The common concern of hundreds of thousands of Internet practitioners!
Source: Zhijia (ID: Zhijiadongshi)
Editor: Verna
This is lei Jun’s speech at the Annual Meeting of Xiaomi Investment on November 2-3, 2017.
‘Xiaomi climbed out of the mud in the past two years, so why did xiaomi have a tough time in the past two years?’ Mr. Lei said. Xiaomi has invested in nearly 200 enterprises. What are their industry distribution and typical characteristics? Here are the answers:
Entrepreneurship is not glamorous. It’s hard work
We’re here today with a hundred and ninety companies, and every one of them is the best in the startup market, and almost every one of them is doing wonders, and their business is booming, and they’re all proud of their time. But as an entrepreneur, I might see the other side. I think it’s extremely difficult for everyone to struggle in the market, because entrepreneurs are not as glamorous as the public thinks.
Many people like the feeling of being a successful entrepreneur before they start a business. What does a successful entrepreneur look like in the media? Successful career, fancy house, fancy car, plane one day, yacht the next, glamorous events.
Of course, there are a few successful entrepreneurs who do lead happy lives.
Anyway, according to this label, there’s no question that I’m a failure as an entrepreneur, because I’m a model.
When others say THAT I am a model worker, I feel very guilty, sorry to everyone, I made a wrong example. But sometimes I wonder, if you really want to realize your unique dream, you do not pay more than others, how can you succeed? Do you really have a higher IQ than most of you? Do you really have special resources?
Almost every one of us is a first-generation entrepreneur, facing such fierce competition, if we don’t give more than others, there is no way to succeed.
This is my heart very contradictory very complex place, I really do not want to hear everyone kua I am a model worker. I feel guilty when I’m busy. I feel like I’m not successful. Why can’t I be like those successful entrepreneurs who drink coffee every day and get the job done? Was it right or wrong for me to waver in what I had done?
Of course, when the company comes to a stage, I think the CEO’s main focus should be on strategic decisions, organizational restructuring and major cooperation, but even these are also very busy. I’ve met a lot of successful entrepreneurs who are busier than most people think.
In September, I went to Samsung headquarters in South Korea with Zhang Feng (vice president of Xiaomi Supply Chain) and had the opportunity to meet three vice presidents of Samsung.
I just asked a question, what time do you go to work in the morning when there is such a traffic jam in Seoul? Two of the three vice presidents told me to be on duty at 6:30 a.m. Because of memory shortage, I went to visit the vice president in charge of memory, he is five o ‘clock in the morning. He said he had to go for a one-hour run in the office and would arrive at the office at 6:30. I mean, what time do you get off work? He said it’s usually 6:00, but there’s always a party in the evening, around 10:00. That evening as expected there was entertainment, is to invite me to drink, the end has been more than 12 o ‘clock.
I give this example, and you understand why Samsung has become one of the most profitable or successful companies in the world, and everyone’s contribution may be much more than you think, so I have a little bit of balance.
On the plane, I read a book by Kazuo Inamori. Who is Kazuo Inamori? He built two fortune 500 companies from scratch, Kyocera and KDDI, and was praised by the Japanese as the god of management. Kyocera came by a few years ago and gave me a stack of Kazuo Inamori books. To be honest, I’ve been too busy to read it. It’s all covered in dust. When I came to Chengdu for a meeting, I picked up a copy from the table – “Six Precisions”. Two-thirds of the book is about these three sentences:
1, pay as hard as anyone else;
Work hard seriously;
In addition to hard work, there is no higher business know-how.
I was moved after reading the book. I may have inadvertently used the best business trick in the world, which is to work as hard as I can. Inamori kazuo spoke a lot of ideas, I found after reading, and millet spoke is surprisingly consistent. Xiaomi’s values are two words: sincerity and love. The three words they speak: love, sincerity and harmony. Such concepts as transparency — that is, all operations in the company are transparent — are very much in line with Xiaomi’s practices. I’m not going to go into that. I’m just going to share the first point.
In my opinion, starting a business is not an easy thing, and successful entrepreneurs are not as easy as the public understanding. There is only one secret to success: work hard and work hard.
Millet out of the mud, I know how to win back
Second, xiaomi has been under a lot of pressure over the past two years.
Xiaomi has been on a tear in the last four and a half years, setting a series of world records. In the past two years, we have been in the mud, with all kinds of ravages and criticism. Indeed, once the performance of the mobile phone industry began to decline, it entered the death channel, few companies can reverse, the difficulty of competition is more than most industries. You close your eyes and think, what is the mobile phone industry? It’s definitely not a human business!
Internationally, you think Apple is easy to beat? Or is Samsung easy to fight? Apple just crossed the $900 billion mark, making it the most valuable company on the planet. People always tell me, why can’t your phone do as well as Apple? I said, if I did Apple, I’d be worth a trillion dollars, okay? I’ve never been in any of the places where some entrepreneurs have been so quick to denigrate Apple. I think doing even a few things better than Apple is a world-class challenge. The same goes for Samsung. I won’t go into that.
