Case Study Xiaomi

Innovation Management - Sino-Danish Center 16 January 2015-1st Semester-110,040 Characters, 46 Normal Pages

Case study, Xiaomi Integrating User-driven Innovation and the Organizational Design Jens Giver Pedersen, Anders Spile Christensen, Xiangying MENG, Jiayi RAO – Supervised by Yimei HU

Abstract Xiaomi is focusing on being the most user-collaborative mobile internet company, which constantly exceeds user expectations, through innovations in software, hardware and Internet services. The rapid growth of Xiaomi benefits from the way it classifies its users, and engage them in product development processes. The project studies the reason why Xiaomi chooses users as external partners, and investigate how they collaborate, by using the cross-sectional case study method. method.

摘要本文主要研究小米公司在软硬件与互联网服务方面所应用的粉丝驱动模式。小米的快速发展得益于其对用户进行精确分类并鼓励用户参与产品设计与研发过程。本文将利用时点法与案例法展示小米选择用户作为外部合作伙伴的原因以及其合作方式。

Introduction

the smartphone industry reached 27 % in the second quarter of 2014. Android Android managed to capture

There are currently more than 1.4 billion s-

a market share of around 85 % of this increase. An

martphones martphones in the world. In comparison comparison there are

interesting development amongst these five major

only only 2 bill billion ion comp compute uters rs in the the world orld,, and and with with

companies within in the smartphone industry is be-

a marke markett growth growth of 1.8 millio million n smartp smartphon hones es per

ing illustrated by the latest report done by the In-

day day, havin havingg a smartp smartphon honee is basica basically lly the norm norm

ternational ternational Data Corporation Corporation (IDC), depicting depicting the

nowaday nowadays. s. The smartphone is always always within arm’s

smartphone smartphone vendor market market share. The mentioned mentioned

reach, and a recent study even shows that 9 out of

development shows the rise of a relatively new com-

10 searches on your smartphone, leads to some sort

pany, which by the third quarter this year was able

of action, and more than half of these actions leads

to overtake the third place within the smartphone

to some sort of purch purchase ase (Forbe (Forbess – 2013 2013). ). In oth-

industry, with a 5.2 % market share. The name of

er words, the smartphone has become an essential

the company that through the past four years has

part of our consumer behavior.

gone from zero percent market market share to respective respective--

The multi-billion dollar smartphone industry

ly 1.0 % to 2.1 % and now has risen to 5.2 %, is

is currently being led by five large companies, Sam-

Xiaomi.

sung, Apple, Xiaomi, Lenovo, and LG. As of third quarter quarter in 2014 these combined combined had more than a 50

Xiaomi was founded in 2010 by the renowned

% market share. The year-on-y year-on-year ear growth growth within

angel investor and entrepreneur Lei Jun, who had 1

Case Case stud study y, Xiao Xiaomi mi-I -In ntegr tegrat atin ing g User User-d -dri rive ven n Inno Innov vatio ation n and and the the Orga Organi niza zati tion onal al Desi Design gn

Inno Innov vatio ation n Mana Manage geme ment nt - SDC SDC

a vision of creating a company, that made it possiContent Table

ble for the consumer to acquire a high-end quality product product,, at a reason reasonable able price. price. Xiao Xiaomi mi is primar primar--

Abstract................................ ................................................ .....................1 .....1 Introduction................................. ..............................................1 .............1 List List of Acrony Acronyms ms ......................................3 Problem Problem Backgroun Background d ..................................3 Problem Problem Formulati Formulation on ................................3

ily focusing on the Chinese and adjacent markets, which is why the company name to most people outside of Asia, may be unknown, despite it being the third largest smartphone company in the world

Research Research Questions Questions...........................................3

(IDC - 2014).

Problem Problem Limitatio Limitation n ...........................................4

Methodology................................ ...............................................4 ...............4

Paradigm..............................................................4 Ontology..............................................................4

When Lei Jun founded the company, he put

Epistemology.......................................................5

together a team consisting of skilled people from

Research Research Design Design .................................................5

1.Theoretical Framework ........................8

various companies such as Google, Microsoft, Mo-

1.1 Open Innovation Innovation.........................................8

torola, Yahoo Yahoo etc. These were were all brought togethtogeth-

1.2 Want Find Find Get Manage Manage Model Model...................10

er for the purpose of bringing Lei Jun’s vision to

1.2.1 Want-Diffu Want-Diffusion sion of Innovatio Innovation n .........10

life. What really really sets Xiaomi apart from the rest of

1.2.2 Find-Scouting .....................................12

the industry is the philosophy stated on their web-

1.2.3 Get-Partic Get-Participato ipatory ry Design Design ................13 1.2.4 Manage-Organization Structure .......14

site, which clearly indicates the concept of the com-

2.Case 2.Case Analysis Analysis ......................................16 2.1 Resear Research ch Questi Question on 1 ................................16 2.1.1 Diffusion Diffusion of Innovation Innovation..................16 2.1.2 Xiaomi Scouting Scouting Strategy Strategy ................19 2.2 Resear Research ch Questi Question on 2 ................................22 2.2.1 Xiaomi Xiaomi User Categoriz Categorization ation............22 2.2.2 Engaging Engaging users users in innovatio innovation n ........23 2.2.3 2.2.3 The role role of social social platfo platform rm ..........26 2.2.4 Maintain Maintain sustainab sustainable le innovation innovation ...28 2.2.5 2.2.5 Synerg Synergy y betwee between n Xiaomi Xiaomi and users users .29 2.3 Resear Research ch Questi Question on 3 ................................33 2.3.1 Current Formal Formal Structure Structure................33 2.3.2 Capabilities Capabilities needed for Xiaomi Xiaomi .....34 2.3.3 Formal Structure Structure VS Capabilit Capabilities ies .34 2.3.4 Restructur Restructuring ing organizat organization ion ............35 3.Conclusions..........................................36 3.1 Conclusio Conclusions ns...............................................36 3.2 Reflectio Reflections ns...............................................37 References................................ ................................................39 ................39 Scientific Articles ........................................39 Non scientifi scientific c Articles Articles................................40 Books..................................................................40 Appendices................................ ................................................41 ................41

pany pany. Xiao Xiaomi mi has been engagin engagingg their their fans from the founding of the company, through social media where a two-way communication has been facilitated. This has contributed to the process of developing new products, which has the aim of satisfying the needs of their fans.

Henr He nry y W. Ches Chesbr brou ough gh has throu through gh his his reresearch on how companies are able to generate new ideas with external partners, stated ”not all of the smart people work for us so we must find and tap into the knowledge knowledge and expertise expertise of bright bright individindividuals outside our company” (Chesbrough H. W. 2003). This is exactly the belief that Xiaomi’s philosophy losophy emphasizes. emphasizes. To include include and engage external partners in order to acquire the best possible soluti solutions ons.. The purpose purpose of this this project project is to examine how Xiaomi effectively have managed, and are able to improve their interaction with fans. 2



a vision of creating a company, that made it possiContent Table

ble for the consumer to acquire a high-end quality product product,, at a reason reasonable able price. price. Xiao Xiaomi mi is primar primar--

Abstract................................ ................................................ .....................1 .....1 Introduction................................. ..............................................1 .............1 List List of Acrony Acronyms ms ......................................3 Problem Problem Backgroun Background d ..................................3 Problem Problem Formulati Formulation on ................................3

ily focusing on the Chinese and adjacent markets, which is why the company name to most people outside of Asia, may be unknown, despite it being the third largest smartphone company in the world

Research Research Questions Questions...........................................3

(IDC - 2014).

Problem Problem Limitatio Limitation n ...........................................4

Methodology................................ ...............................................4 ...............4

Paradigm..............................................................4 Ontology..............................................................4

When Lei Jun founded the company, he put

Epistemology.......................................................5

together a team consisting of skilled people from

Research Research Design Design .................................................5

1.Theoretical Framework ........................8

various companies such as Google, Microsoft, Mo-

1.1 Open Innovation Innovation.........................................8

torola, Yahoo Yahoo etc. These were were all brought togethtogeth-

1.2 Want Find Find Get Manage Manage Model Model...................10

er for the purpose of bringing Lei Jun’s vision to

1.2.1 Want-Diffu Want-Diffusion sion of Innovatio Innovation n .........10

life. What really really sets Xiaomi apart from the rest of

1.2.2 Find-Scouting .....................................12

the industry is the philosophy stated on their web-

1.2.3 Get-Partic Get-Participato ipatory ry Design Design ................13 1.2.4 Manage-Organization Structure .......14

site, which clearly indicates the concept of the com-

2.Case 2.Case Analysis Analysis ......................................16 2.1 Resear Research ch Questi Question on 1 ................................16 2.1.1 Diffusion Diffusion of Innovation Innovation..................16 2.1.2 Xiaomi Scouting Scouting Strategy Strategy ................19 2.2 Resear Research ch Questi Question on 2 ................................22 2.2.1 Xiaomi Xiaomi User Categoriz Categorization ation............22 2.2.2 Engaging Engaging users users in innovatio innovation n ........23 2.2.3 2.2.3 The role role of social social platfo platform rm ..........26 2.2.4 Maintain Maintain sustainab sustainable le innovation innovation ...28 2.2.5 2.2.5 Synerg Synergy y betwee between n Xiaomi Xiaomi and users users .29 2.3 Resear Research ch Questi Question on 3 ................................33 2.3.1 Current Formal Formal Structure Structure................33 2.3.2 Capabilities Capabilities needed for Xiaomi Xiaomi .....34 2.3.3 Formal Structure Structure VS Capabilit Capabilities ies .34 2.3.4 Restructur Restructuring ing organizat organization ion ............35 3.Conclusions..........................................36 3.1 Conclusio Conclusions ns...............................................36 3.2 Reflectio Reflections ns...............................................37 References................................ ................................................39 ................39 Scientific Articles ........................................39 Non scientifi scientific c Articles Articles................................40 Books..................................................................40 Appendices................................ ................................................41 ................41

pany pany. Xiao Xiaomi mi has been engagin engagingg their their fans from the founding of the company, through social media where a two-way communication has been facilitated. This has contributed to the process of developing new products, which has the aim of satisfying the needs of their fans.

Henr He nry y W. Ches Chesbr brou ough gh has throu through gh his his reresearch on how companies are able to generate new ideas with external partners, stated ”not all of the smart people work for us so we must find and tap into the knowledge knowledge and expertise expertise of bright bright individindividuals outside our company” (Chesbrough H. W. 2003). This is exactly the belief that Xiaomi’s philosophy losophy emphasizes. emphasizes. To include include and engage external partners in order to acquire the best possible soluti solutions ons.. The purpose purpose of this this project project is to examine how Xiaomi effectively have managed, and are able to improve their interaction with fans. 2


List of Acronyms


and are are being being em embr brac aced ed and and enco encour urage aged d by the the company company to do so. These fans are also co-creatin co-creatingg

• Fans - For this paper an understanding of ”fans”

and coco-des design igning ing new Xia Xiaomi omi product productss which which is

will entail a consumer that is actively engaged in

very interesting in regards to the development of

the product and the development hereof.

open innovation (Shih, Lin, and Luarn, 2013).

this paper aper we define define • Community of users - In this

Having recognized the amount of value these

”community of users” as a group of users who ac-

fans bring the company through interaction on the

tively participate in the design and development

social media platform, the question of why other

of a product and have a relationship consisting of

technology firms haven’t done this is.

sharing, communicating and disseminating information and knowledge about about the product. product. When they use community toolkits for innovation, they

Problem Formulation

become creation communities.

• Crowdsou Crowdsourcing rcing - In this paper, crowdsourcing is

With the outset in the above, the overall prob-

defined as an open call to source traditionally gen-

lem formulation of the project is as follows:

erated by a large group of undefined individuals or a community of users

How can can Xiaomi structure structure their organization organization to more effectively engage creativity of their fans?

