From Phones to Pillows: Decoding Xiaomi's Open Innovation Strategy

​The tech world features many specialized companies, but Xiaomi stands out. Their product range spans smartphones and laptops to smart pillows, 3D printers, and even smart water guns. A recent Mrwhosetheboss video showcased these "craziest Xiaomi products," highlighting their diverse offerings, generally solid design, and integration within the Xiaomi ecosystem. This raises the question: how does one company produce such a vast array of products while maintaining consistent design and quality? While known for competitively priced smartphones, Xiaomi's product explosion is driven by a powerful concept: Open Innovation.

What is Xiaomi

​Xiaomi emerged in 2010, initially focusing on software before launching its first smartphone, the Mi 1, in 2011. Prioritizing design, they quickly became known for stylish and affordable devices. Expanding beyond smartphones and laptops, Xiaomi evolved into an Internet of Things (IoT) company with a product range far exceeding traditional tech gadgets. This rapid diversification sets the stage for understanding their unique approach to innovation.

​Xiaomi's website as it looks in Mainland China

How Does Xiaomi Create So Many Products?

How does Xiaomi produce such a dizzying array of products, from smartphones to scooters and even electric screwdrivers? Developing a cutting-edge smartphone requires different expertise than designing a scooter or a smart home appliance. It's difficult to imagine one company excelling in so many disparate fields through internal R&D alone.
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This is where the standard model of internal research and development falls short in explaining Xiaomi’s diverse product lines. It simply doesn’t seem feasible that they’re designing and manufacturing every single one of these products entirely on their own. This leads us to consider a different approach—one that hinges on collaboration and external partnerships: Open Innovation.

What is Open Innovation?

​Xiaomi's product explosion stems from an innovation approach often called: Open Innovation, which involves looking beyond internal R&D. Instead of relying solely on in-house teams, companies practicing Open Innovation collaborate with external partners, communities, and individual innovators to generate new ideas, develop new products, and bring them to market. This contrasts with "closed innovation," where companies keep R&D strictly internal. While closed innovation has merits, it can limit speed, diversity, and adaptability. Open Innovation allows companies to tap into a wider pool of talent and resources, accelerating innovation and enabling them to explore new markets more efficiently. For Xiaomi, this has been key to their diversification.

Closed Innovation Vs. Open Innovation

The Xiaomi Ecosystem: A Case Study in Open Innovation

• Design and Engineering Expertise: Xiaomi's teams collaborate with partners, ensuring consistent design and quality.
• Supply Chain and Manufacturing: Partners access Xiaomi’s established supply chain, streamlining production.
• Quality Assurance and Branding: Xiaomi’s quality processes are applied to ecosystem products, leveraging the Xiaomi brand.

Simplified Structure for the Xiaomi eco-system

This creates a win-win: Xiaomi gains diverse products with reduced risk, while partners benefit from resources, expertise, and brand recognition.

Benefits of Open Innovation: The Xiaomi Advantage

Xiaomi's success story highlights the significant benefits of Open Innovation. By collaborating with external partners, companies can achieve rapid product diversification without the full burden of internal development. This approach reduces risk and development costs, while simultaneously granting access to a wider pool of expertise and creativity. Open Innovation fosters dynamic ecosystems, strengthens brands through collaborative partnerships, and accelerates time to market. In essence, it allows companies like Xiaomi to achieve more with less, driving continuous innovation and growth by leveraging the power of external collaboration.

Beyond Xiaomi: Other Examples of Open Innovation

While Xiaomi provides a compelling case study, it's important to recognize that they are not alone in leveraging Open Innovation. Many other companies across various industries have adopted similar strategies, even though they have different approaches and focuses. Here are a few notable examples:

• Procter & Gamble (P&G): P&G has been a long-time proponent of Open Innovation, famously implementing its "Connect + Develop" program. This initiative aims to source at least 50% of its new product ideas from external sources. P&G actively seeks partnerships with external innovators, researchers, and startups, bringing in diverse perspectives and accelerating its innovation pipeline.
• LEGO: LEGO Ideas is a prime example of crowdsourcing within Open Innovation. This platform allows fans to submit their own LEGO set designs, and if a design receives enough support from the community, LEGO will consider producing it as an official product. This not only generates fresh ideas but also fosters a strong sense of community and brand loyalty.
• Apple App and Google Play Stores: These platforms exemplify Open Innovation by allowing external developers to create applications and services that significantly extend the functionality of Apple's iOS and Google's Android operating systems. This fosters richer ecosystems for users, offering a vast array of choices and enhancing the overall user experience.
• Hackathons: Another form of Open Innovation, although often shorter-term and more focused on specific challenges, are hackathons. These events bring together developers, designers, and other creative individuals to collaborate intensively over a short period (typically a weekend) to develop innovative solutions. Companies often sponsor hackathons to generate new ideas, identify potential talent, and foster a spirit of collaboration.

The Apps store is a great application for open innovation

​These examples demonstrate that Open Innovation is not a one-size-fits-all approach. Companies adapt the model to suit their specific needs and industries, but the core principle of collaborating with external partners remains the same.

The Future of Innovation?

Xiaomi's journey exemplifies the power of Open Innovation. Through collaboration and a thriving partner ecosystem, they've achieved rapid diversification, reduced risk, and fostered continuous innovation. While their approach is unique, the principles of Open Innovation are widely applicable, as seen in companies like P&G, LEGO, Google, Apple, and hackathons. In today's rapidly evolving world, Open Innovation is a powerful strategy for companies to stay ahead, tap into external expertise, and drive sustainable growth. It's a fundamental shift in how businesses approach innovation and a key to future success.

In this article, we focused a lot on the positive parts of Open Innovation, do you think there are negative parts to it as well? What are they? Also, what other companies follow an open innovation approach?

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Watch our related video:

We also have a YouTube video on How Come Xiaomi Have So Many Products? that talks about the same topic if that is your preference. 

By Tayseer Almattar

Tayseer is a passionate designer and educator. He believes that innovation potential can be grown and nurtured within organizations with relevant design innovation processes. 

LinkedIn: https://www.linkedin.com/in/tayseer-almattar-design-innovation
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