The Executive Study Group (ESG) seminar – Leadership Innovation
“How Xiaomi Motivates Staff Innovation & Becomes the World’s Largest IPO”
was held by the ESG, Asia Pacific Institute for Strategy Limited (APIFS) and
the Hong Kong Science and Technology Parks Corp (HKSTPC) on 29 Jun 2018. The seminar was held in Golden Egg in this
time. I would like to summarize the
seminar for sharing below.
In the beginning, Dr. Mark Lee briefed some background
of ESG and briefed the content included “Unicorn Phenomena”, “IPO Crisis”, “7S
Performance Assessment” and “Eco-Chain Strategy to Overcome Crisis and Risks”. Firstly, Dr. Lee mentioned 300 unicorn accumulated
since 2004. Then he briefed the Global
Unicorn top 10 to us in which five unicorns were from China.
Then Dr. Mark Lee discussed
crisis in Xiaomi such as sales fell sharply in 2016, risk of product range
extension (lacking of focus) and low cost strategy. However, their market share in China
increased again in 2018 Q1 (upto 13%).
After that Dr. Lee explained
Xiaomi’s Smartphone-Centered Strategy for Growth to us. Core is Xiaomi Smartphones. Layer 1 is smartphones peripheral devices.
Layer 2 is Smart Devices and Layer 3 is Lifestyle Products. Their low margin high volume strategy was
similar to Uniqlo. Xiaomi succeed to
take 31% market share in India.
Another crisis was identity. Xiaomi’s open letter from Chairman said “We are more than a hardware company. We are an innovation-driven internet company.” But China Regulator query that they were an internet firm (e.g. BAT) or hardware maker (e.g. Samsung, Lenovo). Then we had an exercise to rank Xiaomi identity.
During the discussion, some
participants rated very low and others rated very high. It is no true answer that’s why Xiaomi
delayed IPO in China but selected IPO first in Hong Kong.
After the discussion, Dr.
Lee introduced 7S performance assessment which was developed by Tom Peter and
Robert Waterman in McKinsey. It
separated into hard and soft elements.
Three hard elements included Strategy, Structure and Systems; and four soft
elements included Shared Vision, Skills, Style and Staff.
The 7 Strategy diagram was
showed with description.
Strategy:
Bamboo Forest rather than Pine indicated that fast growth, massive and strong root networks. Xiaomi would like to turn the entire eco-chain company into a bamboo forest. Its’ “Fans” were approximately 190 million monthly active MIUI users as of March 2018. Moreover, they had high customer loyalty that over 1.4 million users had more than five connected Xiaomi products. Therefore, they invested different types of companies with small portion amount (e.g. 20%) and integrated into Xiaomi eco-system. They used no controlling power as innovation strategy and only provided active supports including Brand, Supply Chain, Pipeline, Investment and Quality requirement, etc.
Bamboo Forest rather than Pine indicated that fast growth, massive and strong root networks. Xiaomi would like to turn the entire eco-chain company into a bamboo forest. Its’ “Fans” were approximately 190 million monthly active MIUI users as of March 2018. Moreover, they had high customer loyalty that over 1.4 million users had more than five connected Xiaomi products. Therefore, they invested different types of companies with small portion amount (e.g. 20%) and integrated into Xiaomi eco-system. They used no controlling power as innovation strategy and only provided active supports including Brand, Supply Chain, Pipeline, Investment and Quality requirement, etc.
Then Dr. Lee said “Speed is
the most important dimension.” in Xiaomi strategy. Dr. Lee used rocket as example to explain
Xiaomi’s support and quoted Liu De (VP, Xiaomi Industrial Design and Ecological
Chain Leader) statement “If it can run to a stratosphere before the capital
chain breaks, it will succeed.”
After that Dr. Lee
discussed the new Innovation Diffusion Curve that growth very fast in the
beginning and then decay (Red line in the chart).
Another strategy is disrupt existing practices that they entered an industry and stirred up it. Then they promoted an industry revolution. (Like big fish eat small fish) They also used cross-industry technology to enhance higher standards significantly.
Style (Adversity) is creating adversity that has advantage during difficult time! That could casuse quick decision. Then Dr. Lee quoted Liu De again that “Business theory only requires money. Military theory is fatal, so the most vanguard and supreme theory in any era must be military theory.”
Finally, he used creators
of renaissance (Medici Effect – shaped historical eras of innovation) to
explain Xiaomi’s cross-industry talents.
He quoted Prof. Michael Porter (Harvard Business School) “The competitive
value of individual activities cannot be separated from the whole.”
Reference:
ESG facebook - https://www.facebook.com/groups/esg08
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