Problem Background This raises the following questions, why would The Xiaomi phenomenon has taken China by

a comp compan any y engag engagee its its fans fans at all? Wher Wheree woul would d

storm, with triple digit growth from third quarter

they they find the right right fans to collaborat collaboratee with? with? Ho How w

of 2013, to the third quarter of 2014, and are now

would they collaborate with these? And how would

the third largest seller of smartphones in the world.

they have to structure the organization to have this

Xiaomi has unlike any other smartphone company

sort of collaboration?

a devoted budget of only 1 % of its total revenue to dire direct ct ma mark rket etin ing. g. The The larg larges estt produ produce cerr of sResearch Question

martphones, which is currently Samsung, are using close to 5.5 % of their revenue on direct marketing

1) Why would a technology company like X-

(Bloom (Bloomberg berg - 2014 2014). ). Moreo Moreove ver, r, Xiao Xiaomi mi is pricin pricingg

iaomi include fans in their organization and how

their smartphones around half the price of the de-

would they find the right fans?

vices vices offe offered red by their their bigges biggestt com competi petitor tors, s, Apple Apple

2) Which types of user collaboration is impor-

and Samsung (Harvard business review - 2014).

tant for Xiaomi as a consumer electronics compa-

Xiaomis’ current success has many aspects to

ny?

it, but one of them is the society of Mi-fans that surrounds the company. company. These fans are actively pro-

3) How can you structure an organization like

moting Xiaomi-products on social media and blogs,

Xiaomi to effectively engage its fans? 3



Problem Limitation

Since this project is only focusing on assumptions for a certain type of industry, and only one case will be included in the research, our findings will not necessarily be applicable to other companies, despite despite them being in the same industry. industry. The assumptions will be clarified within the work with each of our research questions. The findings in the project can, however, however, be used as inspiration to oth-

Figure 1: Overall research approach

er companies who seek to develop a more collaborative approach, towards its’ external environment.

Ontology

Furthermore, the projects only focus is on the Open Innovation aspect of the Xiaomi case, since this is

For interpretivism in regards to ontology, Bry-

the most relevant to our project. Due to the limit-

man emphasize that a given social phenomena and

ed time to conduct the project, no interviews have

the meaning of it, has an existence that is depen-

been made, and no other primary data have been

dent of social actors actors (Bryman – 2012). The individindivid-

obtained.

ual creates its own meanings, attitudes, lifeworld etc. and with an outset in these cognitions, cognitions, a fun-

The project is conduc conducted ted from a com compan pany’s y’s

damental understanding of the social world arises.

point of view, and does not take the consumer or

According to Kuada, the interpretive paradigm re-

the societies point of view into account.

quires investigators to perceive their actors as engaged in continu continuous ous interpre interpretation tation,, meaning meaning creation and sense-making of events, and their con-

Methodology

texts. texts. These These inve investi stigato gators rs subscribe subscribe to the view that that huma human n being beingss do not not pass passiv ivel ely y respo respond nd to

Paradigm

what is going on around them (Kuada – 2012 p. The interpretivistic approach is the ideal for

77).

our our resea researc rch h (Brym (Bryman an – 2012 2012 p. 30). 30). To fully fully

With our project, a part of the Xiaomi cor-

understand our use of the interpretivistic paradig-

poration will be investiga investigated. ted. To acquire the nec-

m both ontology and epistemology is thoroughly

essary knowledge, we will scour through available

being being descri described bed in regard regardss to philos philosoph ophy y of scisci-

empirical data such as scientific articles, research

ence ence.. Follow ollowin ingg an unde unders rstan tandi ding ng of the the use use of

papers, and company homepages, as well as rele-

the methodology, methods and techniques will be

vant theoretical research papers. These will be the

outlined in order to comprehend the ”package” of

sources used to conduct our research upon. We will

fundamental assumptions that a paradigm consists

be using an interpretive approach on the gathered

of. Model Model 1 provid provides es an overv overview iew of the researc research h

information. information. From the interpret interpretive ive point of view,

method of the project.

our analysis will be the interpretation of materi4

Case study, Xiaomi-Integrating User-driven Innovation and the Organizational Design

Innovation Management - SDC

al from people who are within our field of study.

also influence the main points we get from working

Hence, the benchmark of answering our research

with our collected data. In relation to the Xiao-

questions will be their perception of the ”truth”,

mi case, and to give an example, we need to define

within their respective fields.

what is meant by the ambidextrous organizations, in the final part of our research paper. To solve

Epistemology

this we combine the points from the two articles we have chosen in relation to this subject, and in-

For a researcher grasping the social world with

terpret them based on our education in relation to

an interpretivistic scope, observations of the indi-

ambidextrous organizations. Thereby we interpret

vidual and its perception is the cornerstone of the

what the researchers who originally conducted re-

analysis. Hence, the knowledge gathered is not be-

search on the matter defines as ambidexterity, and

ing tampered with, but rather sought to be under-

at the same time influence it ourselves (Bryman –

stood in the context in which it occurred. The epis-

2012).

temology for this branch, is according to Bryman how it: ”... requires the social scientist to grasp the

Methodology

subjective meaning of the social actor” (Bryman – When choosing what kind of methodology you

2012 p. 27). The type of epistemology called antipositivis-

want to use, it is essential to be aware of what y-

m will be the prime approach used in this project.

ou want to know, and why it is important. Baring

The assumption that a certain individual direct-

that in mind, the research object of this project is

ly involved in a given environment has an accu-

best being examined by primarily using the cross-

rate understanding, is the reasoning behind this.

sectional design, by incorporating elements from

Understanding and interpreting the social world is

the case study approach.

our approach throughout the project. According to

The prime research design chosen for this

Kuada it is possible as an external observer to view

project is the cross-sectional design. The cross-

the social world as it is, and still locate the actual

sectional design has been chosen due to the very

truth (Kuada – 2012 p. 73). The choice of this the-

limited amount of time, we have to conduct this

ory is also closely related to our choice of method of

research paper. We simply do not have the time to

analysis. We use the general inductive method of

collect longitudinal data or conduct experiments.

analysis and by incorporating a substantial amount

Looking at our problem formulation, we will be

of articles, we are able to create consensus between

comparing a theoretical point of view with a con-

several social researchers, as to how we define cer-

ceptual approach, to reflect upon an ideal solution

tain aspects of our case. In this way, antipositivis-

for Xiaomi. This also results in a primarily theo-

m is our way of understanding the general idea in

retical project.

the researchers society, about different aspects of

Research Design

the Xiaomi case. Moreover, we acknowledge that we have our own interpretation based on our edu-

The cross-sectional research design is often

cation and understanding of the world. This will

used when static and structured observation is be5



ing used as methods, for data gathering. Since we

generalizations based on theory on what might

employ a research strategy founded in qualitative

work for technology companies. Cross-sectional

data within the cross-sectional case study, our ap-

design can have more success than other designs

proach will tend to be inductive (Bryman 2012).

in achieving representativeness based on theory.

Baring this in mind we are aware that a purely

To answer which type of external collaboration

inductive approach is almost never possible, and

is best for Xiaomi, a thorough description of the

we acknowledge that some deductive and abduc-

process of innovation diffusion of Xiaomi is need-

tive aspects does influence our project as well. As

ed. Cross-sectional designs are well suited to

interpretivism subscribes to understanding a given

descriptive analysis, at least for descriptions of

social world from the points of view of people, and

things as they are at a given point of time. How-

the intentions underlying their behavior, the induc-

ever, cross-sectional designs have been criticized

tive method is the primary approach. This mean-

for their weakness at the level of causal analy-

s basing conclusions on specific observation rather

sis. Since no specific causal relationship would

than logical arguments that may not be necessarily

be included in the project, cross-sectional design

supported by empirical evidence. When choosing

is the most optimal given our circumstances and

the qualitative method you are studying the expe-

the overall research design frame.

riences, attitudes, meanings as the individual per-

• Case-study Design

ceives them, and interpreting these to make sense

Case-study designs are suited to situations in-

of a given phenomenon or situation.

volving a small number of cases with a large num-

• Cross-sectional Design

ber of variables. The approach is appropriate for

Cross-sectional design entails collecting data at

the investigation of cases when it is necessary to

a certain point in time, all analysis relies on dif-

understand parts of a case within the context of

ferences in the sample at that point of time. In

the whole case (Bryman – 2012 p. 69). In this

the cross-sectional design the groups” are con-

research, both the descriptive case study and the

structed on the basis of existing differences in

explanatory case study design are applied.

the sample and the sample is divided up into groups according to the category of the indepen-

Due to the fact that good description is the pre-

dent variable to which they happen to belong (De

condition of good explanation, the descriptive

Vaus – 2001 p. 171). In regards to this project,

case study design in the project consists of an in-

we are analyzing why and how Xiaomi chooses

troduction to the Xiaomi case and has a focus on

to cooperate with its fans and a representative

its external collaboration with its users and fur-

sample among technology field is necessary, if

ther highlights the important role of user-driven

we are to generalize from results obtained in a

innovation and the want, find, get, manage mod-

sample to the wider population. However, we

el. As mentioned we have chosen just one part of

do not include a representative sample but use

the Xiaomi case and focuses on the open innova-

a theoretical approach to our case in order to

tion part of the company and especially the par-

test theory in practice and thereby drawing some

ticipatory innovation. We have chosen theories 6



and concepts I order to conduct our explanatory

generalize based on theory and not the data we

as well as our descriptive analysis of the case.

collect. In this way, we address the biggest flaw in convenience sampling (Bryman – 2012 pp. 200

Explanatory case study seeks to achieve both

– 202).

more complex and fuller explanations of phenomena. They seek to achieve idiographic as well

From having a cross-cultural group we have

as nomothetic explanation, which in the project

gained access to databases which would not be

refers to the fan-centric collaboration model in

accessible otherwise. The library at Peking Uni-

Xiaomi. Among categories according to the d-

versity has been one of our sources of data as well

ifferent relevance to theory testing, theory de-

as the Chinese magazine “Executives” and the

velopment and using existing theory the project

Chinese UCAS library. In this way, our cross-

is using the existing innovation diffusion theory,

cultural group, expand our convenient sampling

user-driven theory and open innovation theory

to grasp both Chinese and Western sources of

and so on. As a consequence, the specific ex-

information, broadening the boundaries of where

planatory case study design used in this paper is

we are able to seek information, in regards to our

a clinical case study design.

project. • Evaluation of the Case Study

Research methods used in this paper such as participant observations is being used to keep an

Case study focus’ on a large number of variables

open mind in relation to combining our data and

while other designs rely on controlling out the

the theories. This is how Bryman describes the

influence of other variables and focusing on the

inductive approach, which aligns with the con-

influence of a very limited number of variables.

cepts being used within the paradigm of this pa-

Hence, one strength of applying case studies in

per (Bryman – 2012 p. 71).

this research is that it attempts to understand the significance of particular factors within the

• Data Sampling

context of the whole Xiaomi case, rather than by

For our method of data collecting, we have cho-

screening out this context. Due to the fact that

sen non-probability sampling and more specifi-

the unique user-driven model exists in a given

cally, convenient sampling. This type of sam-

cultural context, specific market environment, or

pling is chosen solely based on the accessibility

special characteristics of the company itself.

of data. As we have had limited time to conducAs a consequence, the case study in this project

t this project, we simply do not have the time

has the potential for good internal validity based

to conduct large data collections. Furthermore,

on a more thorough understanding of the mean-

convenient sampling is often used when study-

ing of Xiaomi’s particular external collaboration

ing organizations, and is more prominent than

with its users (De Vaus - 2001).

samples based on probability sampling. One of the major flaws with probability sampling, is the

In regards of making statistically valid general-

lack of validity as it is not representative for a

izations beyond that particular case, case study

population. For our research paper, we try to

is lacking external validity. 7

But case studies



do not strive from this type of external validi-

the research project. Then you categorize those

ty. They do theoretical generalization instead of

based on all the empirical data we have collect-

statistical generalization (De Vaus - 2001). The-

ed, and then we are able to say something about

oretical generalization involves generalizing from

what the tendency is within the case of Xiaomi

a study to a theory. Case study is designed to

or, if there are any outstanding points of view. It

help develop, refine and test theories by using the

resemble grounded theory a little bit but with the

logic of replication. Findings of a case study can

general inductive analysis we don’t have to state

be tested by repeating case studies under differ-

any hypothesis before we begin, we simply have

ent conditions. Regarding the research question-

to let the authors tell us about their thought-

s, the findings of the most important collabora-

s, and analyze based on our grouping of these

tion type for company like Xiaomi and the most

thoughts. Below is a model illustrating general

effective organization structure could be tested

inductive analysis. (Bryman – 2012 p. 568-569)

by replication in other companies in the same technology field, and then develop and refine the

1

Theoretical Framework

theory of user-driven, innovation diffusion and 1.1

organizational structure. Hence the theoretical generalization is achieved.