Who is the domestic market? Huawei, the world’s top 500, a huge scale of 180,000 people; When we entered the market, we also had Lenovo, which is one of the fortune 500 companies in the world, and tens of thousands of people. It was a very competitive market. In fact, I do not understand today, such a great company, why xiaomi a small company killed in the market, two and a half years all the whole collapse. People take it for granted that we should always be king, and they definitely underestimate how difficult the mobile industry is.
Q1 mobile market Ranking:
No 1 Samsung
No. 2 Apple
No 3 Huawei
A fourth OPPO
Fifth place in VIVO
Millet? I couldn’t find Xiaomi, and then I finally understood that we had a common name with all the other companies in the world called Others. Two years ago, I discussed with Liu De (co-founder and vice president of Xiaomi) that we should change the name of our company to others, and maybe we would rank first. This would be great. If you look at the list, Other accounts for 39.9%, twice as much as Samsung. Later, I do not know whether it is true, Liu De told me that the industrial and commercial bureau did not allow registration.
Everyone thinks millet is no good, my heart is a little aggrieved. Guys, this is a global ranking, and we’re actually number six in the world. Media always scold me, I sometimes have a little personality, I said: the world sixth disgrace? There’s no shame in it, but when everyone scolds you, it hurts your little ego a lot. Of course, if we die from now on, even without a chance to explain, we can only be considered losers.
From the third quarter of two years ago, we were really in a lot of pain, we lost the number one position in China and we went all the way down. In the second quarter of this year, we returned to the top five with 58.9% year-on-year growth; IDC just released q3 numbers, and we’re up 102.6% year over year. I think we have a very good chance to climb one place further in the fourth quarter and get to number four in the world. Today this score table is put on the table, I feel very confident, I know how to lose in the past, but also know how to win back step by step.
After the second quarter earnings report came out, I saw a report called “The golden years of Lei Jun”, I only read the title, because the content does not need to read. I know very well that Today’s Xiaomi has just started, and there are still countless difficulties and problems. This achievement is nothing at all. Because I firmly believe that Xiaomi is on the right track and will move forward step by step in at least the next two or three years.
Dreams, values and business models never wavered
I want to share how Xiaomi did it. Besides hard work, I think the reason for the reversal is essentially the success of Xiaomi’s dream, values and business model. Over the past two difficult years, I have never doubted or wavered on these three points.
Seven years ago I couldn’t understand why we Chinese looked down on domestic products when China was the world’s number one manufacturer. Why do we have so much stuff in our stores that we can’t sell and buy all over the world? I don’t know why products made in China are so much cheaper to buy in America than in China.
I had never made a product, and seven years ago, bored, I said I would solve this problem, and I did it for you. Although I know nothing, I have a simple and pure heart: I want everyone to be able to use high-quality products made by Chinese people. I hope that not only Chinese people, but everyone in the world, regardless of nationality, color, religion, men and women, old and young, can enjoy the joy brought by China’s technological innovation.
So seven years ago we had the goal of becoming a Globe Company. That was our ambition. We want to lead the overall rise of the whole Manufacturing industry in China, which is the biggest driving force behind our decision to start the ecological chain four years ago.
In my opinion, the Millet family is not alone. A lot of people told me that the Millet model is too complicated to copy, lei Jun you guys are fierce. I said no, the great thing about The Mi model is that it can be copied. I would like to help a hundred millet model enterprises, on the establishment of the ecological chain department. This is what we are here for. Even though Xiaomi is closed, we have promoted the progress of the whole Chinese mobile phone industry, which is also xiaomi’s glory.
Think back to what China’s mobile phone industry looked like six years ago. All are shanzhai machine, Xiaomi is a little better shanzhai machine. But today, the world has recognized how powerful the Top four Chinese mobile phones are, which is really a sea change. The next decade belongs to China. I hope you can seize the opportunity and believe in xiaomi’s model and values.
Of course, the biggest difficulty here is that it’s not easy to do. Say simple, very simple, say complicated, very complicated. Like controlling gross margins, making less money on things you could have made a lot of money on, maybe just making a dollar per person.
Control greed, these four words are easy to write, difficult to do.
What is the nature of the restraint of greed?
Is any time to put users in the first place, partners in the second place, shareholders in the third place, put yourself in the fourth.
It’s a stupid way to think forever, but it’s the smartest way in the world, like working hard. Because you persevere, you end up with a huge success that can truly impact the world.
Holding such a dream, we started to make mobile phones, started to incubate eco-chain enterprises, and started to preach the whole methodology of Xiaomi everywhere. I require the eco-chain department to be the disseminator of Xiaomi’s values. We will demonstrate and promote Xiaomi’s values, so that more Chinese enterprises can stand out. This is what we will do. Then the value of Xiaomi is sincerity and love, so I won’t talk about it here.
