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Lessons from China: what western brands can learn from Chinese smartphone giant Xiaomi

By David Brabbins, Associate partner

September 18, 2014 | 7 min read

With Chinese e-commerce giant Alibaba getting set for the biggest stock market flotation ever (it is looking to raise up to $24.3bn in its share sale), David Brabbins of Prophet in Hong Kong thinks we could be set to see more brands emerge from China to make their mark on the world stage. Here he takes a look at smartphone company Xiaomi and the lessons western brands could learn from it.

As China rebalances its economy towards market-driven growth, the narrative around its ability to build global brands is changing. A decade ago, few would have believed a global brand could emerge from China; today the BrandZ 100 list of the world’s most valuable brands includes 11 from the country.

The thing is, while most brands on this list clearly have scale, value and a growing global influence, it has been hard to single out any one Chinese brand as being genuinely meaningful, differentiated or culturally interesting. Until now.

One emerging brand is turning brand building on its head by basing the entire company around customer-driven design. In bringing the ‘customer-development’ philosophy of internet companies to a hardware product category, it is rewriting the established order of the smartphone industry.

It’s called Xiaomi – “Think of ‘show me’ and then pronounce the first word as if it was ‘shower’” recommends Hugo Barra, the ex-Google Android boss who now heads up the company (it has recently shortened to ‘Mi’ for a global audience) – and it’s transforming the way smartphones are developed, priced, promoted and sold, while reinventing how brands are built in the digital age.

It has a killer lean business model that’s making everyone else look expensive, and this gives it a huge number of competitive advantages.

Firstly, it is putting high-end hardware into the hands of the many by selling it at near-cost while making profits from the sale of cloud services, apps and other content through its online store and so breaking the link between low cost and low quality.

It has also cut out operators and retailers entirely, selling its products via flash sales through channels like WeChat, WhatsApp, Facebook and its website. It can sell tens of thousands of units of a new product in one second, as it did recently in Taiwan with the launch of its new RedMi device. And because there’s no retailer, it can pass the savings on to customers.

It is also relentlessly iterative: Mi polls users on its online forums, as well as on Chinese microblogging site Weibo, about the features they’d like to see. It then releases a new version of its MIUI user interface (pronounced ‘Me, You, I’) every Friday, packed with the latest innovative features inspired and improved by customer feedback.

Mi enjoys Apple-grade brand loyalty, with all its marketing done by its legions of fans, while its launch events are organised by fans for free. It also does the majority of its creative work in-house, so can be more responsive to customers while cutting yet more costs out of the equation. In many ways it is the anti-Apple, taking the opposite approach to the ‘we know best’ path to innovation.

This is a company that is only three years old, employs just 6000 people, and yet has become China’s number one smartphone maker, on track to do $10bn in revenue this year. It’s reasonable to assume that it can repeat its Asian success in other markets too as it turns its attention to emerging markets further afield.

It is part of a new wave of C2B (customer to business) companies that are fast disrupting established industries (think Tripadvisor in travel for example), winning armies of fans and with highly favourable economics that are extremely hard for legacy companies to compete with. Just as companies are getting their heads around thinking ‘inside-out’, the narrative is now shifting to one of ‘outside-in’.

So what lessons can you, as a brand builder outside China, learn from Mi?

1. Take customers on the journey with you.

A compelling and authentic purpose is needed to inspire customers to become fans and help drive your success. Their interest is in making the product work for them, and your brand succeeds by facilitating this.

2. Personality goes a long way

There’s a war on for attention. Brands that are timid get ignored. You need to be bold, brave and interesting to cut through. Xiaomi means ‘little rice’ – a nod to China’s communist past. Its cuddly rabbit brand icon wears a communist hat and the red neckerchief of the Young Pioneers (the youth organisation of the Soviet Union). It’s edgy, postmodern and charming, and people talk about it.

3. Put your fans at the centre of everything

Identify your most passionate customers and make friends with them. Give them inside information, early access to products and other treats so they in turn share stories about your brand with their communities. They’re the best friend a brand can have.

4. Producing timely, relevant content drives engagement

Traditional media is often no longer required to get the word out, but creative content is still hugely important for engaging people online and on mobile. Act like a publisher: know your audience, get it out there, keep the pace up. Done is better than perfect. Responding to today is better than being late to the party next week.

5. Online listening and responding beats traditional market research

It’s now mainstream for people to share their good and bad experiences, ideas and suggestions in public social media channels and on your own forums. Listen, respond and make friends with fans as well as detractors – they are your most valuable (real-time) source of feedback, new ideas and sentiment about your brand. Find the right tools to mine this information and harness it.

6. Proactively shape your story, or others will do it for you

While Xiaomi has recently rebranded as Mi for an international audience, not many in the media seem to have noticed. At the same time, unfair comparisons to Apple abound because the company is ‘inspired’ by the company’s minimalist approach to product design (which was itself ‘inspired’ by the work of Dieter Rams). This is overshadowing the bigger narrative that Mi is the first truly ‘open door’ alternative to Apple, the first brand in the smartphone category that’s ‘made by everyone’.

Customised by customers

Hugo Barra, Xiaomi’s VP, says that the company’s product managers spend half their time browsing through the company’s user forums looking for suggestion which, when picked up, can appear on an engineer’s desk within hours. In a process that the brand calls “design as you build”, new features can go from a suggestion on a forum to a shipped product in the space of a week. CEO Lei Jun points to the voice recording app on its phones which, he says, a group of Chinese journalists suggested improvements for. Following their feedback changes were made to the app so that it now continues to record even when incoming calls come through, and turns to silent mode when the app is recording.

David Brabbins is associate partner at strategic brand and marketing consultancy Prophet’s Hong Kong office. He has over 10 years' experience in the design and marketing services industries, and has previously worked at Figtree, Naked Communications and Manning Gottlieb OMD.


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