Open Innovation Open innovation is a new way of thinking. The

basic assumption regarding this concept is that no

• Analysis Design

business is an island, meaning that you cannot stand alone and you will have to engage the environment around you. Open innovation means that you tap into other people outside your company, to profit from their knowledge and resources. This also means that you don’t have to be the inventor of something to profit from it, a better business model beats getting first to market, and if a firm manages to benefit from both internal and external ideas,

Figure 2: Inductive approach

they are a lot stronger than competitors who are For our analysis design we have chosen to use

not able to do this. The idea of gaining a competi-

general inductive analysis. We use this in the

tive advantage from open innovation is therefore to

sense that we have gathered a number of sec-

cooperate with the environment around the firms,

ondary data. To be able to say something with

in order to better be able to bring innovations to

some kind of certainty we have to break down

the market, and not necessarily be the first to do

this material in order for it to make sense. In

this, in order to have competitive advantage. The

the general inductive analysis you read through

idea of open innovation is illustrated in figure 3.

all qualitative data, before you assemble the au-

Henry Chesbrough introduced open innovation

thors points of view on the things that matter to

as a concept for the first time back in 2003. He was 8



ternal environment and have a business model that seeks to work together with its users and fans to create and improve products and processes within the firm. This is why the theories chosen within this project will all be related to the open innovation concept and this relates to our overall theory as well. Henry Chesbrough defines open innovation as ”the use of purposive inflows and outflows of knowlFigure 3: Open innovation model

edge to accelerate internal innovation, and expand the markets for external use of innovation, respec-

frustrated that the gap between academia and the

tively.” In regards to our project we interpret this in

corporate world was too wide thereby meaning that

terms of the flow of knowledge between Xiaomi and

the collaboration between corporations and the u-

the companies external collaborators. Xiaomi has

niversities was too low, and the firms did not take

millions of fans and users and therefore the com-

advantage of the many good projects and ideas that

pany has to identify who to collaborate with and

the students and professors was working with. He

how to collaborate with these individuals. Further-

therefore enrolled in a PhD program to become

more the company will have to formally structure

a professor after working for several years in Sil-

itself to be able to engage with these fans, without

icon Valley. After working as a professor for some

letting the fans come too close to or influence too

time he wrote the book ”Open Innovation” which

much on the company operations.

described how companies could profit from working together with its external environment. Today there are titles all around the world labeled ”Open

To come up with a solution of these challenges

Innovation Manager”. The corporate world have

we adopt the ”Want, Find, Get, Manage” (WFG-

found out that working with its external environ-

M) as our theoretical framework. This model was

ment can be very lucrative for your business and

developed back in 2004 by Gene Slowinski and was

have several good aspects including reduced costs,

created as a solution to issues within the medical

acceleration from idea to market, increased differ-

industry in regards to insourcing. It has later been

entiation, and the creation of new revenue streams

adopted to consumer products, food, technology

for the company.

and other markets. The model is a ”good practice”

Since we are working with the Chinese com-

which has worked for many companies. The model

pany Xiaomi, we have chosen open innovation to

is designed to enable companies to asses which indi-

be our overall concept for this project. This also

viduals are the most essential to them and then in-

means that we are working with open innovation

source these into the company. It has been proven

theories and have designed our theoretical frame-

to work for a lot of companies but since it varies

work to grasp the ideas of open innovation. The

from company to company it has only been defined

company Xiaomi is very actively engaging its ex-

as a ”good practice” and not ”best practice”. 9


1.2


Want, Find, Get, Manage Model The model is divided into 4 phases where com-

panies have to complete a certain task within each phase in order to proceed to the next phase. For this project we have created three research questions which will all be answered by moving through the four phases within the Want, Find, Get, and

Figure 4: Overall theories used in four phases of Want, Find, Get,

Manage model (WFGM model). As the WFGM

Manage model

model is our theoretical framework we will use theories related to open innovation. The reason for

what capabilities the company is searching for and

using this specific model in the case of Xiaomi is

what goals it is seeking to fulfill. To do this we have

that the company has a very unique business mod-

to look at the vision of Xiaomi which is defined on

el, and other technology firms could learn a lot from

the company website.

the way Xiaomi interacts with its external environ-

In this project we focus on the concept of open

ment. The use of the WFGM model in the case

innovation in regards to Xiaomi. This means that

of Xiaomi will hopefully outline an approach oth-

from our interpretation, the most essential elemen-

er companies could embrace and effectively learn

t in Xiaomi’s vision is the transfer of knowledge

from in order to be able to collaborate with its ex-

between the company and its fans. To investigate

ternal partners. In the following section we will

this, a selection of the theory diffusion of innova-

move through the WFGM model and describe how

tion has been made, because its focus is mainly

we are going to use the different phases in relation

on describing how knowledge is being spread and

to our research. Since we are using a general model

shared amongst participants and it is also explain-

as our framework, the following section will be ded-

ing which actors that is important to engage in or-

icated to further explanation on how we are going

der to acquire new knowledge for the company to

use its phases in relation to our object of investiga-

build upon.

tion. We are altering the model to be able to say • Diffusion of innovation

something in regards to the overall company of Xiaomi, instead of only grasping insourcing in regards

With the theory diffusion of innovation we want

to specific project.

to acquire a deeper understanding of the relationship between new technology and new ideas

1.2.1

in regards to how, why, and with what rate these

Phase 1:Want-Diffusion of Innovation

are being spread amongst users through commu-

In the first phase of the WFGM model a com-

nication in cultures. The forming of innovation is

pany has to define which targets it is opting to

being examined by observing channels over a cer-

engage and what capabilities these targets should

tain period of time, where the communication a-

have. In order to specify what type of targets Xiao-

mongst participants in a social system is the pro-

mi should be engaging, we have taken into account

cess where the diffusion occurs. The diffusion of 10



messages with information shared between par-

channels. When an individual chooses to adop-

ticipants through communication on the social

t an innovation it is often due to an evaluation

platform is vital to fully grasp in order to benefit

done by another individual within the same so-

from the shared knowledge. By understanding

cial system. These individuals evaluating inno-

this process, a company like Xiaomi will be able

vations are characterized as role models. An im-

to efficiently allocate their resources to best en-

portant aspect of diffusion is the likelihood of

gage and benefit from interacting with their fans.

heterophility being present. Heterophily is a ter-

For Xiaomi to pursue their vision of creating a

m used to describe the degree of differences a-

fan base that can contribute to the R&D process,

mongst group members in regards to education,

understanding which kind of fans to engage is a

social status, beliefs etc. A result of the com-

”must”, which is why we have chosen to use the

munication taking place between individuals who

theory diffusion of innovation, because it facili-

are heterophilous, certain problems with the ef-

tates access to this information.

fectiveness of the communication will arise (ibid).

The theory was originally published in the book

The element of time in the process of diffu-

Diffusion of Innovation by Evertt Rogers in 1962

sion can be depicted through five steps. First,

and has been republished multiple times, with

the knowledge is passed along by an individ-

the latest fifth edition in 2003. Rogers argues

ual to, secondly, persuade another individual,

that four overall elements are what causes the

that thirdly accepts or rejects the innovation and

spread of the an idea: 1) an innovation, 2) that is

fourthly chooses whether to implement the new

communicated through certain channels, 3) over

idea and last but not least confirms the deci-

time, 4) among the members of a social system

sion. During this process the decision-making

(Rogers, E. M. - 2003).

individual is seeking further information to eval-

When Rogers talks about innovation he is refer-

uate whether the new technology or idea is to be

ring to an idea, practice, or object that is being

adopted or rejected. The basis of the final de-

perceived as something new by an individual. S-

cision is made with an outset in the uncertainty

ince most of the innovations discussed by Rogers

related to the innovation and the expected con-

are categorized as technological innovations, an

sequences of implementing it (ibid).

acknowledged definition of technology is neces-

When looking at the social system in which the

sary. A technology consists of the two parts,

process of joint problem solving happens, the

hardware and software. Hardware being the ac-

structure that dictates the approach and the es-

tual tangible object, whereas the software is the

tablished common rules are what defines the out-

intangible tools within the object (ibid).

come.

The interconnected units in the social

The messages being shared amongst individuals

system act upon the norms set for behavioral

in the social system is taking place through the

patterns which also facilitates stability and reg-

communication channels. This can either occur

ularity. However the structure of the social and

in the mass media channels or in interpersonal

communication aspect can both be hindering and 11



helping the diffusion of innovation (ibid). 1.2.2

Phase 2:Find-Scouting

From solving our first phase of defining which targets Xiaomi will have to engage, we move on to actually finding those actors. The find phase will consist of 3 parts. First we want to establish why you have to scout for individual capability providers and which errors might occur in this process. Secondly we want to establish the definition of a social media platform. And for the final part, we want to analyze based on the Xiaomi case, how a company successfully can use its Figure 5: Collaboration Spectrum

social media assets to single out important individuals whom the company is interested in collaborating with. Therefore the theory will also consist of

have extensive collaborations with. Therefore,

three main topics; The spectrum of collaboration,

the spectrum of collaboration suggests that the

Defining the ”Social Media Platform” and The Xi-

most effective solution would be to engage few

aomi scouting strategy.

individuals who could provide the capabilities Xiaomi is looking for, and then having an extensive

• The Spectrum of Collaboration

collaboration with these individuals. The model

The collaboration spectrum was developed by

will also be used in regards to the social media

Shoshanah Cohen and Joseph Roussel and was

platform and how Xiaomi targets specific indi-

first published in their book Strategic Supply

viduals to avoid loss of resources and time.

Chain Management: The 5 Disciplines for top

• Social Media Platform

Performance (2005).

There are numerous definitions of what the social

The collaboration spectrum was originally de-

media platform exactly is. For this research pa-

signed to illustrate how to most effectively collab-

per we have chosen to work with the definition by

orate with the supply chain of a company. How-

Kaplan and Haenlein from their research paper

ever, this model is well suited for illustrating how

”Users of the world, unite! The challenges and

firms should collaborate with their external envi-

opportunities of Social Media”. This research pa-

ronment and how they should go about this. The

per describes how social media is a very valu-

model shows that the most effective way of col-

able asset for firms if they are able to control

laboration is with a few individuals and then hav-

it. This definition is therefore the most accurate

ing an extensive collaboration with these. From

in regards to our project as it conducts research

theory regarding diffusion of innovation we de-

from a firm’s point of view regarding social me-

fined the targets that Xiaomi would want to

dia. The definition is; ”Social Media is a group 12



of Internet-based applications that build on the

sional skills to redesign and adapt the product in

ideological and technological foundations of Web

order to predict further needs (Franke, von Hip-

2.0, and that allow the creation and exchange of

pel, and Schreier- 2006). Lead users are usually

User Generated Content.”(Kaplan and Haenlein,

involved in the initial exploration phase where

2010)

the task is to define problems.

• Xiaomi Scouting Strategy

Eric Von Hippel labels participatory design as a

Xiaomi have built up a huge fan base around it-

design and development processes in which end-

s products and services. This means that they

users were invited to participate and contribute,

have to choose from millions of fans, trying to

not simply as critics and evaluators of product,

find the best individuals to collaborate with. We

but as co-designers. Participatory design work-

are going to analyze research papers and figuring

s as a complementary way to gain knowledge of

out how they are using their social media plat-

end users’ work and context (von Hippel-2006).

forms and their forums to sort out which fans to

Participatory design works as a method to bring

collaborate with.

diverse stakeholders together who confront each other with very different perspectives of a cer-

1.2.3

Phase 3:Get-Participatory Design

tain kind of issue. In participatory design, par-

In the two previous phases we have defined

ticipants are invited to co-operate with techni-

who Xiaomi is looking to collaborate with and how

cians, engineers, designers and developers during

to use their unique social media platform to engage

innovation process, bringing about new ideas to

these individuals. To move on we have to define

optimize the product.

what type of alliance they should have with the ex-

This type of approach is particularly diffused in

ternal collaborators they want to engage. To do

hi-tech industries, such as computer - and smart-

this we will use the concept of participatory inno-

phones industries where participatory design in-

vation and the theory of user-driven innovation.

dicates full participation practice taken by users both in software, hardware, service and repu-

• Lead User and Participatory Design Lead-User approach and Participatory Design is

tation (Greenbaum&Kyng-1991; Muller& Kuhn-

the main focus throughout this phase.

