Tag Archives: xiaomi

Asia is Driving Innovation

Unfortunately there is still almost colonial attitude towards emerging markets in the western countries (especially US and Europe). When dealing with people who are not living and working this region, the knowledge of the development and innovation happening in here is still quite modest. Everyone recognizes the business potential, but they think that it is just some void, which can be filled with western products.

They could not be more wrong.

Micromax is biggest phone manufacturer in India.

Xiaomi is the world´s third biggest phone manufacturer and China´s biggest.

Alibaba is worth more than Amazon and Ebay combined.

There are two prevalent myths, which are just wrong. Other is that all the Asian brands are just copying western brands and doing it cheaper. Other is that their whole success is based on the big local markets. These myths are not the whole picture:

1. Asian brands are not just cheap copycats.

Micromax has cheap phones that is true. They also have a solar powered phone. I think that is quite cool. Xiaomi admittedly copies Apple with pride, but it has also totally disrupted the way to sell the phones. Innovation takes different forms in the Asia that is certain, but identifying all the brands as either copycats or cost cutters is dangerous simplification. Price is a big issue in all the markets and many Asian tech innovations have been able to do things more cheaply which is appreciated also by western consumers.

2. They are not popular because they are local, but because they understand local consumer.

One of the main push for Line & WeChat for their popularity, was the addition of stickers. As the script language is slower to type with your mobile, the emojis on steroids enable you to communicate faster and convey more emotion. Facebook messenger has definitely taken some cues from WeChat and Line in its position. Flipkart & Alibaba have understood the delivery dynamics on their respective countries better than Amazon and therefore are now kicking Amazon´s ass.

No matter where you are, you should have eye on Asia. Not only because the region is growing, but also because the next big innovation is coming from (around) here.

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Why Xiaomi is The Future of Smartphone Industry?

What is the world´s fourth and China´s biggest smartphone company?
Hint: It is not Nokia.

It is actually company called Xiaomi, four-year old Chinese company, who does really affordable smartphones and has been dubbed as the Apple of China. it has taken China by storm and is now eying for world dominance. So forget the usual players for a moment and take couple of lessons from the new rising star of mobile:

1.Smartphone market will be commoditized, be cheap
Smartphone is not a status symbol anymore or anywhere in the world. The latest innovations in smartphones have majorly been in terms of size. Xiaomi´s operating margin was only 1.8 percent compared to 28.7% Apple and 18.7 Samsung. Part of it is due to their aggressive growth strategy, but other part is the commoditization. Profits will definitely shrink in smartphone category. Especially when the main source of growth will come from developing markets.

2. Copy with pride & style
One of my colleague ordered new Xiaomi phone. When I tested it out, it was quite a revelation for a devoted Apple user. Actually it was probably the first Android phone I thought of actually, so striking was the similarity with iPhone. Whereas many other copycat products I have seen, it did not feel cheap or shady at all. The package was nice and the phone felt way more premium than its price. So it would be unfair to categorize Xiaomi phones only as copycats, but it would be unfair not to mention that aspect either. It is not coincidence that Lei Jun, the founder of Xiaomi, rocks black turtlenecks and jeans in their product unveilings. Technologic innovation is expensive, so Xiaomi bypasses that one and innovates in other areas of their business.

3. Innovate the business model
Xiaomi is not technologically innovative, that is true. From business perspective, they have been really disruptive. Xiaomi keeps their phones longer in the market than other competitors (even to 18 months compared to 6 months of Samsung). Apple has to come up with new products constantly to keep up their margins. Xiaomi is more betting on component cost drop-off during those two years and prices their product initially close to the component cost. Selling phones (they also have tablets and tvs) is just one side of the coin; their main goal is to actually sell services and apps through the phone.

Next year will be important litmus test for their approach as they are rapidly expanding beyond China. They concentrate on markets with large populations, e-Commerce infrastructure and weak telecom carriers. The initial response from India was great, although now the sales have been blocked because of potential patent infringement. The focus on India, Indonesia, Brazil & Russia is wise strategy, but there might be actually some opportunities in more developed markets as well. My colleague was not the only Singaporean who has bought their new phone. During this Christmas season Xiaomi phones have been more popular lucky draw prizes than iPhones. At least for a while, the slick design and renegade attitude has certain aspirational cool factor, not normally attributed to budget versions.

4. Innovate the distribution
Xiaomi has a digital-first approach to the sales of their phones. They partner with big e-Commerce retailers (like Tmall in China and Flipkart in India), and sell their phones through them. They never sell through brick & mortar stores. By selling directly to consumers, the company can collect and administer all the feedback and built it into the next generation of their phones.
They are also well known for their flash sales, which resemble more of buying rock concert tickets than traditional mobile phone sales. In China, during Single´s day, they sold over 200k smartphones in less than 3 minutes. In India they sold out in their flash sales in 4 seconds. Flash sales work both from branding and business perspective. They create demand and buzz around the phone. Flash sales are not just solitary transactions; they are actual events. One of the main reasons why they sell limited quantity of phones each week is to keep costs down by having smaller inventory.

5. Being cheap does not mean that you do not have brand
Xiaomi phones are entry-level phones, but creating brand affinity with teens is not necessarily a bad strategy. Xiaomi is not just a cheap phone for their devoted fans. It resembles more like religious cult. Part of it is that Xiaomi is probably the first technology brand, that Chinese can really be proud of. It does help to have charismatic leader to go with it as well. Xiaomi launch events are real festivals and people even buy tickets to attend them. Over 60 million watched the livestream and some even took 15h ride to attend those launch events. The events, flash sales and the product serves as marketing. Xiaomi does not really do conventional advertising and uses only 1% to marketing. Their devoted fans and devoted leaders are the best marketers. When Lin Bin (Xiaomi co-foudner) had a “planking” competition with their management team this December, the photo was shared over 3000 times. Not necessarily something that would happen with more traditional companies.

Although you would not necessarily switch to Xiaomi phone, their disruptive business model is something to follow and watch out for in 2015.

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