From Fan-Centric Handset Manufacturing to Intense Product Diversification: A Study of the Rapid Transformation of a Telecommunication Giant in China and Beyond

From Fan-Centric Handset Manufacturing to Intense Product Diversification: A Study of the Rapid Transformation of a Telecommunication Giant in China and Beyond

Min Zhang (Changchun University of Science and Technology, Shanghai, China & St. John's University, USA) and Katia Passerini (St. John's University, Queens, NY, USA)
DOI: 10.4018/IJITN.2020040102

Abstract

Xiaomi Corporation is a very successful company in the wireless telecommunications industry in China. The company has been able to adopt a “fan-centric” business model that includes extensive input from their customer base on handset design, user interface design, and features for other products/services offered by the company. The “innovation ecosystem” the company created has allowed a recent surge in sales and popularity that provides a model for other wireless telecommunications companies ranging from network service providers to application developers to follow.
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Brief Review Of Ecosystems

While this work focuses on the innovative business model of Xiaomi, a discussion of what the term “business ecosystem” and “innovation ecosystem” mean is necessary to give some context. A business ecosystem, as put forth by Gomes, et al. (Gomes, Facin, Salerno & Ikenami, 2018), is a network of actors (customers, companies, non-profit organizations, government agencies, individuals, etc.) that are related through a common set of interests where the success or failure of any given member of the network has some impact on the network as a whole, and therefore, other individual members. Members of such an ecosystem often complement one another and allow for economies of scale, the sharing of scare resources, and cooperative projects/pursuits to benefit individual members as well as the network overall.

Rabelo and Bernus (2015) point out that a business ecosystem brings a broader perspective than an innovation ecosystem as it reveals the true ‘canvas’ of all actors involved. In the broader business ecosystem, interrelationships, infrastructures, boosting polices and regulations and various other factors can be observed along the supply chain that manages the value within the system. Although some of the management elements of the business ecosystem may not directly be linked to innovation, they provide the backdrop for the subset of actors and the network propelling organizational innovation. In other words, the innovation ecosystem is a subset of a larger business ecosystem and this scope must be factored into the analysis. For the case of Xiaomi, actors of both the mobile handset and wireless markets of China and East Asia (including Hong Kong, Indonesia, and other national markets which Xiaomi has penetrated) represent the larger business ecosystem within which its innovation ecosystem operates.

Rabelo and Bernus (2015) also note that most attempts at building an innovation ecosystem fail, which makes the case of Xiaomi even more interesting and unique. Overholm (2015) states that “a critical question for many new ventures is how to orchestrate a complex network of counterparties.” Within the broad business ecosystem mentioned above, Xiaomi was able to create its innovation-focused network in a more direct and streamlined manner through direct sales and marketing and the building of consumer trust with a one-on-one approach to customer relationship management. The term “fan-centric” embodies this approach in that customers not only establish brand loyalty, but become integral parts of the product development process, the sales and marketing process, and the overall value chain.

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