1993; Schuler& Namioka-1993). • User Communities

Users have been regarded as an important source of innovation in many industries, especially in

Traditionally, firms themselves were responsible

hi-tech industries (Baldwin, Hienerth, and von

for their research and development of products,

Hippel-2006). Whether or not the product is

nowadays it is important to accurately assess the

promising in mass market is decided by how ac-

user’s needs before starting the process of defin-

curately this type of product innovation reflects

ing and developing a product. User communities

user needs. Lead users are those users who expe-

do not only facilitate the sharing of users’ needs

rience innovative product ahead of commercial-

but it also accumulates their knowledge and ideas

ization. They usually have the ability or profes-

regarding existing and new products (Brown and 13



Duguid-1991;Murray and O’Mahony-2007; von

the community’s innovation efficiency (Farag,

Hippel-2007).

Jarvenpaa,Majchrzak-2011; Frey, Luthje - 2011). In these user communities, the user creations and

Back in 1988 von Hippel stated that the innova-

innovations are discussed, adjusted and renego-

tion generated by user communities can be char-

tiated by means of virtual tools that facilitate

acterized though three major strengths. First-

a cycle of design by trial and error (Thomke -

ly, the user community facilitates a forum where

1998).

problems can be viewed from diverse perspectives and a broad set of shared knowledge can

The toolkits used in a community support inno-

be used to figure out solutions to these problem-

vation and increases the value of user creations.

s. Secondly, the innovation generated by users in

A user toolkit in a community helps the firm ori-

a community could be accumulated and trigger

ent its development to improve its product. Thus

even more innovation. Thirdly, the user commu-

the toolkit and innovations issuing from a user

nity provides a considerable sum of novel ideas

community forms an innovation system based on

and effective detection of flaws of designs.

cooperation and interaction between community and firm. To determine the role of the innova-

One specific kind of user community is one that

tion toolkit in this system, we need to examine

centers on the brand of a focal producer firm.

the users’ creative and innovative activities, as

O’Guinn defines this kind of brand community

well as their relation with the firm’s innovation

as ”a specialized, non-geographically bound com-

process.

munity, based on a structured set of social relationships among admirers of a brand”. Brand

1.2.4

communities are composed of individuals who

Phase 4:Manage-Organization Structure

share the same interest in a particular brand (Algesheimer, Dholakia, and Herrmann-2005; M-

In the final part of the project, we will be re-

cAlexander, Schouten, and Koenig-2002). Such

flecting upon how Xiaomi could structure their or-

a brand user community has great impact on

ganization to easily collaborate with its external

consumers loyalty, it often uses motivations to

environment. We will be working with different as-

engage users in co-creation process (Franke and

pects and theories regarding organizational struc-

Piller-2004; Kim, Bae, and Kang-2008; Sawhney,

tures in order to create a complete picture of what

Verona, and Prandell-2005).

are essential when structuring an organization like

• User Community’s Toolkit for Innovation

Xiaomi. In order to complete this analysis we will

Von Hippel defined the user toolkit for innova-

incorporate research papers and articles as well as

tion in terms of the isolated user whose need-

organizational theory to determine what capabil-

s are directly realized in the results of his or

ities an organization like Xiaomi has to integrate

her creation, during which users build dense re-

into their organizational structure, in order to suc-

lationships with the firms. Such relationships

ceed with their operations. Finally we will complete

has a strong impact on knowledge creation and

our analysis with a recommendation for Xiaomi in 14



regards to how they could structure their organi-

to help build our ”best possible fit” for Xiao-

zation. The following will be a brief introduction

mi within the Chinese market it is currently

to the theoretical topics we will touch upon in our

engaged in.

analysis. The level of analysis within our third part

• Organic organization

will be an intra-organization analysis, where we focus on how to incorporate external knowledge into

The organic organization is concerned with

the company (Vanhaverbeke – 2005).

how the organization works and how it is managed. The organic organization is made

• Ambidextrous organizations

in contrast to the mechanic organization and

The ambidextrous organization is very loosely

primarily focuses on a more informal struc-

defined in literature. The idea is that an orga-

ture within the organization. The organic or-

nization has to be able to exploit ongoing op-

ganization is more informal and will be used

erations while exploring new possibilities for

in this project to clarify some of the capa-

the company to invest into. In regards to X-

bilities that are needed in the fast changing

iaomi, this will relate to the degree of hav-

hi-tech market where Xiaomi operates. The

ing a mechanic and formal structure within

overview of the organic versus mechanic or-

the company supporting the day-to-day oper-

ganization can be found in appendix 1.

ations, while being able to exploit the huge amount of knowledge from fans and external collaborators. This theoretical topic will also

• Matrix Design The matrix organization is often used when

be used in regards to our reflections as to how

you are working with larger projects. The

Xiaomi can successfully structure themselves

design is characterized by its horizontal flow

(O’Reilly III, C. A. Tushman, M. L. -2004).

of skills and information through the various

• Open systems – Contingency Theory

departments, as showed in the model in ap-

We are going to use the open systems theory

pendix 2. Employees in a matrix organization

and we have chosen to focus on the contin-

will often report to their respective manag-

gency theory with specific focus on the role

er on a day to day basis. Furthermore the

of the environment when reflecting upon how

employees are required to report the overal-

Xiaomi could structure its organization. This

l progress of the project they are engaged in

theory was introduced in the 1960s and build

to the head of the department. This proce-

on the idea that an organization can survive

dure is an important element of this struc-

base on the throughput of resources from it-

ture, because it constantly gives the people

s external environment. Based on the con-

in charge an idea of the development. In the

tingency theory, the organization within the

case of Xiaomi, we will use some of the qual-

open systems theory will therefore be defined

ities from the matrix organization structure

by the environment around it and what this

when we describe the functions the successful

environment dictates. We will use this theory

organization needs to have in order to cope 15


with the changing environment.


development of new products”(Wheelwright and Clark-1992). As a result of the global technological development that has been happening for the past decades, multiple opportunities have risen for companies to take advantage of. One of which is the online dimension, that through the invention and refining of the internet now facilitates an opportunity to gather knowledge from entities no matter their geographical location. If used correctly, this approach

Figure 6: Cenceptual Framework

can also be cost efficient. For Xiaomi, this opportunity has made it possible to implement an online

2

Case Analysis

system that is able to separate their users by categorizing them into groups where relevant data can

This is the chapter where we use our theory on

be obtained. To fully benefit from the gathered da-

the data we have collected. In this chapter we will

ta and the knowledge hereof, a deeper understand-

include our work with research question 1-3. This

ing of how the communication is being spread is

will be the chapter we will base our conclusion on.

essential. For Xiaomi to generate the most value

We have chosen to divide it into working with each

from the interaction with their users, an analysis

question separately and then draw on the summary

of the type of user and its capabilities will be de-

or previous conclusions when we move further down

fined.

thorugh our research questions. 2.1

2.1.1

Research Question 1

Diffusion of Innovation

• The Innovation

Research Question 1: Why would a technology

With the outset in Rogers definition of an inno-

company like Xiaomi include fans in their organi-

vation, as stated in the theoretical framework, an

zation and how would they find the right fans?

understanding of how the users in a social net-

The first research question will be investigated

work adopts an innovation will be investigated.

in this section.

The special characteristics of a new innovation as

We would like to investigate why it is a good

perceived in a social system by its members are

idea for technology companies to engage its cus-

what determines the rate of adoption. This is

tomers and fans in the process of developing its

being viewed through the following five main at-

products. We would like to focus on the increas-

tributes: 1. relative advantage, 2. compatibility,

ing change in the way companies collaborate with

3.complexity, 4. trialability, 5. observability.

its external environment and especially with its customers. ”Users are widely acknowledged as a

The relative advantage is the extent to which the

valuable source of creativity and knowledge in the

prior products capabilities is being exceeded by 16



• The communication channels

the newer version in the eyes of the user, and is positively related to the adoption rate of these.

When a company’s strategy revolves around a fo-

A concept called overadoption is explaining the

cus on using media to increase the adoption rate

degree to which, despite experts predictions, is

of a product, two very different approaches can

being adopted by users. This could occur if users

be used. The two approaches that is referred to

see the product as a preventive innovation, which

are operating with the following communication

entails the product being perceived as a good

channels; the mass media and the interpersonal

investment for future needs. With compatibili-

channel. Depending on the goal of implement-

ty the product is being judged according to the

ing these channels in the business strategy, the

timely context where past -, present - and fu-

mass media approach is in general more effective

ture values and needs of potential adopters are

for spreading the brand awareness, whereas the

being analyzed (Rogers, E. M. - 2003). The time-

interpersonal channel facilitates a space that is

line for Xiaomi’s new smartphone releases com-

effective for forming and changing attitudes to-

pared to its competitors is approximately twice

wards new ideas. The high exposure from the

as long due to their business strategy. However

mass media strategy does not necessarily lead to

when Xiaomi is releasing their new smartphones

adoption of a product, because individuals have

they tend to be the best on the market, hence

varying thresholds of adoption (Marsden, P. V.,

one could argue that it is seen as a secure and

Joel P. - 1990). For Xiaomi that effectively has

good investment for future needs for the con-

managed to exploit the benefits of the interper-

sumer. A fear for most hi-tech companies is the

sonal space, a direct link between the rate of

possibility of their products being too advanced

adoption and their community’s ability to influ-

and complex for the consumer to use, and there-

ence the shaping of the products has shown great

by having a negative influence on the adoption

results. One of the elements Xiaomi’s social sys-

rate. For Xiaomi and their products, the inter-

tem has succeeded with is the characterization

action with their customers facilitates a solution

of different user-groups. A certain group of user-

in which they are able to counteract beforehand.

s that especially has a great impact on the rate of

Due to the social networks where the users and

adoption is the opinion leaders. An opinion lead-

employees of Xiaomi communicate, the trialabil-

er is an individual that is able to influence others

ity which is the process where new products are

through their behavior and attitudes. Opinion

being tested on a limited basis is a constant on-

leaders acts as important entity in the diffusion

going process because new ideas pitched by the

network, and are often localized and used in dif-

company are being evaluated on a regular basis

fusion programs (Rogers, E. M. - 2003). A com-

by the users themselves. Due to the construc-

munication network is consisting of interpersonal

tion of Xiaomi’s online platform the observabilty,

individuals that are functioning interdependent-

which is the option for the users to see the results

ly to nurture the adoption of innovations through

of an innovation, has always been available and

linked patterns and flows. To optimize this pro-

contributed to a positive rate of adoption (ibid).

cess, the network should make sure the presence 17



of heterogeneity, hence the degree of having an

tigated to improve the adoption rate. When an

environment that fosters innovation, is there in

evaluation of a product has been made by a sci-

order to generate the best value from the diffu-

entific expert, most individuals take the gathered

sion within the network (ibid).

information into consideration before an adopting a new innovation. However an actual adop-

• The Time

tion does often not occur based solely on an ex-

Diffusion of innovation is a constant ongoing

perts evaluation, but on the near peers evalua-

process through different phases in time. Five

tions of it. The interesting element for a com-

stages that the element of time can be perceived

pany like Xiaomi, is locating the peers that has

as; knowledge, persuasion, decision, implemen-

the ability of influencing others through their s-

tation and confirmation are all part of a process

tatements, hence opinion leaders, and incorpo-

in which the individual undergoes a process of

rate them into their development process.

