Beijing Center Hosts Public Talk on Xiaomi and the Shift from Products to Services

Nov. 5th 2015, Columbia Global Centers | East Asia hosted a speech by Dr. Clay Shirky, associate professor at NYU Shanghai and author of several books including the newly released Little Rice: Smartphones, Xiaomi, and the Chinese Dream from publisher Columbia Global Report, on the topic of Xiaomi and the shift from products to services. The speech was followed by a discussion facilitated by Kaiser Kuo, Baidu’s Director of International Communications. The event was highly successful and well-attended.

Professor Shirky began his remarks by putting Xiaomi’s recent success in a global context. Xiaomi is a smartphone manufacturing company but it is also a design company and a “maker of things” situated within a global “maker movement” while still retaining its own uniquely Chinese interpretation of what this movement means. Professor Shirky describes his time studying Xiaomi as an “object lesson in making things”, a pursuit he feels Xiaomi has been exceptionally successful at.

The speech was against the backdrop of the release of his new book on Xiaomi’s phones and global commercial success. He first became interested in Xiaomi after seeing the phone everywhere in China which led him to buy his own and then go on to cooperate with the head of the Journalism School of Columbia, publisher of Columbia Global Report Nicholas Lemann to investigate this phenomenon more deeply. He found that Xiaomi’s business model was truly remarkable, as it was backwards from traditional models: “They did everything backward. They started selling to customers before they had products, they started with software before they had hardware, they have set their sights on services even before they started selling objects.” Therefore it was this service oriented model that has made Xiaomi phenomenally successful in the mobile phone market.

This success has also been the result of the “3 Big Bets” made in 2010. According to Prof. Shirky the first big bet was to use the open-source Android operating system and its continuous and rapid redevelopment according to the feedback of their users, before making any actual hardware to sell. The second big bet was the adoption of new and innovative sales channels which included a completely e-commerce-focused sales strategy. Xiaomi only sells their products on-line and this new approach has allowed them to connect directly to their users in ways other companies cannot. According to Shirky, “obsession with user connection goes into everything they do.” Additional innovative sales strategies have included the use of flash sale events as well as encouraging private reselling between individuals. The third big bet was counting on their users to advertise their products on social media as part of a strategy of building strong connections with devoted users through excellent customer service. They encouraged these users to post on Weibo both good comments and critiques. One outcome of this is Xiaomi operating its own extensive customer service program even though it would be cheaper to outsource, a decision which has given them major business advantages. One of these advantages has been their practice of releasing a new phone Operating System on every Friday, collecting feedback about the new OS every Tuesday, and incorporating that feedback in new designs and development. According to Professor Shirky, studying Xiaomi’s business model shows the remarkable advantages of focusing on design, customer experience, and selling on the internet for twenty first century business firms.

The company made “3 Big Bets” early on which all paid off. If any of the individual “Bets” had failed it would have resulted in in Xiaomi’s overall failure. However, they also have to overcome “3 Challenges” in the future which threatens to undermine the company’s business model. As Prof. Shirky’s explained these challenges include domestic competition within China from other cell phone manufacturers attempting to undercut Xiaomi’s more expensive but better-designed products, possible missteps in the global market such as using a name that begins with “X” which is hard to find on international search engines, and overcoming the differences between the local Chinese market and international market which may be difficult for Xiaomi because it is too China-focused.

Professor Shirky concluded his remarks by referring back to a concept which he describes as not only important for Xiaomi but also for Chinese business: “If a company is excellent at optimizing services for the Chinese market how easy is it for them to move into other markets? This is a huge issue because all the things that make China special as a services market are not just economic and cultural but also political. Once something becomes political the question of whether it should change and how becomes much more momentous than how many mobile phones you produce.”

Director Kaiser Kuo of Baidu followed up the feature speech by contextualizing Shirky’s speech within Chinese history and then taking and answering questions from the audience.

Topics addressed included: The electronics markets and technology parks which have emerged in Zhongguancun nearby in Beijing; Shenzhen’s evolution from a backwater town to a light industrial center focused on shipbreaking to a global technology and innovation hub; the Chinese Intranet vs the global Internet and what affects this might have in shaping creativity and innovation; Japanese Anime and Korean K-Pop and their role in projecting those nation’s “Soft Power” and whether China is capable of projecting soft power in this way; and finally the “Maker Movement” centering on 3D printers and robotics and the different forms it has taken in the US and in China.The event offered valuable insights into China’s transition from an industrial economy focused on physical products to a services economy delivered by a uniquely qualified and experienced expert. It was exceptionally well-attended and followed up with lively Q&A and networking sessions.

(Contributed by Mengyao Li, Edited by Tyler Browse)

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