Corporate Entrepreneurship and Business Model Innovation

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Corporate Entrepreneurship and Business Model Innovation
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Table of Contents
1. Discussion on Future of Xiaomi and Development of Business Model Innovation...................2
2. Discussion About Products, Services, Processes And Business Models Xiaomi Should Get
Involved To Respond To The Challenges Or Opportunities...........................................................7
3. Recommendation on the Implementation of Innovation Initiatives............................................9
References:....................................................................................................................................11

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1. Discussion on Future of Xiaomi and Development of Business Model Innovation
It has been found that despite the decline in the growth of the global smartphone the
smartphone market across the world has been heading towards growth. The smartphones that has
been shipped in the year 2013 has been found to touch the 1 billion units that increased to 1.3
billion that is closer to around 19.3 percent by the year 2014 (mi.com 2019). The global
shipment of smartphone rose by about 1.4 billion by end of the year 2015 (Soo Ha and Eun Bae
2014). The compound annual growth rate (CAGR) was close to 7.9 percent by the end of the
year 2015. Thus, there would be added pressure on the mobile companies particularly start-ups
like Xiaomi for reducing the price in order to capture the emerging economies.
Market in China: China seems to be one largest market of smartphone in the entire
world. In the year 2014, the country accounted for close to 32.3 percent of the shipments of
smartphone (Filieri and Lin 2017). According to International Data Corporation (IDC) shipments
of smartphones grew only by 1.2 percent year by year since the year 2015 which is down by
close to 19.7 percent since the year 2014. The Chinese market has hugely faced these tremors.
According to research based firm, in China sales has fallen by close to 4 percent (Sey and
Ortoleva 2014). According to the analyst the overall drop in the market has been closer to 23.1
percent by end of the year 2019. Nevertheless, China will continue to serve a good market for the
key manufacturers of smart phone across the world. According to various reports, Xiaomi holds
a pole positioning in Chinese market having market share of close to 15.8 percent (Rawal,
Awasthi and Upadhayay 2017). Huawei has been found to chase swiftly thereby giving a tough
competition to Xiaomi with market share of about 15.4 percent. Apple has a market share of
about 12.2 percent while Vivo has market share of 8.1 percent and Samsung has only 8 percent
market share.

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Future of the Corporation: Xiaomi has been a smartphone manufacturer that aims at
overtaking Huawei and Apple to become the second biggest phone after Samsung. The company
considers itself to be an internet company providing smartphones and smart hardware connected
by the IoT platform at the core (Bieliński 2016). It sells higher end phones and devices at lower
prices maintaining thin margins. This helps it in creating a marketplace for the connected
products, lifestyle, entertainment and the digital service. Xiaomi also tagged as the “Apple of
China” follows a reverse approach to Apple that sell high end phones at higher margin and price.
Xiaomi on the other hand makes use of third party apps for driving the demand for the
manufacturing business of the phone. However, similar to Apple, Xiaomi is able to oversee a
future in the services and internet of things (IoT) depending on a platform oriented growth
strategy thereby orchestrating an innovative ecosystem. There are various facets of Xiaomi that
seems impressive. One of them being how the company nurtured its fans that provided it with
rapid idea and feedback through interactive forums. The users have been found to spend
minimum of 4.5 hours on their devices that creates the opportunities for monetization (Böhmer,
and Krüger 2013). This acts as the crucial part of ecosystem strategy that proved successful in
sustaining the growth even after there was significant decline of the sales between the 2014 and
2016 (Gupta and Dhillon 2014). With a sales of close to over 60million and valuation of $45
million by the end of 2014, the company did not fail in creating an impression. The predictions
regarding the ability of Xiaomi in translating success in the worldwide emerging markets lay it
ignoring certain potential problems. Thus, the future of Xiaomi would be wrapped in the
following challenges:
1. Cost of Licensing Patents and Fighting Lawsuits: The rise of Xiaomi is attributed
to its strategy of emulating Apple. In spite of the fact that Xiaomi held a different attitude