determining when a product is suited for adoption. Every single individual has a threshold that

• The social system

needs to be surpassed before an adoption of a

To understand what and how a certain outcome

new product can occur. These individuals can

from a social system is being generated, the deci-

either be characterized as early adopters, early

sion process is the subject of investigation. The

majority, late majority or laggards. Understand-

social structure that dictates the common rules

ing when individuals are willing to take a risk

of communication is the outset in which individ-

and adopt an innovation is key for a company

uals within the system acts upon. The rules are

(Valente, T. W. - 1996).

often being established by the lead users, that

The mentioned five elements that explains at

have been able to contribute and create the most

what time an individual is willing to adopt an

trustworthy profile, and thus have a greater val-

innovation, are for a company like Xiaomi quite

ue to the company, hence the opinion leaders.

essential to manage. The reason for it being es-

To benefit fully from the use of a social system

sential is the fact that it facilitates the abilities

and the structure hereof, Xiaomi has to allocate

to minimize the level of rejection and is able to

its change agents carefully in order for them to

speed up the process for the later adopters. One

influence the right individuals on the forums. A

of factors that can contribute to a shorter time-

”change agents’” task is to divert a present atti-

frame of adoption is the level of ties within the

tude or opinion towards an innovation in order

individuals’ personal network. Individuals seek

to implement one that is deemed more desirable

information during the process of making a deci-

(Rogers, E. M. - 2003).

sion to decreases their uncertainty before a pos-

When diffusion of new ideas and innovations are

sible adoption.

being presented to the users through a social sys-

According to Rogers, the question of how a com-

tem, lots of different opinions towards these are

pany like Xiaomi can determine what and when

of course being made. However the actual deci-

individuals take risks, is what should be inves-

sion on whether to adopt or reject it is what is 18



of interest to Xiaomi.

been a big part of their success. Having a forum

To understand how individual independent deci-

where the users diverse capabilities are able to

sions of whether to reject or adopt certain inno-

foster new ideas and innovations, is truly some-

vations are being made, a distinction will be p-

thing Xiaomi have been able strive upon. Being

resented as different innovation-decision-making

able to gather lots of information from a huge

processes.

The first type is called ”optional

database with actual users that all have a differ-

innovation-decisions”, where the individual is

ent point of view is facilitating a unique opportu-

making a decision based on other peers’ evalu-

nity for discussion and problem solving. For Xi-

ations. Second is called ”collective innovation-

aomi to utilize the output from their users in the

decisions” where a consensus on the forum will be

best manner, locating and cooperating with cer-

the used to make the decision. Thirdly we have

tain users are necessary. By locating and work-

the individual that is making a decision based on

ing alongside their lead users, Xiaomi is able to

the ”authority innovation-decisions” that is rely-

not only utilize their feedback and input, but as

ing on a few individuals with a greater amoun-

well influence them in regards to adopting new

t of power, knowledge or technical capabilities.

innovations and products. Hence locating the es-

Lastly we have the ”contingent innovation deci-

sential users are of great importance to Xiaomi.

sion” where two or more of the above listed de2.1.2

cision processes are being used simultaneously.

The Xiaomi scouting strategy

For Xiaomi to influence their users way of mak-

Xiaomi has built up a huge fan base around its

ing decisions, understanding which kind of pro-

products and services. This means that they have

cess they are going through while making them,

to choose from millions of fans, trying to find the

are of great use to them.

best individuals to collaborate with. We are going to analyze the situation of Xiaomi with the outset in the following models, to see how they are using their social media platforms, and their forums to sort out which fans to collaborate with. • The spectrum of collaboration

The spectrum of collaboration was initially created to illustrate the collaborative approach firms should have when working with their supply chain management. This model shows what the

Figure 7: The Diffusion Process

connection between number of collaborators and The fact that Xiaomi is able to gather knowledge

to what extend the company chooses to cooper-

from their users concerning new ideas, needs, in-

ate with its supply chain. However, this mod-

novations and desires for apps or products, have

el is suited to illustrate the collaborations with 19



a company’s external environment as well. On

websites include the Chinese SinaWeibo, RenRen

the vertical axis of the spectrum of collaboration

and Facebook as well as numerous forums regard-

model as shown in the theory section, is the ex-

ing Xiaomi’s products. On these sites, the man-

tent of collaboration and on the horizontal axis

agement including the CEO Lei Jun, post around

is the number of relationships. As seen in the

100 responses every day to their fans questions

model, there are different stages of collaboration

regarding the company and its products. Many

raging from just transactional relationship to a

companies would most likely have sales staff or

synchronized relationship. The worst cases for a

even a PR-manager maintaining the contact with

company is to have either too many relationships

the company’s fans. However in the case of Xi-

with a high level of collaboration, which cost too

aomi, the management is valuing and dedicating

many resources, or having too few relationships

their time to the fans’ concerns, which as a result

with very little collaboration which would result

creates a good relationship that facilitates active

in a very little return from the collaborations.

forums on the social media platforms (Shih, Lin, and Luarn, 2013).

In the case of Xiaomi the issue would definitely be having too many relationships as the company

Xiaomi has built a vast network where fans can

has millions of fans who all want to participate

talk to each other and effectively communicate

in the creation of the newest Xiaomi products.

with the company. This have resulted in a very

To avoid spending resources on fans who do not

active fan base who is surrounding the compa-

provide the capabilities that Xiaomi is looking for

ny and constantly pitches new ideas about how

in their process of collaboration, Xiaomi will have

to improve products as well as how to market

to identify only the most important individuals

these. But as seen in the spectrum of collabora-

to them, in order to maximize from the joined

tion model it is not possible for Xiaomi to have

efforts. Therefore, Xiaomi must have a system

an extensive collaboration with all the fans with-

to scan through millions of fans in order to scout

out wasting resources. This is why Xiaomi have

for the most important capability providers.

developed a system to identify which fans they want to collaborate with.

• Xiaomi’s collaborative approach to fans With the social media gaining an increasingly

What Xiaomi successfully has done is codify their

more important role in the globalized corporate

systems to calculate the value for each of their

world, the demand for a clear social media strat-

fans. These values are being calculated through

egy is more important than ever. For Xiaomi

internal algorithms that are sorting the fans’ val-

this strategy has been developed to grasp the

ue based on factors such as; number of com-

demands of their huge fan base. First of all the

ments, participation level and level of impor-

vision of Xiaomi is in regards to what the fans

tance. This could be described as technological

of the company wants. In Xiaomi the manage-

knowhow or specified skills in regards to design

ment is quite use to incorporating the social net-

and product development. With the outset in the

working websites in their working process. These

score-based system they are able to categories 20



their fans in certain groups. By doing this they

social system where Xiaomi engages their fans,

are able to identify the individuals they want to

the ongoing process of diffusion of innovations is

approach in order to create collaborations with

facilitating knowledge that fuels the development

these individuals to solve a task. To keep the fan-

of new products for Xiaomi. Furthermore it has

s excited, they give fans with high grades more

been discovered that by collaborating with opin-

permissions and perks, and thereby more respon-

ion leaders, the thresholds for other users can

sibility.

be overcome faster, hence a faster adoption rate can be achieved. Throughout the ”find” section

Furthermore they give high graded fans the a-

it has been clarified how Xiaomi can locate and

bility to answer other fans requests, decreasing

engage the essential groups of users. Having an

the workload on the management and company,

internal system that can identify what users work

by outsourcing the task of responding to minor

with is vital, due the huge amount of users. A

question from fans. This fan-to-fan approach is

technology firm should include their fans in their

also encouraging other fans to participate more

working process, because the above stated advan-

in the social media platforms of Xiaomi in order

tages are of great importance in order to acquire

to get better grades and thereby get more perks,

even more fans ”customers”, hence achieve eco-

you can compare it to modern day video games

nomic growth as seen with in the case of Xiao-

where you often have to complete a task in order

mi. Furthermore, the find phase does clarify the

to level up and thereby get more perks.

places Xiaomi is finding the fans, but the specif-

This is how Xiaomi uses social media as their

ic grouping of users and to what extend Xiaomi

platform for scouting. They use this platform

is collaborating with these, will be thoroughly

to in-source individuals who are interesting for

analyzed in the 3 phase of the WFGM model fol-

Xiaomi to collaborate with when developing new

lowing this part.

products and services. • Summary of research question 1

2.2

For a technology firm like Xiaomi to successfully

Research Question 2

engage and include their fans in the process of

Research Question 2: Which types of user col-

developing their products, understanding their

laboration is important for Xiaomi as a consumer

user-base is essential. Locating and understand-

electronics company?

ing what the users are capable of contributing

The second research question will be investigated

with, have been sought investigated through the

in this section.In order to answer the second re-

”want” and ”find” sections. With the ”want”

search question, we would like to first investigate

section, a thorough analysis of the capabilities

Xiaomi’s categorization method to distinguish dif-

certain users contain have been made, and with

ferent types of user groups. After this we are going

an outset in the findings, we are able to con-

to look at what kind of cooperation is employed

clude upon why a technology company like Xiao-

during three different development phase of new

mi should include fans in their work. Within the

products and what kind of role the Xiaomi forums 21



Table 1. Categories of Xiaomi users by privileges and professions Special Team Category

Board Master

Consultant Team

Resource Team

Inter-City president

Duties and responsibilities

Board Master is in charge of the post arrangements, cutout of malicious flooding posts, adding ’essence’ to some posts. Consultant Team is responsible for finding problems in the system, providing feedback to the firm in time and bringing about suggestions as well as answering other fans’ questions. The major task for resource team is to offer various resources such as software, e-book, theme wallpaper and so on to users. They are responsible for gathering local Mi-fans in the same city and organizing events regularly, besides, they also gather professional Mi-fans to answer technique questions of ordinary users. Cool-play group are required to post their experiencing report titled by the topic which could be

Cool-play group

about digital product, life experience, computer game experience, travelling journals and surrounding products as well as Geek events.

Camera team

The way they participate in Xiaomi forum is taking photos and sharing graphic knowledge within the camera team.

play in this process. Since Xiaomi’s forum is the key

frequency of signing on the forum represents the

linkage between users and company, understanding

activity level of the user, and according to this,

the importance of this social platform is necessary

Xiaomi classifies users into seven levels- Mi-forum

to comprehensively answer how Xiaomi could main-

pass-by, Mi-forum novice, Mi-forum acquaintance,

tain sustainable innovation capability from users.

Mi-forum new star, Passionate Mi-fan, Big Mi-fan, Gold Mi-fan.

2.2.1

Categories of users of Xiaomi

After this, Xiaomi grades users according to users’ privileges and professions and distinguish

The users are one of the most important re-

them between ordinary user teams and special user

sources for Xiaomi. The way Xiaomi classifies it-

teams, which are illustrated in Table 1. The ordi-

s users is an effective practice to profit from user

nary user teams is loosely structured and users in

engagement. To fully understand how the classi-

that team obtain a lot of space to share with each

fication contributes to a well-organized operating

other about products and the firm itself. On the

system of the user community, it is necessary to

contrary, special user teams is much more strict-

initially look inside the user structure on the given

ly regulated. Except for the employees of Xiaomi,

forum. To gain an all-rounded knowledge of users,

other members of special user teams include the

Xiaomi employs three levels of criteria to classify

following categories in Table 1.

users; activity level; privileges and professions and engagement level. Their relations and differences

The structure of special teams are not fixed,

are illustrated in figure 8.

new members can join in if they got high grades

The first criteria of classification is their ac-

from other team members, at the same time, exist-

tivity level. To accurately indicate users activity

ing members with an unsatisfying grade will go to

level, Xiaomi applied a signing system that every

ordinary teams. Special team members are acting

member logging in the forum need to sign. The

not only as a consumer, they are also co-operators 22



Figure 8: Three classification criteria and their relations

of the forum, so they have more privileges and are

Xiaomi’s forum is not operating a face-to-face sys-

more skilled than ordinary team users.

tem and the participators are anonymous, it does

In this project, we are using the third level of

not hinder the interaction under certain roles nor

criteria - the different engagement level in prod-

their co-innovation engagement. Specific users are

uct innovation- to categorize Xiaomi users. Based

included in specific development phases. We split

on their engaging activities, users are classified in-

the whole innovation process into pre-development

to lead users, participatory designers and inspired

phase, the development phase and commercial de-

users. Lead users are closely involved in the innova-

ployment phase, which is illustrated in figure 9.

tion process of Xiaomi; participatory designers are

• Pre-development phase

opinion leaders who are valuable resources in terms

In the early pre-development innovation phases

of creating ideas and suggestions; inspired users are

in which firms primarily worked with concepts

ordinary fans who provide quantitative data infor-

and ideas instead of prototypes or features, most

mation for product innovation, which is illustrated

of the data collected come from close interaction

in Table2.

with a smaller set of users, or even lead users. The users were actively and consciously involved

2.2.2

Engaging users in different innovation

in brainstorming ideas, as well as prioritizing cer-

phase

tain concepts.

