Size: $10bn market capitalisation; 3,000 employees
OPENING CHINA: Technology for the people, by the people
Xiaomi is breaking the mould for technology companies—when the Chinese smartphone maker comes up with new products, it looks outside its walls for ideas and input first.
The company was founded four years ago by Lin Bin, a veteran of Microsoft and Google, and Lei Jun, co-founder of Kingsoft and one of China’s most successful entrepreneurs. So far, Xiaomi is living up to its name, which means “millet” in Chinese and is widely considered to be a reference to “millet and rifles”, a Communist Chinese idiom for revolution. Still a newbie on the smartphone market, it is already China’s third-largest smartphone maker, ahead of Apple, Coolpad Group and Huawei. It sold 26.1m units in the first six months of this year, 271% more than in the first half of last year.
Although often compared with Apple, Xiaomi’s business model could not be more different. Mr Lin, who was previously Microsoft’s chief engineer and vice-president of Google China Engineering Research, says the company’s openness, internally and externally, makes it unique not only among Chinese companies but also multinational technology companies.
“We are open with everybody about our business model, even down to the components that we put into the phones,” Mr Lin said in an interview on Xiaomi’s user forums at the Malaysian launch of Xiaomi Mi 3.
The company’s openness extends to its flat management structure, which is the opposite of the hierarchical, top-down structure in place at most Chinese companies. Xiaomi has only three management levels, and employees often use social media to talk to one another—to announce lunch events, form work groups and more. Xiaomi employees talk to suppliers via MiTalk, the company’s smartphone messaging and chat app.
The company also solicits open feedback from users—even inviting them to vote product features in or out—through online forums, MiTalk and other social media. It has 20m registered users on its forums and a staff of 20 to sort through the comments. In addition, Xiaomi has some 50,000 “VIP users” who regularly test new prototypes and products.
“Anyone who has a thought about what we can put into MIUI [Xiaomi’s operating system], we’ll take feedback. We may not be able to do it this week or next week, but we’ll be ranking those and try and see if we can add it into our features. As we go into more countries, we’ll be doing more and more of this,” said Mr Lin, age 45, during the forum interview. Users do more than just give opinions. For Xiaomi’s launch in Malaysia, much of the translation into Malay was crowd-sourced from users, he said. They also design screen icons and wallpaper.
The company also eschews traditional marketing entirely, instead selling directly online to consumers via social media, such as Weibo or QQzone in China or via Facebook, Twitter or Google Plus outside of China. Instead of accumulating and stocking items, Xiaomi sells its goods as soon as they come out of the factory in small batches through “flash sales”. Recently, it sold 7,000 handsets in Malaysia in 35 seconds.
Social media is part of the company’s DNA. Xiaomi sells its devices at close to cost and at about half the price of competitors, even though it uses the same high-performance parts as Samsung and Apple, because it cuts out most marketing and distribution costs. Its real money is made in services, including personalisation tools, security and social media, Mr Lin says.
For now, Xiaomi is best known as a smartphone maker, but Mr Lin has his eye on a services future. It is a vision that he believes will help transform China’s expertise from “making China” to “designing China”.