How China’s Upstart Xiaomi Joined Samsung and Apple in the Big Leagues

Hong Kong is rarely seen as the birthplace of successful tech entrepreneurs or innovators. But with an increasingly vibrant tech startup community, such stereotypes are about to change.

One of the pioneers bringing such change is Kong Kat Wong (also known as Jiangji Wong) – a co-founder of China’s Xiaomi, one of the world’s leading smartphone vendors.

The Hong Kong-born tech entrepreneur (second from left, above) was recently in town to share the journey of Xiaomi’s success and his career development at the Hong Kong International Computer Conference organized by the Hong Kong Computer Society.

“Our goal is to make smartphones available to everyone. So when we launched this phone, we were able to capture market attention”

Joining the returnees in China

Xiaomi is no stranger to many smartphone and gadget fans in China. The company has become a household name in less than six years simply by selling low-priced full-featured smartphones.

Established in 2010, the company has since then sold more than 6.1 million units for RMB74.3 billion (US$11.3 billion). IDC ranks the company as the world’s fourth-largest smartphone vendor, replacing Korea’s LG. Only Samsung, Apple and fellow Chinese enterprise Huawei have bigger market shares.

Xiaomi has also extended its product portfolio to include tablets, Wi-Fi routers, TV, as well as cameras, electronic scooters and air purifiers.

Like many entrepreneurs, Wong had a life-changing moment that led him to Xiaomi. That moment was 2005 when he moved to China from the US, after working at Microsoft for eight years.

“I met Bin Lin [one of eight Xiaomi founders] at Microsoft in the US, and he was the person that suggested I move to China,” said Wong. “Lin was with Google China, and he introduced me to the vibrant Internet market in China.”

Although Wong was working at Microsoft China, he was amazed by the Internet community and potential in China’s mobile market.

His focus back then was Windows Mobile. But with software development experience in Biztalk’s auto-logistics distribution system, Internet Explorer and Instant Messenger, Wong was eager to take on entrepreneurship with his skills in this vibrant mobile market.

He met Jun Lei, who is now CEO and chairman, through Lin and other Xiaomi founders, and the rest is history.

Smartphone for everyone

Despite their passion for building an Internet company, the Xiaomi founders realized China was becoming a crowded market in 2010. Baidu, Alibaba and Tencent (known collectively as “BAT”) were maturing and dominating almost every aspect of the Chinese Internet market.

“We were looking for a market that BAT didn’t dare to enter,” said Wong.

With a low profit margin and high entry barrier, the smartphone market was a bleeding one. But it was exactly the market that the early founders of Xiaomi saw potential in.

“We don’t believe in making money from selling hardware, we only make money from the aftersales interaction and activities,” said Wong. That was how the founders of Xiaomi started to build feature-packed but low-cost smartphones.

When the company launched its first smartphone Xiaomi Mi1 in August 2011, it used Qualcomm’s Snapdragon, the fastest processor back then, with all the features that were comparable to a top-end phone. The device was sold at RMB1,999 (US$306), less than half the price of most smartphones, which easily cost RMB5,000 (US$760).

“Smartphones should not be limited to only the wealthy individuals. Our goal is to make smartphones available to everyone,” said Wong. “So when we launched this phone, we were able to capture market attention.”

Hardware as a triathlon game

The low-cost full-featured phone shook the smartphone market. In the years that followed, Apple and Samsung started to produce and release other low-cost phones. The market is now crowded with other China-based players, including Huawei and Lenovo.

“Hardware is a very complicated business,” said Wong. “It’s like triathletes, you need to be good in different skills, from the processors, user interface, software engineering to product design. That’s why we had eight founders.”

Wong noted that the initial challenge for Xiaomi was to find suppliers and partners to build the phone. It was a very risky business for them to offer parts and components to an unknown smartphone manufacturer.

“We are very thankful to have a CEO like Jun Lei, who has the reputation to convince people to take risks,” he said. “The early partners were crucial to our success.”

The major factor for the brand’s success in building a super active user community with high user stickiness was the creative marketing campaign via social media. Apart from posting creative and witty videos and pictures, the company also drives interactions with its customers

We are an Internet company

Apart from selling at an extremely low cost, Xiaomi also revolutionized the market with its aftersales interactions with buyers.

“We don’t see ourselves as a hardware company, we don’t even see ourselves as a consumer electronics vendor,” said Wong. “We only see ourselves as an Internet company.”

He noted there are two foundations to building a good Internet company. One of them is user stickiness, where customers stay with the product or brand for a long time. Second is building a super active user community.

“Super active means users must interact with the product multiple times per day,” he said. “A smartphone is the most active device. I personally check my phone all the time.”

Xiaomi built a super active community with 150 million active daily users. Wong attributed part of the success to the weekly update of its operating system (OS) MiUI. Different from most vendors, which used to update the OS through new devices – Apple’s iOS offers updates every six months – MiUI’s weekly update was revolutionary.

“Every Friday at 5pm, rain or shine, we will release an update,” said Wong. Throughout the years, Xiaomi has released more than 250 updates. Wong added the update was based on users’ feedback, as they are invited to vote for their most preferred and disappointing features or functions from the latest update.

To supplement its online sales channel, the company also provides express delivery service, within 24 hours. Other aftersales services include online customer support, product return service and express maintenance service, which were unavailable previously.

Wong added the major factor for the brand’s success in building a super active user community with high user stickiness was the creative marketing campaign via social media. Apart from posting creative and witty videos and pictures, the company also drives interactions with its customers.

When the company first launched its Wi-Fi routers, the beta users and media received a huge box. “The box contained all the parts, screws, a screw driver and gloves. We made them assemble the router themselves,” he said. “In this way, they will remember there is a hard drive within the router.”

Making decisions

Creativity and innovation played a big part in Xiaomi’s success. But like any organization, making fast and important decisions correctly is critical, especially for a startup with seven founders. Different from most startups created by young 

“We were by no means a group of young entrepreneurs,” Wong said. “The average age among the seven original founders was 40. We were probably the oldest Internet startup founders, ever.”

With experience in major corporations, the founders all understood the importance of making decisions fast. “We hold short meetings, which usually takes only about an hour,” he said. “We have a shared vision that’s the most important, plus a very good leader.”

Learning from their experience in large enterprises, like Microsoft and Google, Xiaomi’s founders also understand the lessons about M&As.

To support the company’s speedy product portfolio expansion, Xiaomi is building an ecosystem. Instead of acquiring different startups, the company invests in small stakes, allowing the startup to share the Xiaomi brand and community.

“CEOs need to have the passion to continue building the business and acquisition kills the fire,” said Wong. “We only invest in companies that share the same value and vision with us.”

Wong said Xiaomi currently has invested in more than 60 companies. One example is Ninebot, which recently owned Segway, a provider of electronic scooters. Other products include smart wristbands, air purifiers and water purifiers.

“We aim to bring fun tech products to everyone in everyday lives,” he concluded.

About the Author

Sheila Lam is Editor-in-Chief of Computerworld Hong Kong, a sister publication of CFO Innovation.

Photo credit: Xiaomi

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