How Xiaomi Beats Apple at Product Launches

How Xiaomi Beats Apple at Product Launches

by Karan Girotra and Serguei Netessine  |   9:00 AM June 2, 2014

The iPhone 6 is due in September.

The build-up to its launch will almost certainly follow the Steve Jobs M.O. Device specifications will remain a closely guarded secret until the launch date (unless an employee forgets his phone at a bar). There will be long lines at stores. We probably won’t be able to actually get the product for a couple of months after the launch. And, of course, users (we) will have no input into what we actually get; Steve Jobs’ dictum that “people don’t know what they want until you show it to them” is still an act of faith for Apple’s management.

But is this the only way to launch new products? Let’s think for a second about the risks inherent in this approach. Imagine that something goes wrong and a hardware glitch makes it necessary to recall and/or repair all products (remember the iPhone4 Antenna problem)? Or what if a certain feature or the device as a whole is a complete miss with consumers (think Apple Maps)?

All this secrecy comes at a price, both in the supply chain and by creating a difficult workplace. Consider how many people have to keep the secrets: factory workers, supply chain workers, and retail employees. Current employees will work weeks of overtime and self-employed contractors will be hired in the thousands. According to some media outlets, Apple already announced restrictions for employee vacation in Germany, probably because of the launch. This elaborate planning process is complex, expensive, and risky.

But what is the alternative? In “Why The Lean Startup Changes Everything,” Steve Blank argues for “experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional ‘big design up front’ development”. Blank’s approach is as relevant to new product launches as to new companies: they are also highly uncertain, with many unknown unknowns.

One of Apple’s competitors is already applying just such an approach to new product launches. Founded in 2010, Xiaomi is one of the biggest Chinese smartphone companies. Its revenues last year were already more than $5 billion — not bad for a three-year old.

Unlike Apple, Xiaomi produces its products in small batches, allowing for easy changes based on user feedback. Every Friday there is a major feature update of the operating system and a round of feedback from expert consumers. Because Xiaomi only sells directly to consumers (unlike Apple, which goes through many intermediaries), the company can collect all this feedback and build it into the next generation of devices.

In essence, the phone you buy this week can be different from what you’ll buy next week. As one example of the benefits of this approach, Xiaomi got its operating system translated into 24 languages by users and the company didn’t spend a dime. User feedback led to the creation of a very different and much more flexible device. Xiaomi allows users to swap the battery, replace a memory card, change case backs, and remove the SIM card.

Don’t get us wrong: we are not saying that Xiaomi has a better product than Apple: they are priced differently and they appeal to different segments of the market. We both use iPhones, not Xiaomi products. But many companies that try to take clues from Apple’s playbook on innovation will fail because they don’t have the marketing clout and brand appeal to push products rather than pull ideas. Further, Apple’s model is driven by the creative genius of individuals like Steve Jobs, who are not easy to find. Without these resources, a company might be much better off following the Xiaomi playbook.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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