Xiaomi founder Lei Jun prefers to fly economy. The watch he wears is worth just over RMB 1,000 (around US$150). Despite appearances, in the months since Xiaomi went public on the Hong Kong Stock Exchange in July 2018, Lei’s net worth has reached US$11.5 billion, making him one of the richest people in China. Lei’s appreciation for saving money is not simply a lifestyle choice: it’s been one of the keys to his success.
A passion for mobile phones
Born on December 16, 1969, Lei majored in Computer Science at Wuhan University from 1987 to 1991. He finished all the required credits for a bachelor’s degree in just two years. Lei has maintained his work ethic all these years later: working 12–16 hours a day remains the norm.
During his freshman year at Wuhan, Lei read Paul Freiberger’s and Michael Swaine’s book Fire in the Valley: The Making of the Personal Computer. The story of Steve Jobs helped shape Lei’s dream to build a great business like Apple.
During what would have been his final two years at university, Lei tried to start his own business and developed the encryption software BITLO. By the time he received his bachelor’s degree, Lei had already made his first RMB 1 million.
In a speech at Peking University in 2014, Lei said: “If you are truly interested in your work, you won’t feel exhausted or complain. It’s fun to solve a problem whenever it comes. I’m a mobile phone fanatic; I think about them every day. Building mobile phones is not my job, it's my passion.”
His obsession with phones can be traced back to his thirteen years at Kingsoft, where he started his career in 1992. Each time a new mobile phone model was released on the market, he would buy it and study its advantages and shortcomings. He eventually became an expert on mobile phones who could easily disassemble and reassemble many phone models.
His love for mobile phones made his biggest move – founding Xiaomi, a smartphone company – a natural choice once he perceived the coming rise of mobile internet.
Before Xiaomi, which means “millet” in Chinese, high quality always meant high price. A frugal person himself, Lei wants Xiaomi’s users to enjoy a quality product and experience at low cost. He made a conscious decision to limit the company’s profit margin to 5%. To reduce expenses, the company sells its phones directly to users through its website and self-operated e-shops, eliminating middlemen and distributors.
Launched on August 16, 2011, the Mi-1, the company’s first smartphone model, was priced at RMB 1,999. By comparison, Apple smartphones cost RMB 4,999–5,400 that year. When the Mi-1 went on sale in October 2011, the first 300,000 phones sold in less than five minutes. Although the numbers pale in comparison to the worldwide launch of the iPhone 4S that same month – more than 4 million sold in three days – the showing was still quite impressive for a newcomer, especially one that was only targeting the Chinese market.
Lei’s deep understanding of mobile phones and the importance of economizing has been a winning combination: the startup sold 7.19 million phones in 2012, raking in US$2 billion in sales during just its first year of production.
Well-received by customers ever since they first hit the market, Xiaomi phones have contributed to the increase in smartphone popularity in China by enabling less wealthy users to purchase high-end mobile devices.
An unusual approach to management
At the 2013 China Internet Entrepreneurs Conference, Lei discussed his small restaurant theory. “The most successful boss is a small restaurant owner. He knows his customers and engages with them. There are always people waiting in line for his food, which produces a great sense of accomplishment.”
Unlike rivals OPPO and VIVO, which both spend large amounts on marketing, Xiaomi prioritizes users. The company reaches out to people who love its products, so-called “Mi-fans,” for suggestions and beta testing of new phone features.
Even when Xiaomi was valued at US$50 million in 2014, Lei still spent about 3-4 hours every day communicating with a 3,000+ member Mi-fan group. Customers even have their own dedicated "Mi-fan Day" on April 6 – the day the company was founded in 2010 – during which Xiaomi launches special promotions or releases new products.
Xiaomi’s success can be largely attributed to Lei’s unique management style. It helped save Xiaomi from going under in 2015-16 when the company experienced a 36% sales slump and dropped out of the top five global smartphone companies.
Before the crisis, the mobile phone R&D team, which was led by co-founder Zhou Guangping at the time, failed to introduce trendy features like fingerprint recognition in a timely fashion. Additionally, the supply chain management team, also under Zhou’s leadership, provoked Samsung, one of Xiaomi’s suppliers, by behaving in a condescending manner, which caused a delay in the launch of the company’s Mi-5 model. Xiaomi was subsequently flooded with user complaints.
Lei took over from Zhou in R&D and supply chain management. It was rumored that Lei flew to South Korea four times to apologize in person to Samsung in order to repair the relationship until the latter promised to resume supplying Xiaomi with smartphone screens.
All of Lei’s efforts led to a strong rebound during the second quarter of 2017. Xiaomi broke its own quarterly smartphone shipment record and was restored to the world’s top five smartphone companies list.
In an open letter to investors included in Xiaomi’s IPO prospectus in May 2018, Lei wrote, “Besides Xiaomi, there’s no mobile phone company that has made a comeback after such a significant sales plummet.”
Empowering other entrepreneurs
Throughout his career, Lei hasn’t focused solely on his own success. He has also put a lot of work into helping other entrepreneurs succeed.
In 2013, the rise of IoT pushed Lei and Xiaomi in a new direction. He began to grow Xiaomi by building or cooperating with a portfolio of new startups that are allowed to share Xiaomi’s brand, platform, sales channels and other resources once a partnership deal is struck.
Huami, one of the portfolio startups, is Xiaomi’s sole partner for wearable products, including its popular fitness tracker, the Mi Band. More than 1 million Mi Band 3s were sold in the 17 days after the product first went on the market in June 2018. Huami went public on NASDAQ in February.
Besides Huami, there were 100 firms in Xiaomi’s portfolio by the end of 2017, four of which were unicorns. Sixteen of them had annual sales exceeding RMB 100 million. These startups have partnered with Xiaomi to launch more than 100 products, including smart bracelets, robotic vacuum cleaners, air purifiers and portable power banks.
Lei was also a successful angel investor even before he started Xiaomi. His investment philosophy mirrors his work philosophy. When choosing a startup to invest in, Lei studies the entrepreneur and their team intensively. He seeks to invest in like-minded entrepreneurs: people who truly love their work, seize momentum at the right time and, of course, work hard.
A friend of Lei for 10 years, Li Xueling was known as a dreamer and tech enthusiast when he founded social entertainment platform YY Inc. in 2005. Lei invested US$1 million in the company. Since YY Inc. got listed in the US in 2012, the investment has yielded an 800-fold return for Lei.
Lei then made his best known move in 2006: an RMB 4 million investment in mobile browser maker UCWeb in exchange for a 20% stake. In 2014, the company was purchased by Alibaba for US$4.3 billion, which led to a 1,000-fold ROI for Lei.
Lei recommends others who have the financial means to do so follow in his footsteps: “Be an angel investor to help startups fulfil their dreams. This is the best way I know to repay all those who have helped me.”
