The name Lei Jun might not be recognised by many in India. But mention his company Xiaomi and everyone knows the smartphone brand which now has the same market share as long-time market leader Samsung. But then Lei Jun’s Xiaomi is a startup that is still small when you compare the scale of the companies it is challenging across the world. Nandagopal Rajan speaks to serial entrepreneur Lei Jun on Xiaomi becoming No 1 in India, improvising for the local market, Make in India and innovation in the smartphone segment.
How does it feel becoming the largest smartphone manufacturer in India? Has it happened faster than you expected?
In 2015 April, I had expected us to take three to five years to become No 1. Actually, it took us just two years and one quarter. It is something very exciting. It really means the Indian consumers could resonate with the Xiaomi brand, the Xiaomi products and our values.
What do you think is the primary reason for this success?
There are three elements to this success. One, high-quality products; two, our honest and affordable pricing; and three, our very strong local team lead by Manu Jain participating in the Made in India programme. All these elements are recognised by the Indian customers. Even though we are a global company, we are also a very localised Indian company. Since the day we entered the market, my instruction has been that we have to become a local Indian company.
Xiaomi has had this very unique marketing strategy. Did you have to improvise that for the Indian market?
First of all, we are an e-commerce company. So why do we make an e-commerce platform? Because of its high efficiency. It takes a lot of costs to make a great quality product. If you want to sell it affordably, you need to use the technology of the Internet and e-commerce. Since the beginning of this year, we started entering offline in a big way, but we are very different from the other traditional smartphone companies as we are doing new retail. This is the concept that global juggernauts like Amazon and Alibaba have been talking about, the new retail.
Using e-commerce technology and methodology to do retail. We can actually make these products very affordable offline as well. That is why we would never go to a traditional retail model. So how do we do new retail well? The first example is Mi Home. In India, we now have ten of them with huge footfalls and each store selling a huge number of phones. The first store in India sold 20,000 phones a month, it is a big miracle in the retail industry.
What are your big learnings from the India market? Are you taking these learnings to other parts of the world?
We have some great innovations in this market. For instance, the Mi Preferred Partner Programme is something the local team came up with and is now being implemented in our other markets. A lot of our global leads have come to India to learn these concepts.
Are you hoping to take the online virality offline through your fan network? Does it work better in a country like India because of the strong family and community connections?
Yes. We believe that treating our users as friends is a concept that will work well everywhere in the world. Along with the success in India and China, we also rank in top five in 12 other countries now. This philosophy will apply globally.
How do you achieve your price? That has been your USP.
For every product that we design, we will find the best talents across the world. And we will try our best to build the highest quality product that can be achieved. Then we hope to price it at cost; pretty much zero-per cent profit. That way over six to seven years, consumers tend to trust you more.
We are able to achieve up to half the cost of some of the products when compared to our competitors. We have very little advertising or promoters and hence we are returning the cost back to consumers. That is why we are reasonably priced. Even then our quality is still world class.
Over the years Xiaomi has created a network of companies that create interesting products. Are you looking for such companies in India too?
Yes. We will try and build an incubator in India and work with more Indian startups to help them succeed. Of course, they will also help us. Xiaomi India can really accelerate India’s creativity and innovation. We have invested in six Indian startups so far.
What do you think about the culture of technology and innovation in India?
India’s education system is actually very good. I am a big admirer of IIT, especially since Manu is from IIT… also because I don’t know which other universities are there in the country (chuckles). I have met Satya Nadella and Sundar Pichai. I think Indians are really smart and have met many of them. They are super strong on the technology front and this is why we have to be highly localised as a company.
Is it becoming more and more difficult to innovate in the smartphone space?
The top six players globally in the smartphone industry are super competitive. Because of this competitiveness, innovation is still happening. For instance, our Mi Mix phone was the first full-screen display bezel-less phone in the world. We started working on this four years ago and now it has become the norm. We have many patents in this area. We are the only company capable of creating this kind of material (jade-like finish with ceramic). At least in the short-term I don’t think we will hit a ceiling in terms of innovation in the smartphone industry.
