instead of keeping a ton of inventory and trying to intuit customer demand, Xiaomi does limited product runs. Then, they post these flash sales, knowing with certainty that every unit will be sold and shipped immediately. These sales keep demand high and ensure that Xiaomi won’t ever have to resort to discounting excess inventory.
The team couldn’t really afford to spend a ton of money on advertising, either. So, they chose not to spend any money on it at all. Instead, they rely on word of mouth, social media and events to hype their products. And this thrifty marketing approach seems to work. The Mi 1 received 300,000 pre-orders in the first day and a half, which is a lot for a company’s first foray into hardware.
Therefore, within two years, Xiaomi had found a winning model: sell great products, at great prices directly to excited customers who market the product themselves.
Chapter 3: Xiaomi Fans
Jun and his team knew that to stay true to their slogan and model, they were going to have to set a new standard in customer engagement.
So, they began to create an open community of commenters, early adapters, and tech experts to discuss the product online. Soon, they realized that the community could both help the less tech savvy troubleshoot problems and make recommendations directly to the R&D department. Xiaomi, now takes the program so seriously that they systematically classify their fans based on their involvement and astuteness with the highest level, fever fans, being offered special incentives and invitations to be involved in the product development cycle.
Jun gets involved with the fanfare, too. He famously posts over 100 comments daily on the popular Chinese micro-blogging platform, Weibo, to keep fans abreast of Xiaomi developments.
The team has also taken a cue from Apple on the experiential side. Like Apple, Xiaomi does huge announcement events. Jun has even adopted a similar presenting style of Jobs, casually wearing jeans and dark t-shirts, while he enthusiastically announces new products to a captivated audience. Check out how he announces Xiaomi’s first TV:
The fans go crazy. And if you’re wondering what the blinking lights are in the audience, they’re led foam light sticks that are normally passed out at concerts. But, as you can see, the event had a lot of similarities to a concert.
Xiaomi is also expanding the horizon of events by creating festivals and city reunions for their fans to meet up at and talk tech. Xiaomi provides everything needed for the events from gifts and prizes to the venue itself. And they’ve gone out of the box in event concepts too, with meetups ranging from rock climbing to visiting the elderly.
Simply, Xiaomi is creating a branded, democratic subculture, where everyone’s ideas can be heard. So, in a country where free speech is far from heralded, Xiaomi gives their fans a voice. And it’s proving to be a powerful strategy.
Chapter 4: It takes a team
One of the most enduring motifs in business theory is that excellent companies are those in which passion radiates throughout the organization and where talented individuals are empowered to do great work. Simply, to have an excellent company, you need a dedicated and effective team.
And all great teams start with their leaders. Jun, who is so often compared to the late Steve Jobs that he has begun to complain about it, seems to be propitiously suited to run a disruptive technology company.
Jun started his career after graduating from Wuhan University with a B.S. in Computer Science in 1991. First, Jun co-founded Kingsoft, a Chinese office software supplier, like Microsoft. Six years later, and at the age of twenty-nine, Jun became the company’s CEO.While serving in the position, Jun managed to found a side project called joyo.com that became China’s largest online retailer within four years. Amazon.com, looking to expand into foreign markets, bought the company in 2004 for $75 million.
After successfully taking Kingsoft public in 2007, Jun stepped down from his position saying that he was “exhausted and lost.” He quickly turned to angel investing backing a Twitter-like social media company, YY, which went public on the U.S. stock exchange in 2012 and UcWeb, which was bought out by Aliba for an undisclosed amount (the company was valued at $1.9 billion).
After four years away from Kingsoft, the company asked Jun to become chairman of the board and set a new direction for the company. Jun responded with a bold strategy: make their products free and design them for mobile devices. So far the risky play is working, with revenue for the company growing faster under the new model than in previous years.
[su_pullquote align=”left”]I noticed that people here are extremely passionate, almost to a personal level.[/su_pullquote]
Finally, Jun is the chairmen of Cheetah’s board of directors, a company that makes the fourth most downloaded non-game application on Google play, after only Facebook, What’s App and Facebook messenger. Cheetah is planning to offer a U.S. IPO soon.
And with a career of that caliber, it’s not surprisingly that Jun was able to attract other brilliant entrepreneurial minds to his team, starting with its President. Bin Lin, the company’s President and Co-Founder also had a pretty illustrious career before Xiaomi. Lin started his career at Miscrosoft moving swiftly up the corporate ladder eventually overseing the development of both Windows Vista and Windows 8. After leaving Miscosoft, he went to Google to head up the tech giant’s Chinese search product.
The company also recently added Hugo Barra, who they recruited directly from Google, where he oversaw the Android division. The hire has been controversial for a variety of reasons, most interestingly new claims that Google is losing its top brass to startups. In an interview with CNET, Barra said “”Things have been fantastic.” “The culture here is very similar [to the culture at Google] — this notion of having a company formed by a large number of small teams that move very quickly, have a sense of ownership, and are somewhat autonomous and independent.”
He continued: “It’s the Chinese culture of revering work. People take work very seriously — not that they don’t in Silicon Valley, but it’s more impressive here. I noticed that people here are extremely passionate, almost to a personal level. They take competition seriously. I certainly don’t see that in the Valley as much, but you do see it from time to time”
The Xiaomi team, then, decisively built an environment in which the smartest minds the world over, work intensely. And in within those sorts of cultures, successes seem to occur naturally. Not to mention, winning is fun and Xiaomi wins, a lot.
Chapter 5: Sell, Sell, Sell
In late July of this year, Xiaomi took the next step forward in its interesting life, expanding its product offering to India. As expected, it went well. The first day of sales for the reasonably priced, $230 Mi 3 crashed Flipcart, the exclusive online retailer for the product. The first sale lasted under an hour. The next three rounds all sold out in under three seconds.
Overall, the company sold just under 100,000 units. To put that in context, Xiaomi products sold out faster than Justin Beiber’s Madison Square Garden tickets.
And India is pretty indicative of how things are going for the company, overall. In the second quarter, Xiaomi easily surpassed Samsung for the top position in Chinese Mobile Market share. They shipped
just under 15 million phones in China during that time, compared to Samsung’s 13.2 million.
And Jun isn’t looking back either. He said in an interview that he plans to sell 100 million units next year, by expanding into other foreign markets like Russia and Brazil. The company will have more streamlined manufacturing capabilities to do it too, coming off a funding round at $10 billion evaluation.
Xiaomi hasn’t forgotten about America either. They just bought the domain, mi.com, for $3.6 million and are hosting the English version of their site on it. Surprise: it’s sleek.
Chapter 6: No Ending, just a beginning
Still, there seems to be more to this story, than the brilliant team, huge sales and great products. Xiaomi seems to just have something intangible that their competitors have long lost.
In an interview with CNBC, Jun explains what he thinks this element may be: “Xiaomi’s priority is not revenue, not profit, nor market share,” Lei said. “We focus on making the product that makes users scream.”
And they sure do make exciting products. But here at F&F, we think that Xiaomi’s real advantage is they have heart. That they are driven by something more primal than money. And its this oft overlooked element that makes us think China’s new mobile giant is only just getting started.