Expert on Disruptive Innovation, Juan Pablo Vazquez Sampere, thinks that it is Xiaomi, not Apple, that is changing the smartphone industry.
However, looking at the full extent of Xiaomi’s business model reveals just how different – and how disruptive — it is. For starters, unlike Apple, Xiaomi is not targeting premium customers; it’s mostly teens buying those high-quality phones, and hardly at a premium, since Xiaomi’s prices are at least 60% lower. A neat trick. How does Xiaomi pull that off?
To sell high-quality cell phones at so low a price, Xiaomi keeps each model on the market far longer than Apple does. On average, a new version of a phone is launched every 265 days in the industry – down from 345 days in 2009. But Xiaomi doesn’t renew its product for two years. Then, rather than charge high prices to cover the high cost of state-of-the-art components, Xiaomi prices the phone just a little higher than the total cost of all its components. As component costs drop over the two-year period by more than 90%, Xiaomi maintains its original price, and pockets the difference. Apple, on the other hand, collects its highest profits with the introduction of each model and needs to come up with new model after new model to keep those margins up.
When you consider how much easier it might be to profit from plummeting component prices than from continual new feature development (which sooner or later will likely overshoot the needs of most cell phone customers in any event), the disruptive potential of the model becomes clear.
Read the entire article here…
Juan Pablo Vázquez Sampere
Juan Pablo Vázquez Sampere is an expert on Disruptive Innovation. He is an Associate Professor for the Operations & Technology area at IE Business School, his research is focused on using innovation to increase the success rate of both entrepreneurs and corporate ventures. Juan Pablo is the founder of Stratemic, a boutique consulting firm focused on Disruptive Innovation. In 2006 he became a faculty member at IE Business School. He has been selected for IMD’s “World Competitiveness Yearbook” panel.
Professor Vázquez holds an MBA with High Distinction from IE Business School. He has a MR title from Harvard University and is a PhD from Universidad Complutense. His professional experience includes several positions in management consulting firms and in a major media group. He has also worked for governments and NGOs. In strategy consulting he is working for the largest corporations in Europe. His particular interest is in removing the variability in the commercialization process using new technologies that eliminate the factors that introduce randomness.
In his presentations Juan Pablo analyses how to build and manage an enduring successful company and how to improve a manager’s professional career using innovation to his advantage.