Our business model is the tipping model that Zhang Feng talked about yesterday and I have talked about many times. The money we earn is the money our users are willing to give, not the way we hide it. I also do not want to lose money in the business, I require the hardware and new retail level, the profits mainly from the Internet business and Internet finance. People are willing to use our Internet service, willing to pay us, we see it as a disguised tipping model.
In fact, Costco has been in this mode for a long time. Costco’s gross profit margin is very low and its business is basically flat. Its profit comes from membership fees and credit card income. When users become Costco fans, Costco says can you use our credit card, let us make some money, let our employees happy, let our shareholders happy, let our company sustainable growth. Costco should be considered as a traditional chain store, wal-mart’s PE is only 11 or 12 times, Costco, like Google and Facebook, enjoy more than 30 times of Internet PE.
The logic here is that companies like this are truly trusted by users, followed, and followed by fans.
The word fan is overused now, but the essence of a fan is someone who believes in you. Millet home why flat effect is high? ‘I can buy things with my eyes closed when I enter Mi Home,’ said one of our users. Guys, ask yourself, can your customers buy your product with their eyes closed? Xiaomi students here also ask themselves, our business today can let users buy with their eyes closed? How much does a user have to trust you to buy something with their eyes closed?
As you can see when you go to Mi Home, mi Home has a basket just like a supermarket. Many users buy things in a basket. Trust lies behind this. It took Xiaomi more than seven years to build a complete business model step by step, which I won’t go into.
High quality first, high cost performance second
Here, to repeat xiaomi’s most important point of view, the first is to do high-quality products.
High quality products, not only quality, but also reflected in the design and user experience. Why xiaomi products will let everyone’s eyes shine? The core innovation is in design and user experience. When xiaomi’s start-ups grow to a certain scale, they will encounter bottlenecks, depending on whether traditional capabilities can be made up. If not, the quality control ability, supply chain ability and large-scale organization ability will still be under pressure from design and experience to scale. Therefore, these three abilities should be gradually improved.
◆ The first is high quality
◆ The second is cost-effective
Not long ago, we argued that the price is too high. I said, the office use a poor dollar pen, is also cost-effective. Shanzhai product performance, as long as the use of more shanzhai price, is also high cost performance. China’s manufacturing industry has successfully achieved today’s scale under the guidance of high cost performance.
However, seven years ago, the problem we faced was the upgrading of quality and consumption. Xiaomi added high quality on the basis of high cost performance of traditional Chinese enterprises. In our opinion, quality comes first, cost performance comes second. Because China’s spending power is up, there is no point in being cheaper than anyone else.
Are our absolute prices really cheap? When we enter the mobile phone market, the average domestic mobile phone is 600 or 700 yuan, we started at 2000 yuan, many times more expensive. We entered the rice cooker market, rice cooker average more than three hundred dollars, we came up nine hundred and ninety-nine. Cheap? Not cheap. It’s the quality, and then the honest price.
We do the first generation of Mi MIX to promote the application of the whole precision ceramics in mobile phones. At the beginning of mass production, the cost of ceramics was 1,400 pieces. When the production of MIX generation was discontinued, the cost of frame, back panel and buttons was at least 1,100 pieces. The Unibody ceramic of our MIX 2 costs much more than the iPhone X, which is like a work of art.
Therefore, when we consider the millet model, the first premise is high quality. Of course, some users may not need such high quality, the so-called high quality is defined for the user group. Today, our Redmi phones have achieved amazing results in terms of design, experience and quality, but without too much black technology, so 81,000 people can buy them.
We drove the whole adoption of smartphones, and today we’re popular in India, we’re popular in Indonesia, we’re popular in Russia. I believe we are all welcome in America. Because this is human nature, everyone is eager to buy good, fair price products, everyone wants merchants to treat them like friends.
Let’s think about how tired we are when we go to the mall to buy things, and you have to compare and compare. Can we be an honest business where consumers don’t have to compare? They just have to trust us.
Xiaomi brand is not easy, and line and cherish
Therefore, the most important thing in Xiaomi’s model is trust. Here, I also implore the 190 companies in the Xiaomi family: it is not easy to make a Xiaomi brand, but it is easy to make a bad one. Any quality accident of you will be blamed on Xiaomi, even if it is not xiaomi, even if it is not Mijia.
We have many companies, website publicity materials written “Millet ecological chain enterprise”, taobao sales write “Millet ecological chain enterprise so-and-so company do so-and-so product”, all with Millet in endorsement. This is a very heavy burden on the Xiaomi brand, because you hurt the Xiaomi brand carelessly.
Another point is that with so many products created by your own brands, rice fans and consumers are confused: does Xiaomi’s business have boundaries? A company that does everything is hard to do well.
I sincerely ask you to help me, the biggest problem we meet today is how to maintain the Xiaomi brand. It can’t carry that many products, and it can’t endorse you indefinitely. Even endorsing companies that are not here and have nothing to do with us, including those that are fake, is the biggest pressure we carry.
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