ESG Seminar – Leadership Innovation – How Xiaomi Motivates Staff Innovation & Becomes the World’s Largest IPO

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.

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:

HKSTP - www.hkstp.org

Asia Pacific Institute for Strategy Limited (亞太策略研究所有限公司) – www.apifs.org

ESG facebook - https://www.facebook.com/groups/esg08