Demystifying Xiaomi’s ecological chain： Xiaomi has invested in 55 entrepreneurial teams, and four of them have a valuation of over 1 billion US dollars.
Xiaomi once said that he would copy 100 millet in five years. According to Sun Ran, a reporter from China Business News, after two years’ operation, there are 55 Xiaomi eco-chain enterprises, and there are four unicorns with a valuation of more than one billion dollars. Lei Jun scored 99.99 points.
Xiaomi is famous for making explosions, and its recent product logic is still the same. In the case of giving birth to four small unicorns, it is a big unicorn with a valuation of 46 billion US dollars. Therefore, in the 16,000-word long article, Tiger Sniff only picked two parts: the explosion logic and the fate of unicorns to help readers quickly understand the Xiaomi ecological chain.
Liu De, head of Xiaomi Eco-chain and co-founder of Xiaomi, believes that eco-chain investment is the value, methodology and existing resources of products exported by Xiaomi, including e-commerce platform, marketing team, brand, etc., and builds an aircraft carrier fleet around itself. In finding and screening the invested team and locking in the field, Xiaomi follows a complete set of logic:
First, the market in a specific field is large enough to play the demographic dividend model of the Internet; Second, the products in this field have serious shortcomings in cost performance and quality, and there is a chance to be transformed; Third, the products can be iterated or have consumables to ensure that the company’s durability is concerned by the market; Fourth, the product users match the characteristics of Xiaomi’s 150 million user groups (concentrated in 18-35 years old, with 70% of science and technology men), and it is easy to detonate by using Xiaomi platform; Fifth, the technology is excellent, and a professional team like "Niu Dao" is used to do "killing chickens". For example, the developer in mi band is actually a mobile phone team; Sixth, we share common values with Xiaomi, do not make quick money, and have the desire to make new domestic products.
This set of screening criteria corresponds to 80% of mass consumer users in the market. "The Internet is a demographic dividend business and is not suitable for niche markets. In a mature economic system, two or three enterprises should monopolize 80% of the market. What Xiaomi wants to do is to make the middle class live a decent life and become a national enterprise with reasonable price and good quality. The remaining 20% of luxury goods and features are not considered by Xiaomi. " Liu De said.
Strictly speaking, Liu De relies on a set of military theories to control Xiaomi ecological chain enterprises-precision strikes and small-scale special forces operations. The former pursues single product explosion and mass sales, while the latter pursues small-scale surprise attack and counter-attack.
Explosion logic
Understanding the above can help us better understand the explosion logic of Xiaomi and its ecological chain. They must highly recognize this product logic of Xiaomi to become an ecological chain enterprise of Xiaomi:
In Xiaomi’s product logic, what Xiaomi wants to do is not the product with the highest technical content, but the product that can meet the basic needs of 80% of the public and achieve the best cost performance. Therefore, it is necessary to define the product accurately.
In Su Jun’s view, traditional enterprises develop products by trial and error. First, they put in dozens of models, which one sells well, and then they produce more and invest more resources. The whole management system, management system and even data are standardized and healthy, which also disperses risks, but it lacks one thing, that is, the precise definition of the product side.
Take the air purifier as an example. There are many products on the market, but there is actually only one "public version" product. It is a fan plus an Archimedes curve duct, and the front and rear air inlets and the top air outlets are basically a routine. This is true from a technical point of view, but from the product experience, it is a piece of "furniture". To be integrated into the family, the appearance must be beautiful. Moreover, domestic home appliance enterprises still use the operation logic established by Japanese home appliance enterprises. For example, Japanese people will read the instructions carefully after buying products, and the instructions are still very thick, which is the habit of Japanese people. However, this kind of operational logic is very different from the current mobile Internet era. "Should have changed, and it is easy to change. Do not change because there is no pursuit. "
Xiaomi’s "precise definition" and "aiming at a little punching" are risky, but Su Jun believes that the product manager of Xiaomi system has enough confidence in the user experience, industry situation and the definition of good products to avoid this risk. "Sometimes we are absolutely confident that this product is what consumers want."
