Expert Answer:Xiaomi Inc Case Analysis

  

Solved by verified expert:Xiaomi case (First file attach) and related readings, your reactions and thoughts, including rise of Caogen culture after Deng’s reforms and the related phenomenon of shanzhai ji and the related, and the role of social media in Xiaomi’s innovation process. As you read focus on Xiaomi and its culture (“value network”) and business model, and the related readings, including rise of Caogen culture after Deng’s reforms and the related phenomenon of shanzhai ji and the related, and the role of social media in Xiaomi’s innovation process. Also try to find out who else is now competing with Xiaomi and how is their business model different.Xiaomi, Caogen, Social Media, And The Future Of Innovation Can Innovation Be Crowd-Sourced? Is The “Shifting Basis Of Competition” Shifting Again In The Smartphone Field?———————————————————————————————————————————————————————•Discuss Xiaomi and its Innovation Culture –Formal case Xiaomi :The Rise of a Chinese Indigenous Competitor (2015) –“Xiaomi, Not Apple, Is Changing the Smartphone Industry” (HBR, October 2014). –Kean and Zhao, “Renegades on the frontier of innovation: the shanzhai ji “grassroots” culture of Shenzhen, China”. long article, so you may skim. But you will learn recent Chinese economic history. –“When Customer Become Fans” (MIT Sloan Management Review, 2016). –Xiaomi’s “Social MediaBusiness Model” (skim this research article).
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TB0417
Mary B. Teagarden
Carolyn Fifi
Xiaomi, Inc.: The Rise of a
Chinese Indigenous Competitor
Always believe that something wonderful is about to happen.
Xiaomi Mantra
Xiaomi’s rapid rise is changing the smartphone landscape in China, and potentially the world. China rapidly
surpassed the United States of America to become the world’s largest smartphone market in 2011. While industry
giant Apple’s attention was focused on overtaking industry leader Samsung for the fast-growing China market,
Xiaomi burst onto the mobile phone scene catching both giants off guard. In the five years since their founding
in 2010, Xiaomi rose to be the world’s third largest smartphone company based on units shipped. South Koreaheadquartered Samsung Electronics Co. Ltd. and U.S.-headquartered Apple Inc. are the holders of the first and
second spots, respectively.
When founded, Xiaomi’s vision was to develop and sell software for mobile devices using the Android
operating system. As the company evolved, Xiaomi grew into a mobile Internet and e-commerce company that
contract-manufactures smartphones and compatible devices designed to offer a complete customer experience.
Xiaomi, one of China’s relatively few indigenous innovators, has been a major disruptor in China’s lucrative mobile telecommunications industry, due in large part to their emphasis on continuous, incremental improvement.
The reputation of Xiaomi’s driven founder, chairman and CEO Lei Jun, a Chinese serial entrepreneur and
investor, is that he rarely rests. His reach in China’s high-tech sector is extensive, and his vision for Xiaomi aggressive. Lei stands out from many other Chinese IT leaders like Alibaba’s Jack Ma or Lenovo’s Yuanqing Yang;
when he founded the company, he had no Western experience and did not speak English. To realize his vision, Lei
surrounded himself with a world-class team of Chinese executives—and one prominent Western executive—with
collective experience at top foreign IT firms like Google, Microsoft, Motorola, and Yahoo. This executive team
complemented Lei and brought attributes that Lei lacked, in addition to considerable world-class IT experience.
Xiaomi was the 2014 leading smartphone vendor by shipments in China and the third largest smartphone
manufacturer globally. Lei has come a long way from his youth in Xiantao, Hebei, to the helm of the most
highly valued start-up in the world; yet, challenges remain for Lei and for Xiaomi. With more than 18 million
handsets sold in China by 2013, and products launched regionally in Taiwan, Hong Kong, Singapore, Malaysia,
Philippines, India, and Indonesia, the company contemplated global expansion. Xiaomi had been very successful
in China, but how would they fare in the global market? Would Xiaomi need to develop additional capabilities
to compete head-to-head with industry giants Apple and Samsung? Given Lei’s extraordinary range of interests
and activities, would he have the focus and bandwidth to lead Xiaomi to its future?
Lei Jun, Founder, CEO, and Chairman
Lei was born during the height of China’s Cultural Revolution, in December 1969, in Xiantao, a small city in
China’s central Hubei province where his father was a schoolteacher. He attended local primary and secondary
schools. Lei earned a Bachelor of Science degree in Computer Engineering in 1991 from Wuhan University, one
of the first schools in China to offer Computer Engineering.
Copyright © 2015 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. This
case was written by Professor Mary B. Teagarden and Carolyn Fifi for the sole purpose of providing material for class discussion.
It is not intended to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of
the material in this case is prohibited unless permission is obtained from the copyright holder.