After the classification of users into lead user-

Rather than individually develop the MIUI-

s, participatory designers and inspired users, their

system within the company, in August, 2010, the

working role is illustratively defined. Even though

first version of Xiaomi smartphone was undergo23



Table 2. Categories of Users of Xiaomi according to engagement level User Type

Real fanciers

Acting Role

Lead User

Participatory Work

Core Benefits to Xiaomi

The privileges they obtain include to trying out the new ver-

On the media social platfor-

sion of system during the probationary period ahead of launch

m/forum, they are ranked high

and then to experience, test and evaluate the new MIUI sys-

and labeled ”The Honored De-

tem and even the right to veto down the new version.

velopment Team”

All the other senior users in the Xiaomi forum except ”The Passionate Mi

Participatory

fans

designer

Honored Development Team”, such as the forum moderator, the consulting team, the resourcing team who have the right to communicate with the product Research and Development department.

Ordinary Fans

Inspired users

This type of users are in large number and it is the foundation of the social media platform-Xiomi forum and most of them are opinion leaders.

There will be a survey on the most popular new function of

Ordinary fans also own the

the phone and the winner would be awarded with popcorn,

right to grade the new system,

and the name and photos of the proposer or designer of this

which would influence the di-

function will be posted in the forum.

rection of the development.

ing a private beta test. The engineers of Xiaomi

perience enables them to develop new functions

selected 100 users as the first batch of users. All

that are practical and applicable in a real life

these 100 users were from various backgrounds,

setting. In addition, professional lead users can

most of which were technicians or enthusiastic

leverage their knowledge to create new ideas to

system developers with professional knowledge.

new functions (Morrison-2000). As key role in

Lead users of Xiaomi can obtain the original ver-

pre-development phase, lead users provides main

sion of the MIUI system ahead of time so that

values such as: capabilities for describing their

they can report their experiences with focus on

specific needs; they are skilled enough to devel-

the problems they find and then, propose their

op new ideas and concepts in relation to the new

solutions. Users view the product from differen-

products and they can pick up the pace on the

t perspective compared to Xiaomi engineers, so

development process to minimize expenditures.

they are better at detecting problems that engi-

• During development

neers find harder to see. Furthermore, lead users

During the next innovation stage, different set-

recombine need-related information with insights

s of data from users were collected. Features

from other fields and experiments until they ac-

and product ideas with users are tested before

complish a novel solution that is addressing the

the product is deployed onto the market. These

needs (von Hippel - 2005).

teams employ different techniques to gain users feedback. In this phase, qualitative rich user

Anioco, Krishnan and Ulrich suggest four cate-

inputs are gathered through crowdsourcing and

gories of different content types on innovation;

dialogues.

performance, design, usability and functionality. The reason for Xiaomi to involve profession-

Pisano and Verganti defined crowdsourcing as an

al lead users in the pre-development phase is to

open call to source traditionally generated by a

focus on functionality improvement. Users’ ex-

large group of undefined individuals or a com24



munity of users. Before launching on the mass

their forum every week, showing the debugging

market, Xiaomi would invite qualified users in

and new functions development. This update has

forum to do the beta test. Data about the users’

to be carefully done due to a short timetable.

behaviors are collected automatically when the

This development model is called ”Orange Friday

users download the system and other user inputs

Model” named after the system updating patch

are gathered trough forum surveys as a crowd-

released on Friday.

sourcing method. The concept of crowd sourcing

In the updating journal, a video is included to

was first brought up by Jeff Howe in 2006. There

present how the new function works, what is the

are three basic characteristics of crowd sourcing:

new feature and how this function is developed

based on internet, open production and volun-

in order to give a visualized active perception.

tary engagement. Users who participate in the

Hence, the users can fill the experiencing report

design of Xiaomi-innovation are well educated

to vote for the newest function, if the degree of

and in charge of their own free time. Further-

satisfaction is above 30%, the development team

more, they have a very strong desire to share

and the engaged users will be awarded the ”Pop-

their knowledge with others. The way they ex-

corn Reward”. The experiencing report is, in-

press their opinions is based on the internet and

stead of sophisticated data input, made up with

because they are not satisfied being a pure con-

mainly four questions, are you happy with this

sumer and service receiver, they voluntarily join

new updated version? Which is your favorite

the co-innovation. The consumer in this process

new function? What is your expectation about

acts as both information receiver and informa-

the system next week? Which function is most

tion sender, not only Xiaomi looks for consumer

useless? At the end of the updating journal, X-

feedback, the consumers are also acquiring prod-

iaomi shows their sincere respect and thanks to

uct details, updating schedules, other users’ ex-

those Mi-fans who contributes to the new func-

periences and react based on these informations.

tions with valuable ideas.

• Commercial deployment phase Once the product was deployed and placed on the

Firms open their product design to user commu-

market, companies could receive input through

nities during the development process, and get

tests online. Data from users are collected in

the users involved in the production and post-

order to optimize certain features of the deployed

production processes, where they are contributing

product or as input for new developments.

with innovative content and development within the product functionalities. As product innovation-

One third of the functions deployed on Xiaomi’s

s are being presented online, these can be adapted

products come from users. The high frequency

and modified by users from the pre-development

of updates on the MIUI system is very demand-

phase to commercial deployment phase, the bound-

ing, and the attributions from the fans are of

aries between production and post-production be-

great importance to keep this process going. Xi-

comes fuzzy, leading to continuous product renew-

aomi consequently posts the updating journal on

al and continuous flexibility of firm and community 25


boundaries.


Recent research on the co-design of product with users attempts to describe the interconnections between the users’ needs and the company’s. The traditional way of combining the users’ needs and the product design was through marketing research while this type of approach soon presented limitations. This approach did not reach areas connected to users’ actual experiences and thus an actual shift could not really happen with the ‘design with users’. In the paradigm of collaboration between firms

Figure 9: Types of user input among innovation process

and users to co-design products, the users’ needs could be categorized into three degrees: users 2.2.3

The role of social platform–Xiaomi

say; what users do; what users think. Explic-

Forum

it needs can be identified by listening to what

Clear user classification and an engagemen-

the customer say, which is the traditional way of

t practice scheme is not enough to complete the

communicating with customers. It seemed this

co-innovation process, a platform with well-defined

approach enables the customers to lead the di-

roles is a must. The Xiaomi forum is not defined as

rection of the new product because what they

a traditional and simple chatting community or in-

tell the firm is what they want. However, this ap-

formation board, it functions as a channel for quick

proach is limited since it only catches the observ-

and transparent communication, through which X-

able needs of customers and ignores the unex-

iaomi acquires both explicit and implicit informa-

plored area related to what the customer knows,

tion from users. It also works as an innovation

feels and dreams (Sanders-2002).

tool and service provider that facilities users en-

marketing analysis is aimed at identifying the ex-

gagement. In addition, the Xiaomi forum has on-

plicit knowledge of customers, what people say is

going operations providing data, for which the au-

based on their past experience and does not re-

tomatic data collection system embedded in forum

veal their true feelings about their tacit or latent

is responsible.

needs.

• Channel of communication

When doing the marketing research question-

Traditional

Xiaomi forum, as well as Xiaomi account on

naires or being involved in the customer feedback

Weiblog, Wechat acts as a transparent and quick

collection activities hosted by the firm, little s-

way for the communication to users. The reply-

pace and time is available for customers to fully

ing rule of Xiaomi is that employee who in charge

describe their needs. In addition, firms usually

of addressing feedback to users must send it with-

observe customers’ needs at one point in time or

in 15 minutes.

during a certain period of time, rather than ob26



serving and updating users’ needs all the time.

register one Xiaomi account and can then get

Multi-lateral platform can act as an effective and

10GB cloud space to store all the history infor-

efficient channel to catch users’ explicit, implicit

mation on their Xiaomi phone. Even users that

and latent needs.

lost their phone and their private information can be recovered from here.

• Innovation tool and service providing tool Various factors have increased the potential and

Innovation toolkits enables verification of qual-

decreased the costs of searching for innovation

ity of member’s contribution, and their efforts

from external sources. One of the essential fac-

can be validated after being uploaded onto the

tors has been the growing availability of informa-

company’s site.

tion and communication technologies. The rise of the Internet has played an important role in en-

• User data provider

abling searches for external sources of innovation

There is no specific user research departmen-

by facilitating technology intelligence (Veugeler-

t in Xiaomi. The users are directly linked to

s, Bury, and Viaene-2010). Acquiring Innovation

the management teams as well as the engineers,

from external sources usually involves effective-

who make the whole research and design pro-

ness of interaction in which the platform plays a

cess transparent with a strong sense of involve-

key role.

ment by users. In spite of the trend of big data used by other hi-tech companies to gain the

Xiaomi distributes a certain number of human

customers insight, Xiaomi regards the data pro-

resources in the Xiaomi forum. By now, Xiaomi

cessing method as being stiff, instead, every em-

has almost 4,000 employees, 1,300 of them work

ployee in Xiaomi could communicate with users

as operators of these forums. The platform are

by person via Weibo or forum and get the feed-

used to select the most popular and valuable sug-

back the first time and solve the problems in

gestions from the users and work as a platform

time.(Jeppesen L.B-2006)

where they can express their opinions freely. In this forum, all the system engineers can view the

There are two types of registered members in X-

users’ perceptions and ideas directly. Xiaomi has

iaomi forum, one is a Xiaomi smartphones user

always encouraged its engineers to contact user-

and the other type is A non-Xiaomi smartphone

s through social media platforms. On average,

user. The forum has a function called Authen-

every engineer in Xiaomi replies 150 posts week-

tification of users to effectively distinguish these

ly and every post regarding the MIUI system is

two types of users. Xiaomis’ smartphone user-

labeled a status, such as already received; solv-

s could use their identified IMEI code and SN

ing; already solved; already verified. The overall

code to complete the registration process and will

replying system works as a simplified debugging

then be marked with an orange identification. By

system.

means of this mechanism, Xiaomi can track the

Xiaomi provides their services to users through

actual participation of smartphone users in the

the social media platform. Users only need to

forum and collect their activity data. 27


2.2.4


Mechanism to maintain sustainable

ment is up to two years. In Microsoft, no produc-

innovation from users

t could be released without finishing the testing. Although this type of R&D process makes sure

Under a specific acting role on the Xiaomi fo-

that product is launched through thorough de-

rum, participation of users covers the overall in-

velopment steps, it has no time advantage(Kim

novation process from the beginning of the devel-

J.H-2008).

opment to the post-optimization after commercialization has occurred. Because Xiaomi is capable

Instead, Xiaomi regards their users as product

of collaborating with users, which is its remarkable

managers as well as experience testers. Once the

advantage, it is able to keep its favorite position on

problem is detected, the development direction is

the market. Xiaomi has a mechanism to maintain

corrected right away. The engineers and techni-

sustainable innovation from users that are; develop-

cians of Xiaomi are not afraid of making mistakes

ing attractive products; continuously updating the

when developing MIUI system and they are en-

platform and integrating related stakeholders. On-

couraged to release the new versions even though

ly by implementing these sustainable inputs from

it is not perfect, because the problems of system

users, Xiaomi can keep a sustainable competitive

could be solved very quickly. So Xiaomi phone

advantage.

is much closer to users’ needs. • Update platform

• Appealing product is the key

As the most important communication channel is

The chasm of CEO is not enough to sustainably

the Xiaomi updates Forum, this is established to

attracting users to contribute to the innovation

guarantee the components are adjusted for effi-

process, appealing product with high quality is

ciency .Since August 1st 2011, the Xiaomi multi-

the key. Xiaomi has applied the product inno-

lateral platform has been updated according to

vation process described as ”Quick developing,

the new functions on the Xiaomi smartphone.

