When Xiaomi first launched its smartphone in 2011 in China, it was received by many as just another local “Apple wannabe” – the handset bears a strong resemblance to Apple’s iPhone and Xiaomi’s CEO launched the new handset with Jobsian flair, dressing almost identically to Apple’s late CEO.
However, in the past 3 years, Xiaomi has proved that its resemblance to Apple stops at its appearance. Instead of simply following Apple’s innovation, Xiaomi has adopted a unique innovation strategy that stems from the China market context and will likely shape and influence innovation in China going forward.
In this article, we will use Xiaomi as an example to understand how innovation in China takes a different shape compared to other markets and how Chinese brands make use of co-creation in a unique way.
CEO of Xiaomi, Lei Jun stands behind a background proclaiming Xiaomi’s motto “Just for Fans” (source: Huxiu.com)
Innovation through the customer journey
The rapid pace of technology development these days leaves many brands struggling to innovate truly differentiated products. Xiaomi recognizes this issue responding in a disruptive way. Unlike the most recent generations of Apple & Samsung handsets which offer only marginally superior appearance or specifications, Xiaomi has decided to sell smartphones with comparable specifications to these Western brands at very low prices. For example, its low-end Redmi handset features a quad-core 1.5GHz processor, a 4.7-inch display with a pixel density of 312 pixels-per-inch, an 8-megapixel rear-facing camera and a 2,000 mAh battery – and it’s sold at only US$130.
But don’t be fooled: as Xiaomi’s CEO Lei Jun said in an interview with The New York Times, Xiaomi is “not just some cheap Chinese company making a cheap phone” – it has the ambition “to be a Fortune 500 company.”
How are they achieving this? By moving away from product-focused innovation and turning their attention to innovating around the customer experience.
Unlike Apple & Samsung, which make their margin by selling hardware, Xiaomi’s margin is primarily derived from its after-sales services and content offered to customers. To Xiaomi, the bigger objective is to ensure a unique customer experience that keeps customers coming back:
- Making customers heard at every touch-point. Without a physical retail store, Xiaomi leverages social media as its primary channel to interact with customers, from announcing new product releases, purchasing and customization of the smartphone, to capturing customer feedback. It has forums across all the key social media platforms in China to ensure that it builds an open and equal relationship with its customers, and keep customers following their latest news
- Turning customers into fans – by offering consultation and after-sales service at the “House of Mi”, and holding “Mi Fan Festival” annually to inject excitement among Xiaomi fans
- Opening up Xiaomi’s apps and content – by making its operating system MIUI open for download on other Android phones, it has made Xiaomi’s apps and content more easily accessible, widening the potential to provide services to more users
Families taking photos at Xiaomi’s House of Mi (source: Weixin.QQ.com – WeChat China)
Perhaps this doesn’t sound like breakthrough innovation, but in fact it’s a paradigm shift – a move from technology-centric product development differentiated primarily by low prices, towards a much more to a customer-centric innovation showing deep understanding of Chinese consumers’ digital behavior.
Innovation through commercialization
In its report “How China is innovating”, McKinsey argue that Chinese brands adopt an approach of “innovation through commercialization”. Instead of spending time on internal R&D to make the product “perfect”, Chinese brands tend to launch their ideas into the market quickly and improve them through a few rounds of commercial realization and testing.
Xiaomi embraces the competitive context of the Chinese market. In response to Chinese companies launching products that are not perfect, Xiaomi go one step further and essentially say to customers, “The product launched is not going to be perfect, but please get involved and help us make it perfect with you.”
At the heart of Xiaomi’s innovation strategy is the company’s process of quickly turning consumer feedback to their advantage. Unlike other smartphone brands that launch a new phone every 6 months or so, Xiaomi releases a new batch of smartphones every week. With their process “Designed as you build”, Xiaomi’s product managers spend a dedicated part of their time collecting user feedback from an online customer forum – and once they pick up a suggestion, it can be translated into an action appearing on an engineer’s desk within just a few hours. Features can then turn from customer feedback to an improved hardware or software in as fast as one week.
For instance, when Xiaomi launched the Xiaomi MI-3, it included a new wifi password-sharing function allowing people to automatically connect to wifi in a public area and share this information with other users. But consumer response was negative, with many people complaining that the function violates privacy and encourages ‘wifi squatters’. Within a day, Xiaomi responded to the feedback by announcing they had suspended the function with immediate effect and erased all 320,000 wifi passwords they had collected from public venues. A new interface was released within a week.
This process does not only make users extra-tolerant of imperfections in the smartphone’s functionality, it has essentially turned Xiaomi users into collaborators, keen to work and co-create with the Xiaomi brand.
A Xiaomi’s employee re-posts Xiaomi’s announcement about suspending wifi sharing on their personal Weibo account, leading to it being picked up by news sites (source: CNbeta.com)
As a research agency founded around co-creation methods, we have always believed that we need to work collaboratively with consumers, not market at them. Therefore it’s very encouraging to see the rise of Chinese brands like Xiaomi bringing to life the spirit of co-creation by making consumers’ preference and feedback a central part of their innovation strategy.
It’s something for us and the wider research community to bear in mind as market research grows in China and other Asian markets – that is, co-creation isn’t a wholly ‘new’ or ‘outside’ idea here. However, whilst a lot of Chinese business do apply “co-creation”, this tends to be haphazard and with little structure. We can help businesses optimise their co-creative efforts, harnessing their customer insights to drive business growth.
With Xiaomi leading the way, we believe there is going to be an innovation revolution in China as brands look to their customers for innovative solutions and inspiration. And as an agency, we are excited to be actively involved in this new wave of innovation in China.
Want to find out how we can help your brand develop locally relevant innovation in China through the power of co-creation? Get in touch with us at email@example.com.