5 Classes From Xiaomi’s Path to Smartphone Supremacy

In June 2021, a world smartphone gross sales report marked an uncommon tipping level. In accordance with Counterpoint Analysis, Xiaomi, with a 17.1 p.c share of worldwide gross sales, surpassed each Apple and Samsung and have become the #1 smartphone model on the planet for the primary time. Extra apparently, Xiaomi did it with out coming into one of many largest smartphone markets – america – as a result of potential political and authorized dangers. After Huawei’s setback, Xiaomi is much from an apparent contender to take over international management in a market dominated by family manufacturers reminiscent of Apple and Samsung. But, it occurred.

Past smartphones, Xiaomi has achieved international supremacy within the burgeoning Web of Issues (IoT) market, as my INSEAD colleague Amitava Chattopadhyay detailed in a latest INSEAD Data article and case research.

There are lots of causes for Xiaomi’s unlikely rise. For instance, Chattopadhyay describes how the corporate successfully leveraged strategic alliances to construct aggressive benefit in IoT. On this article, I hope to enhance his and others’ insights by trying on the elementary strategic rules that underlie Xiaomi’s extremely profitable method in smartphones – a crowded area deemed unattainable to enter by many. These rules may also help different firms pay nearer consideration to challengers like Xiaomi of their industries.

At first, Xiaomi’s product technique carefully follows the worth innovation rules.

Xiaomi’s telephones are designed to resolve the unmet want of the iPhone customers. As a substitute of following the trade playbook and pushing incremental expertise enhancements, Xiaomi continues to make acutely aware function selections.

For instance, the primary Mi cellphone was designed for the dissatisfied Apple prospects in China. Due to the quick improvement of tremendous apps, reminiscent of WeChat, Chinese language customers use their smartphones to talk, commute, store and pay for all the pieces. Consequently, lengthy battery life is completely essential. For Instagram or Weibo influencers, digicam {hardware} and software program are important for photographs, movies and livestreams. In comparison with these necessities, different options (such because the gyroscope) are superfluous decorations.

Having developed a deep understanding of native wants, the Mi cellphone product workforce made severe trade-offs to switch “ornamental” options with important upgrades. Going through the final word smartphone model, the primary Mi have already received a cult-like following due to the worth supplied within the native context.

As early as 2014, Xiaomi gross sales surpassed each Apple and Samsung in China. By 2018, Mi cellphone overtook Samsung in India.  Each step of the way in which, they keep on with the worth innovation rules and making worth trade-offs based mostly on the native client wants. After I spoke to the Xiaomi design workforce, they idolised Steve Jobs not due to his persona however his obsession with client behaviours and a focus to element. Now it appears the scholar has grown right into a grasp.

Second, Xiaomi created actually differentiated merchandise for every client section.

Whereas Apple attempting to carry on to its high-end positioning and Samsung rigorously enjoying throughout a number of segments by progressively “watering down” options to produce lower-end markets, Xiaomi selected the much less “good” and fewer environment friendly method. The corporate designed completely different merchandise with particular function trade-offs based mostly on the wants of every section. Xiaomi additionally created sub-brands in every section: Mi (and Be aware) for the excessive finish, POCO for mid-market and Redmi for low finish.

For instance, in comparison with Samsung, Redmi telephones typically supply higher efficiency on key options reminiscent of battery life, processors and show whereas promoting at a lower cost.

Third, Xiaomi performs well throughout a number of digital ecosystems.

Xiaomi’s technique differs from Apple, which orchestrated digital ecosystems by means of the App Retailer, iTunes, AppleTV, and so forth. Staying true to its id as a {hardware} supplier, Xiaomi affords gadgets that assist a number of ecosystems in China – WeChat (Tencent), Weibo, Alibaba, and so forth.

As well as, Xiaomi has created a broad vary of complementary merchandise that supply a number of entry factors to those ecosystems, reminiscent of digital scooters for mobility, IoT home equipment, and extra. Their broad protection helps to create an integrative and coherent client expertise and in flip anchors their cellphone because the connecting level of the completely different ecosystems. Chattopdhyay and his co-authors coined the time period “strategic coalescence” to explain how Xiaomi tapped private networks to pick out high-quality partnerships, ensured mutual incentives and profitability all through the ecosystem, and used the positive aspects therein to allow a low-margin coverage that made Xiaomi merchandise irresistible to customers.

Fourth, Xiaomi is all the pieces digital of their enterprise and organisation.

Based a mere 11 years in the past, Xiaomi understands the digital world and the digital technology. In comparison with Apple and Samsung, Xiaomi was born digital and had a clean canvas to arrange its product and its enterprise.

Apple made the smartphone an important a part of our on a regular basis lives. However Xiaomi understands that smartphone is not only one other cool gadget however a central management tower of our lives.

As well as, Xiaomi organises its enterprise actions round digital. Whereas the glass dice flagship shops helped set up the Apple model, Xiaomi constructed its manufacturers primarily on-line. The corporate closely leverages social media advertising and marketing together with flash gross sales and fan occasions to advertise merchandise. Consequently, digital helped Xiaomi considerably cut back its prices.

Xiaomi additionally constructed a small and Agile organisation. With round 22,000 workers, Xiaomi’s complete headcount is considerably smaller than the 28,000-strong Samsung IM division, leaving apart international advertising and marketing and different central useful groups of Samsung.

Lastly, on-line buying highlights the power of Mi cellphone options.

In the course of the pandemic, most customers across the globe wanted to buy on-line, and sometimes with a restricted finances. As a substitute of the unparalleled in-store expertise so rigorously crafted by Apple and the simple model attract from Samsung, on-line worth patrons are introduced with the stripped-down record of options in a product comparability desk. As a result of the value-to-price ratio is designed in accordance with client wants, Xiaomi turns into the apparent winner. Glowing opinions from glad prospects then set off advice algorithms, and their gross sales proceed to rise.

It stays to be seen how lengthy Xiaomi can maintain its international management place. Nevertheless, their technique is probably not simply copied by Samsung in a brief time frame, which makes this probably extra than simply “a summer time fling”.   

Chengyi Lin is an Affiliate Professor of Technique at INSEAD. 

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