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towards customization and design, there are various facets of the mobile business where it aped
Apple shamelessly when it came to the marketing. It not only copied Apple but also made use of
the copyrighted photos in marketing. It can however get away through this in China but it is not
possible to get away in the countries with stronger Internet Protocol laws. Apple however won
the court against Samsung but Xiaomi had little chance of doing it. Cost incurred in licensing the
patents and fighting the lawsuits would imply a massive bite on the bottom line of Xiaomi as it
did not have deeper pockets like Samsung or Apple (Hagiu and Yoffie 2013).
2. Lack of International Experience in Hindering Growth: On a realistic note, Xiaomi
needed to re-imagine the marketing approach that it followed for markets of United States. It
depended on maintaining closer relationship with the fan base with over 100 million users who
enjoyed the weekly update on the customized ROM. The company listened to the customers and
provided them with what they wanted. It boasted of having closer to 40 million forum users with
closer to 500,000 new posts. The fans drove the excitement, design and the word of mouth on the
various social media platforms while the flash sales with the limited stocks reduced the risk and
generated more buzz towards marketing.
Nevertheless, it was impossible for Xiaomi to replicate its success in Europe and the
United States. Absence of an international experience clearly hindered growth.
3. Absence of Brick and Motor Retail Presence: Xiaomi only used the online platforms
for selling the products to the consumers. Although the model is accepted in various markets but
the markets of Europe and US remains dominated by longer term contract and the carrier deal. It
is however difficult for the OEM to strike deal with the carrier (Chen et al. 2019). Acquiring a
shelf life would require a design input followed by pre-installation. Selling the devices only via

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online results in limited success. This is because even at the knock down prices, upfront cost are
believed to exceed on contract deal and people ends up in paying more.
3. Possession of Thin Margins of Profit: The tablets and the phones of Xiaomi are sold
at a very low cost and Xiaomi looks forward towards making money on the accessories and the
apps. Thus, it is termed as ‘Internet Company’ instead of Smartphone manufacturer. Low cost
has been an attraction for the customers but the western market doses not buy only the
accessories and the app ecosystem (Shujie 2017). On a global scale, Xiaomi is known to be a
partner of Google and hence the android devices carries the Google Play Store and app. With
such additional streams of income, it is difficult for the company to generate a profit.
Business Model Innovation: It represented the art of the value creation and
enhancement of advantage through supportive and simultaneous changes both to the value
proposition of the customers and the underlying model of operation (Bashir and Verma 2017). At
the stage of value proposition, changes addresses choice of the target segment, service or product
offering and the revenue model. On the other hand, at the stage of operation, the focus lies in
driving the competitive advantage, probability and the value creation through decisions of
delivering value proposition.
Xiaomi can follow a maverick approach for deploying the business model innovation in
order to scale up its core business. This approach is mostly followed by the startups employs
core advantage for revolutionizing the new industry and setting across newer standards. This
requires an ability of continuously evolving the advantage or rather the advantages of business
for driving growth. This can be described using the following model:

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Figure 1: Xiaomi’s Maverick Approach based Business Model Innovation
Source: (Xie and Liang 2013)
The maverick approach to business model innovation is most suitable for the company
due to the multi faced rich ecosystem of Xiaomi (Owings 2013). Xiaomi’s smartphones and a
variety of its other hardware like the fitness tracker, rice cooker and the television runs on its
copyrighted operating system, built on Android Kernal known as the MIUI. Besides, the
company is able to make most of the profit from digital services that can be accessed through its
devices. This includes games, movies, micro loans and the wealth management service. In
addition to this, it did not provide the services by itself but looked forward towards creating a
third party ecosystem around it that helped in leveraging not only the brand but also the billing
capabilities, customer base and the venture capital. The uniqueness of Xiaomi lies in its
uniqueness. The company stimulated growth of the ecosystem by putting across venture funding
for the startups by creating the services and the products that could be sold into the ecosystem. In

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the past five years, the company invested closer to $4bn across 450 companies. Amongst them
four became valued at over $1 billion.
2. Discussion about Products, Services, Processes and Business Models Xiaomi Should Get
Involved To Respond To The Challenges Or Opportunities
Xiaomi should manufacture products that not only look aesthetically pleasing and good
to touch and hold both in the business and home environment. The products should also possess
better graphics, screen and good performance compared to the competitors. Besides, they should
be solid performers and should run better than any other operating system. In addition to this, the
operating system should be modified to have the capability of removing the malware and virus.
Any apps or programs added to the products should be examined by Xiaomi.
As far as the services are concerned Xiaomi should ensure regular updates of the
operating system along with an app and music service. It should put across dedicated stores
where one get the targeted upgrades and the repair along with buying newer products. It must
also adopt a service that could lead to the emergence of the connected smarter product thereby
making the smart phones to act as remote control for variety of products. This is mentioned as
below:
 Using the phone to switch on and switch off a variety of the LED lamps for task lighting
 Using the phone for navigation of the interface on television
 Using the phone to learn when a connected purifier requires new filter.
 Using the phone for setting and following the fitness goals using a tracker wrist band

