You may not have heard of Xiaomi yet, but that is likely to change soon. Already the fifth-largest smartphone maker in the world, the Chinese startup firm has followed a unique path to growth that its founder insists is the key to its future success, even as critics suggest it will need to become far more conventional if it is to get substantially larger.

Thus far, Xiaomi’s products sell mainly in China. By offering smartphones that are comparable to those produced by rivals such as Apple and Samsung, but at approximately half the price, Xiaomi has emerged as the most valuable startup in the world, with an initial valuation of $46 billion.

This valuation reflects its popularity among “regular” consumers and young purchasers, who appreciate the personal feel that the company provides them. For example, it hosts parties every few weeks, in different locations across China, inviting hundreds of customers to each. These customers are not necessarily those with the most expensive plans or luxury buyers in any sense. One recent guest, arriving for a party at a high-end nightclub still in his work clothes, noted that he had been on the job for 29 of the last 30 days.

Thus the invitees to these parties feel flattered and honored to be invited to the fancy events, increasing their sense of connection with and loyalty to Xiaomi. Senior executives in the company also answer customer’s online questions personally and commit certain amounts of time each week to meet with visitors. When users provide assistance to the company, such as answering additional questions in fan forums, Xiaomi shows its appreciation by sending them gifts and honoring them with VIP titles. In return, these dedicated fans spread the word about the company far and wide, which has meant that Xiaomi has not needed to spend much on advertising thus far.

In its efforts to expand beyond China, Xiaomi strongly believes that the key is first “to understand the fans and to make friends with them, instead of talking as a brand.” But this growth has been slow so far: It has initiated forays into the Philippines and Malaysia but thus far earns less than 5 percent market share in each of these markets.

Still, the formerly small firm is determined that it can bring “the good life” to consumers across the developing world, by offering them not just smartphones but also technologically advanced light bulbs and television sets at reasonable prices.

 

Discussion Question:

Can Xiaomi succeed globally with the approach it has used to grow thus far? Why or why not?

SOURCE: Eva Dou, “Xiaomi: The Secret to the World’s Most Successful Startup,” The Wall Street Journal, April 6, 2015, http://wsj.com