Chinese smartphone maker Xiaomi’s rise to third in the world has been spectacular. At its helm and dubbed the ‘Steve Jobs of China’ is the charismatic Lei Jun
‘Always believe that something wonderful is about to happen’ is the Xiaomi company mantra. Quite a few wonderful things happened at Xiaomi last year.
Already number one in China, the Beijing-based tech company soared into the world number three slot. Revenue went through the roof – up to $11.97 billion from $5.2 billion the previous year; more than 61 million smartphones were sold – up from 7.19 million in 2012; and the world record for a technology start-up was smashed, raising $1.1 billion for new product lines.
At the head is CEO and founder Lei Jun, who at 45 is already a veteran of China’s booming tech scene. Last year was a pretty good one for Lei’s bank balance, too. Owning 77.8% of Xiaomi, now valued as a $45 billion company, has made him the eighth-richest person in China, according to Forbes’ World Billionaire List, with a personal fortune of $13.3 billion. He’s achieved all this in just four years. Not surprisingly, Forbes named him the Asian 2014 Businessman of the Year.
Global technology domination is the goal
Lei Jun isn’t content with being China’s smartphone number one, however – his ambition is nothing less than global technology domination. At home he is revered and famous: a poster boy for enterprise and the man who delivered affordable smartphones to the people.
A Xiaomi smartphone costs around $530 on mainland China, compared with about $980 for an Apple iPhone 6 Plus. If it works perfectly well and looks just as good, why pay more? Apple retains its cachet but the Chinese are starting to appreciate the value of home-grown products.
The markets in China and Asia, plus developing markets in India, Indonesia and Mexico, have massive potential for Xiaomi, but in April 2014 the company changed its domain name to Mi. It cost $3.6 million just to buy up the name, but not only is it simpler to say for non-Chinese, it’s a symbolic sign of Lei’s ambitious plans to become a major player in the West. As its new domain announcement put it: ‘Shorter Name, Bigger World.’
Jumping on the ‘bandwagon of existing trends’
Lei developed the business model for Xiaomi after hard experience in China’s emerging software market in the 1990s. A life-long computer nerd and hard worker, Lei’s first job was at software developer Kingsoft; he became its president in 1998.
While there, Lei founded Joyo.com, an online bookstore that he eventually sold to Amazon in 2004 for $75 million. But life was tough at Kingsoft – Lei struggled to lead the company to file its IPO, finally succeeding at the fifth attempt in 2007. The effort exhausted him and he left the company in the same year.
‘Things get much easier if one jumps on the bandwagon of existing trends. A pig could fly if it finds itself in the middle of a storm’
Lei determined that the best route to success was doing the right thing at the right time, summed up in his oft-quoted saying: “Things get much easier if one jumps on the bandwagon of existing trends. A pig could fly if it finds itself in the middle of a storm.”
Smartphones, he decided correctly, would be the next big thing and with his partner – ex-Google guru Lin Bin – he founded Xiaomi.
High-level buzz atop a low-cost business strategy
Lei’s business plan for Xiaomi is to keep costs as low as possible by spending next to nothing on advertising; selling on the web to avoid having to give retailers a cut; and relying on a loyal band of customers to spread the word on social media.
The strategy has worked brilliantly. From the introduction of the first Xiaomi smartphones in 2011, its products sold fast and gained a reputation for exceptional value.
Lei also employs a ‘hunger marketing’ strategy, where new models are drip-fed into the market to generate interest and excitement. He presents new products personally to whooping fans with slick presentations and showbiz-style razzmatazz.
He stands alone onstage dressed in an open-necked black shirt, jeans and trainers. Smart casual. Not surprisingly, he’s often called ‘China’s Steve Jobs’, though Lei is bored with the constant comparison, which he feels is superficial.
On those comparisons with Apple
Although he greatly admired Jobs’ success, Lei says his approach and character differs from that of the Apple legend. “If Jobs had lived in China, I don’t think he could have succeeded,” Lei said in an interview with Forbes. “Jobs was a scrupulous perfectionist, while Chinese culture emphasises the middle path.” In China, he says, “you also need to make compromises”.
In some ways, Xiaomi’s approach is similar to Apple’s. It, too, has a fervent following – Lei Jun stages an annual fan convention and holds regular user meet-ups that have the feel of religious revivals, where die-hard fans sing, cheer and play games.
But whereas Apple leads from the front – it, and it alone, decides what products will be developed – Lei Jun takes a different path. He consults his loyal fans, mostly young male gadget hounds, and values their opinions. With more than four million blog followers in China he spends hours on Mi Talk – the Xiaomi chat site – to solicit feedback from users.
How to build a technology empire
Lei Jun returned to Kingsoft in 2011, and through the company he plans to diversify his empire by investing in five other lines of technology.
Xiaomi, he says, will stick to producing five products: smartphones, tablets, TVs, set-top boxes and routers. His spin-off companies and affiliates will concentrate on a range of other products, from financial services to smart-home technology, that will ultimately inter-connect and form part of a Xiaomi eco-system.
Not everything is plain sailing, however. There’s the patent issue. Copying Western technology has long been a contentious issue and while Lei Jun vigorously denies charges of copying, he is aware that Xiaomi needs to build up its own patents to avoid costly litigation and delays. Xiaomi has already been forced out of the market in India because of an ongoing dispute with Swedish tech giant Ericsson, which claims eight of its patents are being violated.
India is vitally important for Xiaomi’s expansion plans. Its market is the fastest-growing in the world and only one in 10 people there currently uses a smartphone. There was 87% growth in the market in the first quarter of 2014 alone. The potential is enormous – Lei has to solve the problem, and quickly.
Alibaba, China’s e-commerce giant, raised $25 billion with its initial public offering (IPO) in 2014, the biggest ever. It netted chairman Jack Ma a fortune of $16 billion, making him the richest person in China. Investors are predicting that Xiaomi’s IPO, which could happen this year, will be even bigger. Lei Jun can look forward to quite a payday.
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