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As far the process is concerned, the design team of the company should work separately
particularly when they work on newer products. They should also put across physical control to
prevent the interaction of the team the other employees. They must be removed from traditional
structures and must develop their own structures of reporting and ensuring direct reporting to
executive team. This enables them to focus on the nitty-gritty of design. The information should
only be provided to the product development team the moment they begin to work. Every stage
of design process should be detailed with elaborate detail. The idea should remain on defining
the stages that product creation team goes through who remains responsible for the delivery of
the final product delivery. They also help in identifying who, which, where and when the product
is estimated to get completed.
When it comes to the business model, the model undertaken by Xiaomi should evolve in
relation to its focus on investment on energy, skills, time and money. It must also create a
different portfolio of the traditional competitors. This is shown in the following diagram:

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Figure 2: Xiaomi’s Business Model Evolution
The money raised from the IPO goes into the greater research and development along
with the development of Internet Protocol (particularly around the artificial intelligence),
continuance in the creation of higher quality hardware, building of increased number of digital
service having higher margins, ensuring international expansion and expanding and enriching a
powered ecosystem for building sustainable growth.
3. Recommendation on the Implementation of Innovation Initiatives
These includes:
1. Spotting the Opportunities for the Innovation: Irrespective of the form of
innovation taking place be agile, short, sprint or the long term it is fundamentally directed
towards solving problems. Once the promising ideas get identified it is recommended to
continuously explore it from the various angles. This helps in discovering the exciting
possibilities.

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2. Prioritizing the Opportunities: Time and resources are limited so it is vital to
prioritize the potential innovation depending on the one that is thought off in bringing the
maximum amount of luck. It is thus recommended to narrow down on ideas that seems worth
digging. It must then be tested through practical implications.
3. Building necessary Support for Innovation: It is necessary to identify who directly
benefits from the innovation. It is recommended for tailoring the approach depending on the
need derived from them.

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References:
Bashir, M. and Verma, R., 2017. Why business model innovation is the new competitive
advantage. IUP Journal of Business Strategy, 14(1), p.7.
Bieliński, T., 2016. Innovativeness and human capital as a main source of competitiveness of
Chinese economy. In Forum Scientiae Oeconomia (Vol. 4, No. 1, pp. 21-31).
Böhmer, M. and Krüger, A., 2013, April. A study on icon arrangement by smartphone users. In
Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (pp. 2137-
2146). ACM.
Chen, P., Zhao, R., Yan, Y. and Li, X., 2019. Promotional pricing and online business model
choice in the presence of retail competition. Omega, p.102085.
Filieri, R. and Lin, Z., 2017. The role of aesthetic, cultural, utilitarian and branding factors in
young Chinese consumers' repurchase intention of smartphone brands. Computers in Human
Behavior, 67, pp.139-150.
Gupta, S. and Dhillon, I., 2014. Can Xiaomi shake the global smartphone industry with an
innovative “services-based business model”?. AIMA Journal of Management & Research,
8(3/4), pp.2177-97.
Hagiu, A. and Yoffie, D.B., 2013. The new patent intermediaries: platforms, defensive
aggregators, and super-aggregators. Journal of Economic Perspectives, 27(1), pp.45-66.
mi.com , 2019. [online]. Available at https://www.mi.com/us/about [ accessed 11 Jan, 2020]

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Owings, T.M., 2013. Identifying a maverick: when antitrust law should protect a low-cost
competitor. Vand. L. Rev., 66, p.323.
Rawal, P., Awasthi, A. and Upadhayay, S., 2017. Creating a Hunger Driven Smartphone Market
by Xiaomi. International Journal of Engineering Science, 11250.
Sey, A. and Ortoleva, P., 2014. All work and no play? Judging the uses of mobile phones in
developing countries. Information Technologies & International Development, 10(3), pp.pp-1.
Shujie, Y., 2017. Driving Factors for Successful Brand Extensions in Chinese Market: the Case
of Chinese Brand Xiaomi Tech.
Soo Ha, K. and Eun Bae, J., 2014. Global Smart Contents Market Analysis: Market Growth and
Key Issues. Academy of Entrepreneurship Journal, 20(3), p.57.
Xie, W. and Liang, H., 2013, July. A case study: Innovation strategy assessment of the leading
smartphone companies. In 2013 Suzhou-Silicon Valley-Beijing International Innovation
Conference (pp. 121-126). IEEE.