In fact, the product managers and directors in the Xiaomi Eco-chain team have a great decision on the definition of products and whether they can finally go public. Before the product comes out, it will go through two or three rounds of trial and internal spit. "The internal spit group is very powerful, and sometimes a product will be smashed to pieces." Many products in the Xiaomi ecological chain that failed to reach 80% satisfaction in internal testing were killed before listing. In Su Jun’s view, this is actually doing hardware with the idea of doing software, running in small steps and iterating quickly.
"Without 1 million units, I failed. The single product (annual sales volume) must also be guaranteed at least between 1 million and 10 million units. " This is the standard for Liu De, the head of Xiaomi Ecological Chain, to measure the success of a member enterprise."Eco-chain companies should be the first in the world in every field, and the second is fine, but it is no problem to be the first in China."
After two years of business, the Xiaomi mobile power supply made by Zimi sold 20 million units in 2015, ranking first in the world among similar products. Another Huami, which makes bracelets, sold 13 million bracelets in 2015, and it is also approaching the number one position in the world. Liu De thinks it is not difficult to become the world’s number one. "When you are based on a dividend market, you should have the number one base in the world."
Single product, mass production and explosion are the product logic that Xiaomi eco-chain enterprises follow together: they focus on a single product line, aim at 80% of the mass consumer goods market, sell high-configuration products at a low price close to the cost, and strive to reach the first position in the sub-sector within two or three years.Xiaomi saw clearly that the opportunity of the Internet model comes from the demographic dividend. Therefore, in this logic, scale is the core of everything, whether it is for profit or for maintaining benign operation.
Xiaomi requires every eco-enterprise to agree with the values of "don’t make quick money, don’t make huge profits and pay attention to quality".At the beginning, Su Jun set the price of 899 yuan, which was based on a set of "assuming success formula", that is, the cost of millions of sets of sales that could be imagined, plus the operating cost.
For example,
Zhang Feng, CEO of Zimi Technology, takes Xiaomi mobile power supply as an example. The average cost of 50 million units is much lower than that of 500,000 units and 5 million units. Assuming that a power supply (profit) costs 1 yuan money, there may be a profit of 30 million to 50 million yuan. If the profit rate is 10% and 5 million units are sold, there will be a profit of 20 million to 30 million yuan.
The decreasing cost effect brought by scale is one reason, and it is also very important to "cooperate" with the supply chain in a benign way. Before entering the Xiaomi ecological chain, Zhang Feng was the general manager of Inventec, a Xiaomi mobile phone OEM factory, and had been in the supply chain circle for more than ten years. When Xiaomi Mobile Power Supply was first introduced, 69 yuan’s pricing plan could not be formed without the support of a bunch of suppliers. In the eyes of many people in the industry, it is the unspoken rule of the industry that hardware manufacturers cut prices by squeezing the supply chain. However, Zhang Feng believes that "every expense of long-term cooperative suppliers is the same as their own, and their efficiency is our efficiency."
In the off-season, purple rice will allow manufacturers to continue production and build a part of their own inventory to take risks. "The plan we gave them is not two or three months, but six months, and their personnel should be kept stable. When machines and people are running, the efficiency is improved, the efficiency is improved, and the processing cost is reduced. "
At the same time, the realization of the cost-effective model also depends on the design ideas of Xiaomi products. Xiaomi enterprises have cut off all unnecessary functions in their products and the expenses they bring. This is related to Xiaomi’s positioning. What it wants to do is not the product with the highest technical content, but the product that can meet the basic needs of 80% of the public and achieve the best cost performance. Corresponding to this set of design ideas, Xiaomi Eco-enterprise does not use sophisticated "black technology", but mature industrial-grade solutions and accessories, which avoids the high cost of becoming a laboratory product.
The fate of unicorns
Most of Xiaomi’s investments are intelligent hardware entrepreneurs with traditional enterprise backgrounds, and their tolerance for price is much lower than Xiaomi’s. Therefore, when they run in with Xiaomi’s investment team, the most painful and tormenting thing for them is product pricing, but the price/performance ratio is the biggest weapon of destruction for Xiaomi and its eco-chain enterprises.
How to run in between eco-chain enterprises and Xiaomi;
Several Xiaomi eco-chain entrepreneurs have used the words "torture", "force" and "pain", especially in the pricing process. The earliest market price of the cooperative model of Ninebot and Xiaomi was 14,900 yuan, and the price was set at 2,999 yuan when negotiating with Xiaomi in the early stage. Gao Lufeng thought this was a very "millet" pricing style, but he didn’t expect it to be just the beginning. "Chatting and chatting, I don’t know when I started running for 1900 yuan." He recalled.