Quick updating” to continuously optimizing Xi-

The interactive pieces of the forum is expanded

aomi phone to appeal users. The basic premise

with new ones and enriched with new contents in

of this type of development model is the original

the existing pieces. The overview of Xiaomi Fo-

product is presented with many problems, but

rum updating condition is presented in Table3.

the product is released quickly for users to detect Xiaomi kept updating its platform to better en-

problems and the product could be adapted and

gage their users and to maximize their contribu-

optimized. On the contrary to this innovation

tion to product innovations, removing outdated

model, traditional product development models

boards or groups along with adding more mod-

employed by hi-tech companies such as Microsoft

ern and useful components. Thus, users’ ideas

would spend first the couple of months on plan-

can be expressed in more convenient and effec-

ning and then another couple of months on de-

tive ways, which does promote sustainability of

signing and developing. The final phase is testing

users’ engagement(Lee, Jen Fang-2012).

which is conducted in the last few months. As

• Integrating related stakeholders- firm, prod-

a consequence, the total time spent on develop28


Table 3. Xiaomi Forum Updating Overview Time

2011.9 2011.10

The firm supports the creations made by the

Platform Updating Milestone

Xiaomi smartphone user registration system

users, this is done by making new tools avail-

went online

able and providing necessary data and basic tech-

XiaomiHonoured Development Team went on-

nological online equipment.

line

2012.3

Such toolkits al-

Xiaomi smartphone college went online

low community members to involve themselves in

Resource team went online

the creative process of developing innovation and

Xiaomi smartphone college went online 2011.11


Inter-City Meeting went online

firms use them to promote and make use of user

Daily Signing function released

innovations. The community works as a compe-

Board Master Assesment System released

tition platform for different ideas that helps the

Geek Zone went online 2012.7

ROM Zone went online

company gaining the much desired user-created

2012.9

Xiaomi smartphone college revisioned

2012.12

Xiaomi Family went online

content, and thereby be able to directly adapt

2013.2

Cool-Play went online

products to meet particular needs as expressed

2013.5

APP Channel went online

by their users.

2013.7

Xiaomi Forum revisioned MIUI Development Team revisioned

Traditionally, producers are in charge of the de-

2013.12

Signing system upadated

2014.5

VIP User Registration system went online

signing new products and their perceptions of all

2014.11

Global Development Team established

the users requirements are mainly being predicted by analyzing the sales. These firms separate R&D, production and sales so that time lag ex-

ucts, users and community

ists to receive accurate feedback from produc-

The Xiaomi forum community connects the com-

t users. In addition, because the production is

pany with its users, by having a product where

not invertible, customers who want to experi-

the co-creation can be viewed as bridge between

ence new functions have to buy new product, in

the two. Stakeholders are integrated in the user

that sense, producer and consumer are separated

community through mutual interactions.

- firm and users are separated. However, Xiaomi

In order to encourage users’ to participate in co-

forums breaks boundaries between producer and

creation and sustain the positive effect of users

consumer, hence multi-lateral Xiaomi stakehold-

involvement, Xiaomi opens its product and ser-

ers are integrated together.

vice boundaries to better absorb the users contri-

These four aspects of efforts made by Xiaomi

butions and service quality. The way of enhanc-

guarantee the firms capability to keep exciting

ing the status of the most active users increas-

their users and motivate them to contribute fur-

es their involvement in the product developmen-

ther throughout the innovation process.

t. Once the existing users feel like they really makes some difference to the product develop-

2.2.5

ment, they will spontaneously attract new users

Framework for synergy between Xiaomi and users

to be members of the online community, thus their motivation and involvement is maintained

The company culture plays an important role

and more users will support the community.

in the willingness and ability of the organization to 29



successfully profit from external sources of innova-

is also applicable to the smartphone industry in

tion. ”Paying enough attention to our fans” is the

which the physiological needs implies the most

essence of the company culture in Xiaomi.(Shin,

basic function needs, like dialing, texting, apps

Lin and Luarn – 2012)

and so on.

Focused on the relationship building process, With their physical needs relatively satisfied, the

Xiaomi spends a certain amount of time to under-

individual’s safety needs take precedence and

stand users’ needs, to grasp users’ insights, employ

dominate behavior. In the sense of smartphone,

motivation methods and construct consumer loyal-

the safety requirement refers to private informa-

ty.

tion safety. Since the smartphone is the most frequently used tool for individuals in daily life

• Comprehensive understanding of users needs

to receive and send information, people are more careful about their information safety, an advanced safety system would be appealing to users. Regarding first two levels of needs, Xiaomi has no competitive advantage. However, Xiaomi is more capable in the high level needs requirement by method of users’ community. The third level of human needs is interpersonFigure 10: Maslow’s hierarchy of needs in user innovation of Xi-

al and involves feelings of belongingness. Xiao-

aomi

mi forum is the exact link to all Xiaomi users. When users log on the forum, participate in the

The priority of synergy strategy is comprehen-

discussion with other users who share the same

sive of users’ needs. Only by gripping both the

interest online and when they meet with each

explicit and implicit even latent needs, the inno-

other offline to take part in the real activities

vative product can sustain being attractive and

such as an inter-city meeting, their needs of be-

will urge the users willingness to keep a long and

longingness is met. The fourth level of Maslow’s

far-reaching relationship with the firm.

hierarchy of needs is the need to feel respected;

From Maslow’s hierarchy of needs, a human-

this includes the need to have self-esteem and

s needs could be described using the terms

self-respect. The technicians and engineers are

”physiological”, ”safety”, ”belongingness” and

replying fans questions in time and the manager-

”love”, ”esteem”, ”self-actualization” and ”self-

s, even the CEO, interact with users frequently

transcendence” as a shape of a pyramid where

which indicate the high respect to users. Esteem

the most fundamental levels of needs are at the

presents the typical human desire to be accepted

bottom and the need for self-actualization at the

and valued by others, Xiaomi offers a platform

top. Physiological needs are thought to be the

for users to engage in the designing process with

most important and they should be met first. It

professional technicians and these activities give 30



users strong sense of contribution or value.

from face-to-face conversation to posts, chat-

The last need is to be recognized or realized.

ting room, boards and e-mails. Post is the

Maslow describes this level as the desire to ac-

basic element on Xiaomi Forum. By read-

complish everything that one can, to become the

ing and responding to posts from users, Xiao-

most that one can be. Xiaomi makes their users

mi could enhance its understanding of what

become conscious of their potentials by actively

users want and why they want it. Posts also

inviting them and helping them to engage in it.

reflect users’ own perceptions of product and

Members in special user team are highly recog-

function which provides an ’in-depth’ under-

nized by their distinguished dedications. Ordi-

standing of users minds. By 5th, January,

nary users are also recognized for their effective

2015, the total number of posts on Xiaomi fo-

feedback and suggestions.

rum has reached 23.8-87.049. Posts are zoned on various boards, the most popular ones are

In the light of Maslow’s hierarchy of needs, the

Xiaomi news broadcast; Mi-fans lives; Ap-

way Xiaomi understand users’ needs is showed in

plication zone; Product zone; Activity zone;

figure 5.

Service board; Computer games; ROM zone; • Accurate grasp of users’ insight

FAQ zone and so on. There are more than sixty sub-boards under each main board.

The online platform is useful to gain users

Thirdly, the frequency of interaction has in-

insight. It is based on the feature of the in-

creased dramatically, immediate information

ternet as it is helping reducing the distance

transformation technique enables high fre-

between individuals drastically. The Xiaomi

quent information interaction. This charac-

forum, one of the numerous online platforms,

teristic of the internet platform is of signifi-

works as one of the most effective channels to

cance to avoid time lag of grasping consumer

gain abundant user insight.

insight. User insight is extracted from suffi-

Constant updating of internet necessitates

cient instant information which is updating

more accurate and comprehensive under-

very often. By scanning all contents from

standing of consumers’ minds for three fol-

users in time, Xiaomi is better apprehending

lowing reasons. Firstly, forum breaks the lim-

the inner nature of users’ comments, more ef-

itation of space, enlarging the range of room

fectively than other smartphone companies.

of multi-lateral interaction, by enabling longdistance communication. Xiaomi firm does

Almost all the employees are required to focus

not need to allocate human resources to dif-

on the Xiaomi forum and other social media

ferent cities collect consumer feedback from

platforms. This approach ensures that every

different region, and the forum is cost-saving

opinion or complaints from users are received

since it is beyond the concept of space. Sec-

in time, which improves the efficiency to grasp

ondly, the form of interaction has changed

the users’ insights. 31



Table 4. Interactive activities for loyalty construction Inter-activities

Activity Description

Inter-City Mi-ting is based on specific city and the Mi-fans in that city. The registered users in Inter-City Mi-ting

Xiaomi forum could apply to be the president of Mi-fans in one city who is responsible to hold activities and set up the organization structure Popcorn national tour is initiated by Xiaomi company. Compared to Inter-City Mi-ting, Xiaomi

Popcorn national tour

founders, software and hardware engineers, community managers are all participating in the popcorn national tour and would communicate with fans face to face. Mi-fans meeting is the activity that are targeted to mainly lead-users who could meet with the

Mi-fans meeting

managers and technicians of Xiaomi. This kind of activity is beneficial for the users to talk about the product development deeply.

Mi-fan festival Xiaomi Family

Mi-fan festival is held annually as a reward to fans. Although Xiaomi does not own any physical stores, it has Xiaomi Family to provide repairmen service and technical support.

• Users loyalty construction–Interaction on

While firms may wish to incorporate external

community animation

innovations into their product, this depends on

The way Xiaomi constructs user loyalty is based

motivating external partners, namely users in

on various activities held by in the Xiaomi Fo-

this project. Motivation strategy is distinguish

rum. To attract new members and to stimu-

between pecuniary and non-pecuniary incentives

late and recognize members’ status and encour-

for obtaining external innovations. User innova-

age them to create new contents, Xiaomi allo-

tion emphasizes the latter type of motivation.

cates different users into different boards and

For pecuniary motivation, Xiaomi rewards con-

guides them to engage in the discussion. For the

tributable users with virtual money-Mi-copper.

horizontal interaction between fans, Xiaomi firm

Although his type of pecuniary reward is sym-

plays the key role to organize and manage, while

bolic, users can benefit of discounts when pur-

the extensive activity from on-line to off-line re-

chasing Xiaomi product.

quires the collaboration of all the Mi-fans. Users’

For user innovation, the non-pecuniary benefits

loyalty construction activities consist of mainly

include meeting their own needs as well as di-

five types which are illustrated in Table 4.

rect and indirect benefits of sharing their newly developed knowledge in their community (von

• Motivation and reward strategy Given the large variety of possible sources of ex-

H-2007). The prevalence of knowledge sharing

ternal innovation in a firm’s value network, firms

can often be explained by the direct benefit-

are challenged by how to maximize the supply

s users gain from freely revealing their knowl-

of innovation that originate beyond their bound-

edge (Harhoff, Henkel&von Hippel-2003). Com-

aries. Motivating external stakeholders to sup-

munity members may benefit from privileges and

ply innovation is particularly challenge because

recognition-which is regarded as status reward. • Summary of research question 2

of the possible misaligned interests between these stakeholders and the focal firm(von H-2005).

