Xiaomi sank its roots in the smartphone market in 2010 with MIUI, a software product for devices equipped with the Android operating system. It took only 7 years and specifically in 2017, to gain global recognition as a leading smartphone manufacturer reaching a revenue of $15 billion. Today, Xiaomi is the largest Internet of Things (IoT) company in the world and at the end of 2020, it had revenues in excess of $37 billion.

How has Xiaomi managed to achieve such extraordinary growth? Research has revealed that Xiaomi’s approach to collaboration has been the key factor behind its rapid growth. Since its inception, the company has focused on building mutually beneficial relationships with both consumers and partners. This new and deepened collaboration-based strategy, which we call “strategic coalescence,” has given it a sustainable competitive advantage and shaped every significant move it has made, driving its spectacular growth.

IoT

Xiaomi’s Road to Internet of Things (IoT) Dominance

In 2010, the Chinese mobile phone market was saturated with well-known domestic and international brands, as well as numerous low-quality brands competing at every price point. Xiaomi decided to avoid direct competition by offering its first software product, MIUI, for free.

To entice consumers, Xiaomi created an online community of smartphone users and encouraged tech enthusiasts to help test software versions and provide ideas for improvements. The feedback was integrated into free weekly software updates. This process of co-creation with end users was unprecedented in the history of telephony and differentiated Xiaomi from other software providers. Users not only received free software that they helped create, but they belonged to a tribe and felt that their ideas mattered. Xiaomi had successfully created a way to quickly identify and produce anything the community wanted, culminating in user-friendly software and brand advocates who would become early adopters of Xiaomi’s smartphones.

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IoT

When Xiaomi released its first phone in 2011, its product release strategy further differentiated it from the competition and established a solid foundation for future products. It launched a narrow range of smartphones, produced limited batches that were sold online (mainly through its own platform) and shipped directly to buyers. In addition to releasing next-generation phones every year, Xiaomi released limited batches of updated phones on a weekly basis. Each phone was stato pre-installed with MI Community, a channel through which users were encouraged to submit feedback and vote on updates they wanted to make.

Xiaomi leveraged the power of this community to promote and crowdfund the production of the phones. Community members, grateful to be included in the development process, were informed about upcoming products before they were launched. Many were so excited to pick up these limited devices that they eagerly paid a reservation fee to pre-order the phones. Demand was so high that these limited batches would sell out in hours, often minutes, creating a sense of scarcity that fueled further excitement and demand. This secured sales and dramatically reduced inventory, distribution and marketing costs. The cost savings allowed Xiaomi to sell high-end smartphones at very low margins (less than 5%) and capture the attention of value-conscious consumers.

IoT

Despite the self-imposed low margins, Xiaomi’s overall profits have been thriving due to high sales volume and low overhead costs. Additionally, while MIUI software was free and easily accessible to consumers on any Android device, Xiaomi received a healthy commission for services purchased through MIUI (games, apps, music). This allowed Xiaomi to invest in new product lines and leverage its resources to create an offline retail infrastructure and expand market reach internationally. With a strong brand and distribution system in place, it was well equipped to produce, market and distribute other technology-related goods and services to a wider range of consumers.

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Xiaomi capitalized on the IoT movement by redefining MIUI and its smartphones as a core component, similar to a remote control, that can connect and control a network of services and products within an ecosystem. Its ecosystem strategy was based on the premise that, with the advantages of seamless integration and visual harmony, the more Xiaomi IoT products consumers owned, the harder it would be for competitors to lure them away.

IoT

Xiaomi did not have the resources and expertise to quickly occupy the IoT device market and create a sustainable competitive advantage. It chose to invest in other companies that had the knowledge and resources to develop devices that would complement and add value to Xiaomi’s vision of an ecosystem. To ensure that partner companies were properly integrated into its ecosystem, Xiaomi’s founders and executives used its social networks to select companies that aligned with Xiaomi’s core values. In essence, the selected companies had to essere able to produce high quality technology at a low price and also had to follow Xiaomi’s quality specifications, IoT protocol and design aesthetics to ensure a consistent brand image.

In addition to financial investment and brand equity, Xiaomi offered significant value and incentives to partner companies to become its allies. Once allied, the partner companies immediately benefited from Xiaomi’s global supply chain, research and development, design, manufacturing, and marketing resources. In addition, they were able to distribute their own branded products through Xiaomi’s online and offline global distribution channels, thereby gaining access to millions of existing customers.

IoT

Xiaomi’s decision to leverage personal networks ensured the quality of its ecosystem partners : only companies with exceptional specialization and high potential were enlisted. The larger the partner network became, the more market capacity the company gained, putting it in a prime position to quickly meet consumer demand and pre-empt competition. As a shareholder, Xiaomi benefited from the profits made by its partner companies and received commissions from products sold through its distribution channels. With this increase in revenue, Xiaomi was able to continue to enforce a low-margin policy to ensure that consumers received more value from Xiaomi than any other brand.

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Xiaomi’s approach to collaboration has allowed it to entice and lock in consumers and aggressively expand its IoT product portfolio. Today, with over 324.8 million smart devices connected to its platform (excluding smartphones and laptops), Xiaomi has established itself as the world’s leading consumer IoT platform.

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La strada di Xiaomi verso il dominio dell’IoT (Internet of Things)

<a href=”https://www.xiaomitoday.it/author/emanuele-lafulla” target=”_blank” rel=”nofollow noopener”>Emanuele Iafulla

Nerd, Geek, Netizen, terms that don’t belong to me. Simply myself, technology lover and provocative as Xiaomi does with its products. High quality at honest prices, a real provocation for the other more emblazoned brands.