What follows is an open letter from Xiaomi Corp. co-founder and Chief Executive Officer Lei Jun included within the firm’s preliminary public providing paperwork filed in Hong Kong on May three.
Thank you to your curiosity and assist for Xiaomi. As you learn this doc, I hope you not solely see a fast-growing and thriving firm, however extra importantly, perceive how we pioneered an incredible, progressive enterprise mannequin underpinned by braveness and belief.
In this letter, I want to share my private ideas on Xiaomi and what we attempt for.
|We are greater than a firm. We are an innovation-driven web firm.|
Xiaomi is an web firm with smartphones and good related by an IoT platform at its core. Our mission is to relentlessly construct superb merchandise with sincere costs to let everybody on the earth take pleasure in a greater life by way of progressive expertise.
Every day for the previous eight years, our imaginative and prescient to be pals with our customers and to be the “coolest company” within the hearts of our customers has motivated us to pursue innovation and keep an unwavering give attention to high quality and effectivity. This has resulted in us frequently reaching many ground-breaking milestones.
We based Xiaomi in April 2010. At the time, my co-founders and I had a easy idea-to create a really cool smartphone that we might personally love. Among Xiaomi’s eight co-founders, six of us are engineers and two are designers. All of us are hardcore followers of expertise.
“Amazing products” and “honest prices” come hand-in-hand. They are inseparable. Only by way of constructing superb merchandise that properly exceed individuals’s expectations and providing them at sincere costs, can we win over the hearts of our customers. Pursuing progressive expertise and excellent design is in our DNA. Our engineers are obsessive about pushing the boundaries of expertise, they usually repeatedly craft each minute element to make sure our merchandise utterly exceed our customers’ expectations. We have the braveness to interrupt with conference and always enhance ourselves, and these are the important thing the explanation why we now have been in a position to achieve our customers’ sustained belief and appreciation.
We promote a daring progressive tradition, not restricted to expertise. We are progressive not solely in smartphone expertise, together with supplies, shows and SoCs, but in addition in design, the place we now have acquired over 200 globally acclaimed industrial design awards previously few years. We have a singular “triathlon” enterprise mannequin and have constructed a one-of-a-kind ecosystem of firms. We have a singular engagement mannequin with our on-line customers, in addition to a extremely environment friendly new retail technique incorporating each on-line and offline. The spirit of innovation is deeply ingrained in the whole lot we do and motivates us to speed up our exploration of uncharted waters.
Currently, we’re the world’s fourth-largest smartphone firm. We have created many good merchandise, amongst which many are leaders of their respective classes. We have additionally constructed the world’s largest IoT platform with over 100 million related units. In addition, we now have 190 million MIUI month-to-month energetic customers who recurrently use our progressive web providers.
What makes us even prouder is that we now have utterly remodeled the industries that we take part in. We have pushed the speedy adoption and high quality enchancment of smartphones in China, laying a robust basis for the rise of the cellular web within the nation. The speedy growth of cellular funds, e-commerce, social networking, and short-form movies in China will be largely attributed to the penetration of the cellular web into the lives of lots of of thousands and thousands of individuals. China is now the world’s largest smartphone market with a robust and vibrant cellular web business. We consider our contributions to this have been well known.
Good firms make earnings, nice firms additionally win over individuals’s hearts. We pleasure ourselves much more in being a expertise firm with a uncommon “fan culture.” We have a big international neighborhood of “Mi Fans,” passionate customers who’re intensely loyal to our model, extremely engaged on our platform and actively contribute suggestions and have concepts to our product growth.
|After a profitable rebound, Xiaomi’s enterprise mannequin has been confirmed once more.|
As a younger web firm, Xiaomi has conquered many challenges. In 2016, our smartphone gross sales declined. It was clear to us that as a result of we grew so rapidly in our early years, we didn’t have an adequately sturdy basis to face all of the challenges in entrance of us at that point. We intentionally slowed our development to give attention to strengthening three key facets of our enterprise: innovation, high quality and provide administration. In 2017, Xiaomi efficiently delivered on these key facets and rapidly returned to speedy development.
As far as we all know, aside from Xiaomi, there has by no means been one other smartphone firm that has efficiently rebounded after a decline in gross sales.
This was a turning level for Xiaomi. This expertise was invaluable for us. We strengthened our administration functionality, grew our expertise pool, broadened our expertise foundations and enhanced our provide chain and manufacturing capabilities.
More importantly, our enterprise mannequin was examined and confirmed once more. Xiaomi is greater than a firm. We are an innovation-driven web firm. Although our enterprise is crucial to constructing our consumer base, we don’t count on it to be the principle supply of our earnings. We keep wonderful design and excellent high quality in our merchandise, whereas pricing our merchandise as shut as potential to value by promoting them to customers by way of extremely environment friendly on-line and offline new retail channels. We then present our customers with complete web providers.
This is our distinctive “triathlon” enterprise mannequin, which encompasses , new retail and web providers. Xiaomi’s achievements up to now illustrate the energy and resilience of our mannequin. Within 7 years of our founding, our annual income exceeded RMB 1OO billion, reaching a development price that many conventional firms are unable to match.
The enhance in effectivity comes from decreasing working prices, particularly gross sales and advertising and marketing prices. Xiaomi’s distinctive enterprise mannequin ensures that our merchandise are top quality and priced truthfully, which is the muse of our customers’ belief in us.
|We pledge that our total internet revenue margin won’t ever exceed 5%.|
During the early years of Xiaomi’s founding, we had a grand dream: to enhance the effectivity of the complete enterprise world.