After analyzing how Xiaomi engages its users in 32



innovation processes, we found out that Xiaomi

what users from the social media platform their

firstly categorieses its users into different types

organization should seek to incorporate, in order

according to three criteria, in order to perceive

to gain the most beneficial output, from their ex-

their capabilities and accurately grade them. As

ternal partners. The following section will contain

to maximize the benefit from users’ participation

an analysis on which capabilities the organization-

in product innovation process, Xiaomi engages d-

al structure of Xiaomi should possess, to engage in

ifferent specific groups of users in different devel-

the best possible collaboration with the individu-

opment phases. During this process, the Xiaomi

als who can create value for the company. After

Forum works as the key linkage between com-

this, a comparison of the capabilities of their cur-

pany and users because specific groups receive

rent structure to the ideal capabilities will be con-

needed information and contribute their knowl-

ducted. Lastly, a recommendation on how Xiaomi

edge on different boards, and this type of multi-

could structure itself, in order to gain the needed

lateral communication is necessary for compa-

capabilities, will be conducted.

ny to cooperate with external partners. Xiaomi makes fully use of the platform to promote inter-

2.3.1

actions and synergy with users. The way Xiaomi collaborates with its various users by the method

Current Formal Structure

The current structure of the Xiaomi organiza-

of building and updating the forum is the key to

tion is a divisionalized form (Pengfei, Ding – 2013).

integrating related stakeholders and effectively

This structure is shown in appendix 4. The divi-

involve them in the co-innovation process.

sionalized form has both strengths and weaknesses. First of all the structure is known for having verti-

2.3

Research Question 3

cal lines of communication, and skills. The current

Research Question 3: How can you structure

structure of Xiaomi is placing each of the founders

an organization like Xiaomi to effectively engage its

in control of an area. They have to manage their

fans?

departments input and output independently from the others. With this structure information within

The third research question will investigated

the company is traveling through multiple channel-

in this section.

s, before reaching its final destination. This type

With this question we would like to summa-

of structure is also known for having independen-

rize our findings in the previous questions and re-

t teams, working without including other depart-

flect upon which organization structure would be

ments in the process (Mintzberg – 1980;Ihl, Piller,

ideal to successfully collaborate with its customer-

and Wagner - 2012). Furthermore, the manage-

s. Through the work with the first 3 phases of

ment of Xiaomi is very focused on having contact

the WFGM model, an investigation of what kind

with the fans, which can be seen though the inter-

of users Xiaomi should be collaborating with, and

action on the social media platforms, which is being

what capabilities these should possess, has been

prioritized on a daily basis (Shih, Lin and Luarn -

sought completed. It withholds information about

2012). 33


2.3.2


The capabilities needed in the Xiaomi

This means that the structure of the company is

organization

very much in relation to the environment, in which the company operates.

”One of the more enduring ideas in organiza-

To elaborate on this, the open systems contin-

tional science is that an organization’s long-term

gency theory is very useful. For Xiaomi the open

success depends on its ability to exploit its current

system organization theory is essential. With the

capabilities, while simultaneously exploring funda-

current business model in Xiaomi, the flow of ideas

mentally new competencies (Levinthal and March

from their environment is what defines the compa-

1993, March 1991).”

ny. This also means that it has to adapt to the

The idea of the ambidextrous organization is

environment to keep having a flow of information

one of the primary focuses of Xiaomi. When an

streaming through the company, in order to con-

organization chooses to emphasis the attributions

tinue having their current business model. What

of an ambidextrous organization, an important el-

this means for the structure of the organization is

ement is having a sound management team, who

that it has to be very adaptive to the needs of fan-

are willing to make radical decisions based on the

s, and more importantly, is has to make sure that

company’s current situation (O’Reilly, Tushman –

the collaboration between fans and the company is

2004). When working with the concept of ambidex-

unhindered by bureaucracy.

terity it is possible to adjust your organization, to

Summarizing the capabilities, the organization

have two distinct sections of the company, where

of Xiaomi has to possess, to collaborate effectively

one focuses on exploiting and the other focuses on

with fans. It has to have a solid core structure

exploring. Xiaomi has to separate their business

where the company is able to develop projects in

in to two parts. One part has to be exploiting

cooperation with fans. The company has to let the

the current business and will include, production,

demand from the fans determine what products to

marketing, R&D, financing and HR among others.

develop, and which goals to pursue. Furthermore,

This part of the business will not be changed by

the structure within the organization needs to allow

fans but will be the platform where fans can de-

all sections of the company, to have some kind of

velop and market ideas. This will be the formally

collaboration with fans.

structured core of the company. 2.3.3

The other part of the company will be the part

The current formal structure compared to the capabilities needed

that changes with the demands from fans. This part will be everything in regards to Xiaomi’s exter-

We assume that the current structure of Xi-

nal environment, and will be defined in the collab-

aomi is a divisionalised form (Mintzberg – 1980).

oration between the company and the fans (Shih,

The main capabilities of this structure are out-

Lin and Luarn – 2012). This section of the compa-

lined in the beginning of this chapter. The divi-

ny should grasp everything in regards to product

sionalized structure possesses many of the capabil-

development, and be very flexible. This will be the

ities needed by the Xiaomi organization. However,

part of the company to explore new possibilities.

the current structure of the organization is non34



Figure 11: Our idea of restructuring organization structure

collaborative between the different products. The

the fans exactly collaborate with the company, and

power is generally very decentralized which is also

as the company have the divisionalized form, there

a very good idea in some cases. The issue in Xi-

is no overall platform for the development of prod-

aomi might be difficulties in collaborating between

ucts, which varies from department to department

the departments. A centralization of specific parts

(Ihl, Piller and Wagner - 2012).

of the business could help to a more collaborative 2.3.4

approach within the business and might help the

Our idea on restructuring the organization

company save resources (Ihl, Piller and Wagner 2012). To centralize some parts of a company of-

Based on our analysis of the capabilities need-

ten means that these parts become less flexible. For

ed within the Xiaomi organization, we have created

Xiaomi to centralize some parts of their business,

a formal structure that we believe could help Xiao-

would probably give fans a more effective platfor-

mi to be more resource efficient, and more effective

m to develop ideas, and a less bureaucratic line of

in collaborating with fans. The model looks like

communication within the company (Ihl, Piller and

this.

Wagner - 2012).In the current structure of Xiaomi, each product facilitate contact with the fans, in the

• Explanation of the model

respective area and try to collaborate most effec-

Our model is built upon the basic framework of

tively with these. This is also the solution we are

a matrix organization, but with a few moder-

looking for, but in our perspective, the fans have

ations. We have chosen to centralize some of

to create the products and then the teams develop

the operations within the company. These oper-

and market these. In the current structure, the de-

ations include HR, Marketing, R&D, production

velopment part takes fans wishes into account, but

and financing. This means that these different

it does not base its production solely on the wishes

departments is formally structured within the or-

of fans. Therefore, there might be issues as to how

ganization, and will take care of their respective 35



field, within each of the products the company

fans. And in addition, it would create a platform

looks to create. On the other hand, there is the

for development where fans know the processes

specific product, which is currently controlled by

within the firm.

each of the founders. We believe that this is a

• Summary of research question 3

very good idea, and that it should continue to

In the work with our third and final research

be this way. The changed part in our restruc-

question we found the capabilities needed in the

turing is the creation and development of prod-

structure of Xiaomi. Furthermore we compared

ucts. This will now be based almost exclusively

these to the current structure of Xiaomi and con-

on the wished of the MI fans. This structure

cluded that their current structure did not meet

does not prohibit the company from introducing

all the criteria we believe is essential for the or-

new products, but the fans should participate in

ganization. We then moved to creating our own

defining the capabilities of these products.

idea, of the best possible structure for the Xiao-

Furthermore, we illustrate that Xiaomi have col-

mi organization, in order to effectively cooperate

laboration between certain departments and its

with fans and at the same time have a strong

fans. This illustrates that Xiaomi should be able

core within the company. We found that a ma-

to insource people in their formal structure with-

trix organization with fans being the main source

in HR, Marketing and R&D primarily.

of product ideas is the best solution. Furthermore we suggests that Xiaomi centralizes part of

In our model, the fans demand certain products

its core operations in order to make a platform

or changes. Then the departments in charge of

for easy commercialization of ideas and a plat-

their product contacts R&D and informs them

form where they can easily insource fans to the

about the changes demanded by the fans. The

company.

R&D then has the possibility to contact the individual fans they are interested in collaborating with. When this is completed, the respective

3

Conclusions

team can keep fans informed on the state of the 3.1

given project, and when the project is completed, the fans will help diffuse knowledge about the

Conclusions When we started working with this project, we

innovations and thereby, help market the new

found the uniqueness of Xiaomi, in regards to their

product or service.

exponential growth interesting. We chose to work

We believe that this organizational structure

with open innovation as a main concept of analysis,

would help save Xiaomi resources by centraliz-

and more specifically, we chose to investigate the

ing some of their operations. It would increase

fans of Xiaomi and the collaboration between the

the inter-firm communication and help close the

two entities. We found the WFGM model to suit

gap between the different teams. It would help

our needs, since it facilitated the needed tools for

create a strategy for the development of product-

answering our problem formulation, along with the

s and services based on the demands from their

research questions. The WFGM model have proven 36



to grasp the combination of open innovation, in

more efficiently communicate with all three types

regards to user-driven innovation, while including

of users. By engaging all related stakeholders in

the organizational aspect as well. After identifying

the innovation process, Xiaomi can achieve a com-

how to solve each of the steps in the framework, we

petitive advantage in product innovation and keep

chose theories accordingly.

synergizing with their users.

What each of the step revealed gave us the

In the final part of our paper, we establish

tools to depict the current situation for Xiaomi, and

what capabilities the organizational structure of X-

we were able to acquire the needed knowledge of

iaomi should possess to effective collaborate with

related theories to answer our problem formulation

their fans. After defining these, we compared their

along with our research questions.

current organizational structure to the capabilities

By understanding exactly what capabilities

needed. We therefore created a formal organiza-

the fans on the Xiaomi forum was able to contribute

tional structure, which emphasized the capabilities

with, the types of users to collaborate with was de-

of their fans, along with the companies’ capabil-

fined. Through the diffusion of innovation, multiple

ities. Based on our findings, we then presented

new ideas and innovations can be located and inte-

the organizational structure we acknowledge as the

grated in the development of new products. Hence,

”best possible fit”.

locating the users that are able to contribute with 3.2

essential knowledge is what Xiaomi should to be emphasizing.

Reflections When we reflect upon our project, we see a

The mentioned users who Xiaomi is able to

way of structuring an organization, in order to cope

benefit from, are what we call lead users. These

with open innovation. Xiaomi have succeeded in

users are to be found within the large group of X-

creating a collaborative approach, which is con-

iaomi fans. We found that it is not possible for

trolled by the demand of the market. This gives

Xiaomi to collaborate extensively with their entire

them a better chance of creating commercial suc-

fan base. Hence, categorizing their fans though a

cessful innovations, and thereby maintaining a sus-

coding system is the ideal method to locate the ex-

tained competitive advantage.

act fans Xiaomi wants to collaborate with.

What this project has established, is a frame-

To maximize the benefits from collaboration

work for other technology companies are able to

with users, Xiaomi classified users into 1) lead user-

learn from. Despite the case focusing solely on X-

s who participate in the initial development phase,

iaomi, this framework is based on the concept of

2) participatory designers who are engaged in con-

open innovation, and the ideas and reflections can

tinuous optimization of products and its functions,

easily be implemented in other companies. A tech-

and 3) ordinary users who are labeled as inspired

nology company does not have to collaborate as

users, who offer quantitative user data. To main-

extensively with its external environment as Xiao-

tain innovation input from users sustainably, Xi-

mi, but it could definitely learn something from the

aomi updates its forums frequently, which serves

collaborative approach Xiaomi has emphasized.

as the key linkage between the firm and users, to

Our initial choice of using the WFGM model 37


as the theoretical framework was initially to have a proven theory to shape our project. However, as we have been conducting our research it has become clear, that this framework will also make it easier for companies to actually choose a single step in the model where they might be struggling, and seek inspiration in our way of solving this particular step. This also enables our project to be separated into single steps, which might be easier overcome and implement in a company. We feel that by conducting this project, within the WFGM model, we have made it fairly easy for adjacent companies to copy our method of solving each step, even when the findings might not be identical due to our base case being Xiaomi. We think that our project could serve as an inspiration to other companies, in regards to how technological company could shape their strategy for insourcing external partners and shape parts of an overall open innovation strategy for the company.

38



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Case Study Xiaomi

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