This document is authorized for use only by di feng in SPRING 2019 (UNGER) THE INNOVATION PROCESS-1-1 taught by BARRY UNGER, Boston University from Jan 2019 to May 2019.
For the exclusive use of d. feng, 2019.
Today, billionaire Lei is one of the richest men in China. Often referred to as the Steve Jobs of China, he
dresses in simple black shirts and blue jeans emulating Jobs, whom he has admired since his college days. Like
Jobs, he has been called a shameless self-promoter and supreme marketer—characteristics that are thought to
partially explain his company’s success by Xiaomi’s competition and the media. Described as wonkish by the
media and his colleagues, Lei’s technical focus remains intense and consistent. In the spirit of continuous professional improvement, Lei seeks criticism as well as praise. His reputation as a very hard worker propelled him on
a dynamic career path from the beginning.
Shortly after graduation, Lei began his career with Kingsoft Corporation Limited, a Chinese office software developer that creates software similar to Microsoft Office. His talent was recognized early and his career
progressed steadily. Although he is often identified as its co-founder, Lei worked for Kingsoft for several years
before being appointed CEO in 1998. He remained at their helm and, after repeated attempts, oversaw a successful initial public offering launch and listing on the Hong Kong Stock Exchange in 2007. Lei resigned from
Kingsoft in 2007, reportedly for health reasons associated with the preparation of the company’s Hong Kong
Stock Exchange listing. The IPO process had been exhausting. In July 2011, Lei rejoined Kingsoft and has been
its chairman since then.
During his time away from Kingsoft, Lei realized that his real dream was to build his own high-tech company. He concluded that timing was critical when starting a new venture, especially in the high-tech industry
sector. The mobile Internet industry was taking off. Lei saw an opportunity to pursue his dream by catching the
mobile Internet wave. Years later, in a post on Sina Weibo—a social media forum similar to a combination of
Twitter and Facebook—in September 2011, he reflected on Xiaomi’s success and commented, “Things get much
easier if one jumps on the bandwagon of existing trends…A pig could fly if it finds itself in the eye of a storm.”
Lei’s entrepreneurialism has been a consistent theme since his graduation from college. While at Kingsoft,
Lei founded Joyo.com in 2000, an online bookstore company that was subsequently acquired by Amazon in
2007. From 2007 to 2010, Lei invested in various tech start-ups, including UCWeb—purchased by Alibaba in
2014—where he served as chairman and president of what became China’s largest mobile browser company.
In addition to his entrepreneurial activity, Lei is an investor who pursues three key areas for investment—
the mobile Internet, e-commence, and social networks. He is a co-founder, founding partner, and chairman of
the Shunwei Fund, a venture capital firm that specializes in incubation, early to mid-stage, and growth capital
investments in a variety of information technology-related high-tech industries. Lei also co-founded VANCL
Limited, an online apparel and accessories company; and YY Inc., a communications and social media platform
where he serves as chairman.
Lei is sought after as a consultant in the mobile Internet industry for his vision expertise. He served as a
director and chairman of Cheetah Mobile Inc., a Chinese firm specializing in Internet security, beginning in
October 2010. Lei is an investment advisor for Taiwanese Hotung Investment Holdings Limited, a venture capital
fund that invests primarily within Greater China. He also served as a director of 2020 ChinaCap Acquirco, Inc.,
a hedge fund, and is an advisory board member at the Great Wall Club, an organization that provides professional services to leaders in China’s mobile Internet industry.
Xiaomi, Inc.
Xiaomi disrupted the smartphone industry in China through a combination of innovative marketing and distribution practices; dynamic and pragmatic supply chain management; flexible manufacturing; and ambitious
staffing practices focused on attracting and retaining world-class executive talent. From Lei’s founding vision
to develop and sell software for mobile devices using the Android operating system, the Beijing-based Xiaomi
quickly evolved into a smartphone juggernaut.
In 2011, unit sales of all Xiaomi smartphone models stood at 3.52 million. In 2012, Xiaomi sold 7 million
units. Xiaomi far exceeded its unit sales target of 15 million units for all its models by selling 18.7 million units in
2013. Xiaomi’s unit sales of all its models more than tripled in 2014 as unit sales reached 61.1 million. Xiaomi’s
evolution has been rapid, savvy, and calculated. (See Tables 1 and 2 for details on China’s smartphone shipments.)
2
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For the exclusive use of d. feng, 2019.
Table 1. China’s Smartphone Shipments by Vendor, 2014Q4 vs. 2014Q3 and 2013Q3
2014Q4
Market Share
2014Q3
Market Share
Rank
Vendor
1
Xiaomi
13.7%
14.8%
2
Apple
12.3%
3
Huawei
11.0%
4
Lenovo
5
Samsung
Others
Total
2013Q4
Market Share
Year-on-Year Unit
Growth 2014Q4
6.5%
150.0%
5.0%
7.4%
99.7%
9.1%
10.2%
28.3%
9.5%
12.8%
13.2%
-14.3%
7.9%
11.0%
18.8%
-49.9%
45.6%
47.2%
43.9%
23.5%
100.0%
100.0%
100.0%
19.1%
Source: IDC Asia/Pacific Quarterly Mobile Phone Tracker, February 2015.