What does it mean to cut the price of 1000 yuan again? According to Ninebot’s previous manufacturing experience, such a price is almost impossible to achieve.
Therefore, on the premise of ensuring safety and performance, the team finally carried out a lot of algorithm optimization to improve efficiency, and replaced many high-precision parts with high prices and low production with mature industrial-grade devices and solutions with high prices and low prices. Gao Lufeng said: "We are very clear that basically no one in the industry can achieve this level of price. This is a conscience production, which is basically the cost price. " Xiaomi’s support through the supply chain is also an indispensable condition for the realization of this "floor price". "For example, like LG batteries, with our original production capacity and bargaining power, it is difficult to talk about good prices. The Xiaomi ecological chain took us to talk, and soon the price was’ beaten’."
Like Ninebot, Yeelight, the bedside lamp brand in Xiaomi ecological chain, has also experienced this "bargaining" process. Jiang Zhaoning, the founder of the company, said that the original price of Yeelight in 500 yuan was cut to 299 yuan. However, according to the original sales method, channel and advertising expenses accounted for at least 50% of the selling price, and this part of the expenses was covered by Xiaomi’s existing e-commerce channels and marketing team after cooperation with Xiaomi.
Chen Xiaoping, the founder of Yunmi Technology, was born in a traditional household appliance enterprise. He revealed that taking water purifier products as an example, the cost of the traditional household appliance industry only accounts for one-third to one-sixth of the retail price. But in the face of Xiaomi’s cost pricing method, they still experienced some struggles.
Gao Lufeng later imagined that even if the price of the product was set at 2999 yuan at the beginning, it would be subversive to the balance car market. Even if the price was higher in 500 yuan, there would be a net profit for 500 yuan, but there was no assumption in business. "If the price was not hard enough for yourself, Ninebot would not be as unique as it is now."
Ninebot may be the most experienced enterprise in the whole ecological chain for the attack of Xiaomi’s cost-effective model. This understanding stems from the strong contrast between two fates: on the one hand, Ninebot quickly opened up the volume of the balance car market under the transformation of Xiaomi; On the other hand, Segway, an industry tycoon, has always taken the mid-to-high-end route, entrenched in enterprise-level and niche markets. However, due to its high cost and eclipsed performance, it was eventually taken over by Ninebot. Therefore, Wang Ye, another founder of Ninebot, shouted the slogan very early: Don’t be the second Segway, be a consumer product.
For eco-chain enterprises, the biggest difficulty is not to straighten out the price, but to pass the product manager of Xiaomi and even Lei Jun before the product goes on the market. Jiang Zhaoning didn’t adapt to it at first. "Sometimes it takes two to three months for internal testing and public testing to add up. We have developed products for American customers before, and we have never suffered such torture."
Ninebot’s most uneasy and fastest-growing period is also the eve of the listing of the No.9 balance car. That product was originally scheduled to be launched on July 21, 2015, but one day in June, after seeing the prototype, Lei Jun thought that the appearance and many details did not reach the extreme he requested. "Ray always commanded, we basically didn’t resist, and the appearance was all over again. It was officially released on October 19 th. " Gao Lufeng said.
During the three months after Lei Jun proposed the revision, more than a dozen designers of Ninebot moved their computers to work in a conference room on the first floor of Xiaomi Company every day. "That stage was particularly painful. Our industrial design team completely collapsed after getting the instructions to reinvent the appearance." Gao Lufeng said.
The effect is also obvious. Under the impetus of Xiaomi, Ninebot, a startup company established only three years ago, acquired Segway, the originator of the balance car with a history of 16 years. The success of Ninebot is Liu De’s masterpiece. "Give it a push and you will buy Segway". Zhimi Technology and Huami Technology were both valued at nearly $300 million in the last round of financing, and now they are growing exponentially. Ninebot’s latest valuation has also risen to $1.2 billion, and it will launch an overseas listing plan. It seems that they are "forced" by Xiaomi, and this one is worth it. But more importantly, can these unicorns hatched by Xiaomi become truly "billion-dollar enterprises" after gradually reducing their dependence on Xiaomi?
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