Do you think a big disruptor will come and change the smartphone industry again?
There is a possibility. For example, the full-screen display (of the Mi Mix) is very different from that of the iPhone when it comes to industrial design. Why does everyone follow us? Because it is so innovative. The whole front is a screen and there is nothing else there. When you compare it to other phones, everything else is a different generation and outdated. This is why a phone like the iPhone 8 cannot sell in China now. There will be a lot of such innovation coming up in the future.
How do you look at the Indian environment when it comes to the ability to do business here and the lack of a component ecosystem here?
India also needs to take a step-by-step approach to develop the manufacturing industry. Two decades ago China also followed the same step-by-step approach – start with assembly and slowly go to localisation of components. We have been trying to encourage our suppliers to start their factories in India. We already have a few of our factories set up in India and a few more that are being set up as our capacity has been reached. I think some component suppliers also will set up factories in India. But this takes time.
PM Narendra Modi’s Made in India campaign is a visionary project that will improve India’s industrial capabilities, solve employment issue and develop the economy.
That is also one of the key reasons why China has undergone a transformation in the past few years. Technological innovation is always step-by-step and you should not set up a too ambitious goal in the very beginning.
Where do you see Xiaomi… as a smartphone brand or a larger tech entity spread over other segments too?
Xiaomi is a very innovative model. We are in the smartphone business, the TV business and also in the laptop business. But we are also an Internet company and an e-commerce company. So we are a new species. We will probably position ourselves as a leading digital lifestyle brand.
How do you see Xiaomi five years down the line?
Every global citizen be able to enjoy the benefits and fun of technology thanks to Xiaomi. Today, thanks to Xiaomi and Redmi phones, a lot of Indians are able to enjoy the benefits of mobile internet. If they want to buy phones from other brands, the cost will be two times; or they could afford only cheaper low-quality phones.
What is the timeline you have set for becoming a truly global brand?
Now, we are in over 60 countries and are entering some of the more developed countries in Europe like Russia and Spain. Maybe by end of next year, we will consider North America. Even though we are already at a certain scale and very likely to enter Fortune 500 by next year, we are just seven years old. Actually, we are still a very innovative startup with just 16,000 employees.
We are talking about such scale with so few people — (in India Xiaomi has just 300 employees). Some of our competition in India has 100,000 people on their rolls.
How important is the Indian market for you?
It is a proven business model. In China we are number 1, in India we will become number 1 and people will now believe that we can become number 1 in many more markets now. The executive team has spent a lot of time thinking about the India market. Internally, in HQ we have prioritised India as our number 1 market.
For example, from an R&D perspective, we have to fully consider the needs of the Indian users. For instance, India is a hotter climate, so when we design phones we have to consider how to control the temperature of the phone. We do so many different things to localise the products. From supply and production also, India has been a priority for the company. Even on this trip I have brought over 20 top executives from different departments to help the India team to continue to grow in the next few quarters.
Will we see all Xiaomi’s products come to India?
We will curate the products that we believe Indian consumers will need. We might even consider setting up a Bangalore R&D centre to design products only for India.
You have Ratan Tata as an investor. What have been your learning from him?
We respect Mr Tata for his success. Before I entered the Indian market, my only impression of India was Mr Tata. His is a very respectable enterprise. There are a few things that struck a chord with me, including the charity projects that they do. Xiaomi is a startup, but we also try our best by participating in charity projects. This is what we have learnt from Mr Tata.
Over the past few quarters, Indian smartphone manufacturers have struggled against the Chinese entrants. Do you have any advice for these companies?
The Chinese company learn a lot from great global companies. Perhaps a good advice for Indian companies might be to communicate and learn from Chinese companies and other global companies. Because the smartphone market is huge. If we all work on great products, the consumers will be super happy.