Table 2. China’s Smartphone Shipment by Vendor, 2014 vs. 2013
Rank
Vendor
2014 Market Share
2013 Market Share
Year-on-Year
Growth in 2014
1
Xiaomi
12.5%
5.3%
186.5%
2
Samsung
12.1%
18.7%
-22.4%
3
Lenovo
11.2%
11.9%
13.7%
4
Huawei
9.8%
9.3%
27.4%
5
Coolpad
9.4%
10.7%
4.6%
44.2%
44.9%
22.0%
100.0%
100.0%
20.0%
Others
Total
Source: IDC Asia/Pacific Quarterly Mobile Phone Tracker, February 2015.
The Xiaomi Executive Team
Lei did not achieve this success alone. He surrounded himself with a world-class team of Chinese former executives,
who previously worked at multinational high-tech firms, like Lin Bin from Google, and others from Microsoft
and Motorola, and a deep bench of technical experts eager to grow with the company. Lei recruited Hugo Barra,
formerly vice-president of Android Product Management at Google, to oversee global operations. Lei is quick to
give credit to the team who, for the most part, have been with him since the beginning. (See Table 3.)
Xiaomi Early Days
Xiaomi began with firmware—software that provides control, monitoring, and data manipulation in devices
such as digital cameras and mobile phones. Their MIUI firmware was developed and launched in August 2010.
MIUI is a customized ROM—read only memory. (See Exhibit 1 for a picture of the MIUI skin.) During the
rise of Android smartphones, firmware developers across the world debated what features were important and
what needed to be added to a smartphone. The varied preferences among the community gave rise to different
versions of Android. One such Android firmware was MIUI (pronounced as Me-You-I) developed by Xiaomi.
MIUI, a custom Android ROM, was developed for the specific needs of Chinese users. However, the ROM
found fans all around the world for two reasons. One, MIUI simplified the Android interface in terms of the
application drawer, notification bar, and camera functionality. Two, the interface of MIUI was similar to that of
an Apple iPhone without the iOS and a high price tag. This meant that Android users could have the flexibility
of Android while enjoying the simplistic aesthetics of iOS. These two points enabled MIUI to gain traction and
attention among those in the international Android community. On the other hand, MIUI was criticized for
imitating features from Apple’s iOS and Samsung’s TouchWiz UI (user interface).
3
A04-15-0008
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For the exclusive use of d. feng, 2019.
Table 3. Xiaomi Executive Team
• Mr. Bin Lin graduated from Sun Yat-sen University in 1990, where he obtained an Electronic Engineering degree.
He received his Master’s Degree in Computer Science at Drexel University in 1992. Soon after, he joined Microsoft,
where he worked as Lead Project Engineer, Senior Development Manager of MSRA, and Engineering Director of
MSRA. Mr. Lin also contributed to the R&D of Microsoft products, including Windows Vista and IE 8. In 2006,
he joined Google as the Vice President of the Google China Institute of Engineering and the Engineering Director
of Google Global. He was in charge of building and managing Google China’s Mobile Search and the Android App
Localization teams.
• Mr. Wanqiang Li is currently head of the Mi.com e-commerce team. In 2010, Mr. Li co-founded Xiaomi where he
led both the MIUI and Mi.com teams. Mr. Li has made a significant contribution to software and hardware design,
development, marketing, and other departments at Xiaomi. Since 2012, Mr. Li has been in charge of the e-commerce
Management, Operations, and Marketing teams. Mr. Li is also the creator of popular Internet keywords such as “mobile
phone geek,” “F code,” and “Mi Fan Festival.” In 2000, Mr. Li joined Kingsoft and co-founded their UIUX Design
Center. He served at Kingsoft in various positions as the General Manager of Kingsoft Dictionary, Chief Designer
of UI department, Director of Design Center, and Director of Internet Content. Mr. Li has also played a key role in
developing many well-known software projects, including Kingsoft Antivirus, Kingsoft Dictionary, and WPS Office.
He is also considered one of the earliest UI and HCI experts in China.
• Dr. Guangping Zhou is the director of Xiaomi’s Mi-Phone Team, and obtained his PhD from Georgia Tech University
in 1991. He was the Chief of Hardware R&D of Motorola’s best-selling model “Ming” series. In 1995, he joined
Motorola as a core expert engineer and returned to China to establish the R&D Center for Motorola China in 1999.