For instance, in China, a shirt that prices US$15 to provide might retail for as a lot as US$150. This is a surprising markup of 10 occasions. A pair of footwear could also be marked up by 5 to 10 occasions, and a tie will be marked up by 20 occasions. The checklist is countless.
It has all the time been tough for me to grasp why companies are so inefficient. Why do customers must bear the prices of inefficiency? Cost discount efforts are often centered on decreasing manufacturing prices, which can account for under 10% of whole prices. Rarely do firms give attention to eliminating the inefficiencies in gross sales, advertising and marketing and operations, which can account for 90% of whole prices.
Xiaomi has the desire and dedication to revolutionize the industries that we take part in by way of relentlessly pursuing cost-efficiencies.
At the start of 2011, throughout our first worker annual assembly, I informed greater than 100 workers and their households that we needed to make smartphones with the most effective efficiency and consumer expertise, and promote them for under US$300. At that point, related smartphones have been promoting for greater than US$600.
Great firms are all the time centered on creating high quality merchandise and promoting them at higher and higher costs in order that customers can get their cash’s value.
As Xiaomi continues to progress, we ask ourselves: what has remained fixed within the everaltering enterprise world? Our reply is that customers have all the time anticipated superb merchandise at sincere costs.
Many of our customers inform us that once they browse Mi Store or go to a Mi Home, they will purchase any of our merchandise with full confidence, as a result of they know these merchandise have the very best quality and worth. When I hear this, I do know that every one of our power and efforts are value it. This is finally our aim.
Our customers’ belief is the muse of our enterprise and effectivity is the soul. As lengthy as we proceed to earn the belief of our customers, our enterprise will proceed to carry out properly. An organization that is ready to obtain world-class effectivity could have the power to outlive a number of financial cycles, repeatedly seize new alternatives within the business, and maintain wonderful operational efficiency in the long term.
“Amazing products, honest pricing” comes with actual motion. At this level, I want to pledge to our current and potential customers: beginning in 2018, Xiaomi’s companies’ total internet revenue margin won’t exceed 5% per 12 months. If the online margin exceeds 5%, we are going to return the surplus to our customers.
It is our perception that delivering sustained, top quality consumer expertise is extra necessary than pursuing one-time earnings. Focusing on effectivity is extra necessary than short-term earnings. We are assured that sustaining cheap earnings will inevitably grow to be an business pattern. Blindly pushing for larger margins won’t be sustainable.
Therefore, I want to emphasize that we’ll give attention to upholding our customers’ and our firm’s long-term pursuits, which in flip creates extra worth for our shareholders.
It is our final dedication to effectivity to cap our enterprise internet revenue margin at 5%. We know that it might take time for everybody to completely embrace our beliefs. However, time is on our aspect. Our steadfast dedication and execution will ultimately assist us to appreciate our desires.
|Building an open international ecosystem, our potential has no boundaries|
Today, we current ourselves to you as we put together to enter a brand new stage in our journey. We consider that the potential of our international enterprise is barely restricted by our creativeness.
We are constructing an open international ecosystem, and never a walled backyard. To let everybody on earth take pleasure in a greater life by way of progressive expertise, one “Xiaomi” will not be sufficient. We have to incubate and companion with at least 100 different “Xiaomis” so as to efficiently construct a wealthy and vibrant new international enterprise ecosystem.
With our distinctive ecosystem mannequin, we now have mobilized many like-minded entrepreneurs. We usually are not alone. Together, we now have created a complete suite of merchandise that revolve round our smartphones, together with cellular peripherals, good and way of life merchandise. Currently, Xiaomi has invested in additional than 90 IoT and way of life firms, and collectively, we now have modified many industries. In the longer term, our ecosystem will get even larger.
We usually are not solely altering industries in China, but in addition elsewhere on the earth. Among the greater than 70 nations and areas that we now have entered, we’re primary in India by way of smartphone market share and are among the many high 5 smartphone firms in 15 nations. We will proceed to show that Xiaomi’s enterprise mannequin will be prolonged globally at a speedy tempo.
Building a worldwide ecosystem has supplied Xiaomi with extra alternatives for long-term growth, expanded our boundaries, and additional strengthened our basis. With the period of huge information and Al upon us, we consider that the excessive quantity of knowledge generated by our ecosystem will enable us to higher perceive our customers’ wants and provides us a big edge to supply improved services and products.
The spirit of engineering runs in our veins. This spirit drives us to relentlessly discover probably the most superior applied sciences so as to profit as many customers as potential and to be the best firm within the hearts of our customers. We consider that everybody on the earth ought to take pleasure in a greater life by way of progressive expertise.
Fundamentally, the Internet is all about transparency, effectivity, and equality. We need to enable everybody, no matter gender, ethnicity, faith, nationality, or schooling degree, to take pleasure in the advantages of expertise. This is the aim that every one Xiaomi workers and I are working tirelessly for.
Thank you to your curiosity in Xiaomi. Together, l consider we will create a paradigm shift of effectivity within the enterprise world and use expertise to enhance the lives of many.
To reward honesty to enterprise, to reward heat to expertise, to reward happiness to everybody, our mission has no boundaries, and we now have solely simply begun. We have modified how lots of of thousands and thousands of individuals stay, and we are going to grow to be part of the lives of billions of individuals globally sooner or later.
Good issues occur to good individuals. Please be part of us on our journey. Always consider.
— With help by Shelly Banjo, and Yuan Gao