During his career at Motorola, Dr. Zhou served as Senior Director of the Motorola Beijing R&D Center, Chief
Engineer and Director of the R&D Center of Motorola Personal Communication Department, Vice Chairman of
the Mobile Patent Committee in Motorola China Research Academy, and the Vice Chairman of Cellphone Quality
Control in Motorola Asia-Pacific.
• Mr. Jiangji Wong leads the Mi Wi-Fi and Mi Could teams. He graduated from Purdue University and worked for
Microsoft from 1997 to 2010. While serving as the Director of Development at the Microsoft China Academy of
Engineering, he oversaw the development of products such as the high-performance analysis system of Microsoft’s
business server, B2B systems, Biztalk auto-logistics distribution system, Windows Mobile (China), Windows Phone
7 Multimedia, Internet Explorer, and Instant Messenger.
• Mr. Feng Hong leads the MIUI division at Xiaomi. He graduated from Shanghai Jiao Tong University, where he
obtained a computer science and engineering degree. He continued his academic career at Purdue University, where
he received a Master’s Degree in Computer Science. From 2001 to 2005, Mr. Hong worked at Siebel and then joined
Google as Senior Software Engineer in 2006. While at Google Headquarters, Mr. Hong oversaw Google Calendar,
Google Maps, and Google 3D Street View. From 2006 to 2010, he worked as Senior Product Manager of Google
China and led the Google China team to develop a series of localized products like Google Music and Google Pinyin
Input.
• Mr. De Liu leads Xiaomi’s Industrial Design and Ecosystem development programs. He graduated with a Master’s
Degree in Industrial Design from Art Center College of Design located in California, USA, where he is one of only 20
Chinese students to receive a diploma during the institution’s 80-year history. Mr. Liu returned to China to establish
the Industrial Design Department at Beijing University of Technology, where he served as the department’s dean.
• Mr. Tong Chen leads Xiaomi’s Content Investment and Operations. He holds multiple degrees: an MBA from China
Europe International Business School; a Master’s degree in Journalism from Renmin University of China; a Master’s
degree in Communications from Beijing Institute of Technology; and a Bachelor’s degree in Electrical Engineering
from Beijing University of Technology. Mr. Chen participated in the founding of a Sina subsidiary company in 1997
before joining Sina in 1998 as Executive Vice-President of Sina Corp and Chief Editor of sina.com.
• Mr. Hugo Barra is responsible for Xiaomi’s Global Division and is in charge of the company’s products and operations
in all markets outside of Mainland China. Before joining Xiaomi in 2013, Hugo Barra was Vice President of Android
Product Management at Google. Prior to joining the Android team, he worked for Google in London as Director of
Product Management for Mobile, a role he had since joining the company in 2008. Hugo is a graduate of Massachusetts
Institute of Technology, with Bachelor and Master’s degrees in Computer Science, Electrical Engineering, and
Management Science.
Source: Xiaomi Corporate Website http://www.mi.com/en/founder/. Retrieved July 5, 2015.
4
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For the exclusive use of d. feng, 2019.
MIUI was made for China. It quickly gained popularity among the Chinese users who primarily had inexpensive
Android phones until then. Chinese users preferred the
integration with local apps such as Sina Weibo and Chinese
language options. Early on, emphasis was placed on MIUI to
be able to run on multiple devices. MIUI continues to push
firmware updates to phones that are no longer supported by
their parent companies. For example, Samsung Galaxy S2 has
received the latest Android firmware through MIUI rather than
from Samsung. This has enabled Xiaomi to pursue longer life
cycles for their own devices later on.
Exhibit 1. MIUI ROM Created by Xiaomi
Beginning in 2013, Xiaomi decided to discontinue
Google services on their devices in China and promoted the
usage of their proprietary cloud services (MiCloud), paid
themes (MiThemes), and paid games—one of the fastest
growing IT sectors in Asia. To facilitate adaptation of these
services, Xiaomi developed a virtual currency called MiCredits
that can be redeemed in their online stores to access their value
added services.
Inspired by the Walmart and Apple business models,
Xiaomi provides the market with high-quality, customerresponsive, low-cost smartphones and extraordinary customer
service. They offer high-end Android devices using many of
the same components from the same vendors as industry leaders Samsung and Apple. They do this at very attractive price
points. Xiaomi has earned the reputation as the smartphone
manufacturer that enables almost everyone to own a smartphone with high-end specifications due to its affordable prices
and willingness to earn thin margins.
Xiaomi Smartphone Journey
In 2011, Xiaomi expanded its offering with the launch of its first smartphone, MiOne.1 Chinese consumers liked
the MiOne so much that Xiaomi received 500,000 pre-orders in the first 36 hours they were available online.
The company’s product portfolio currently includes two product families, the smartphone family and smarthome
family, which offer a range of related mobile phones and consumer electronics that connect to the Internet in
addition to mobile applications.
Xiaomi’s smartphones …
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