- 2018-10-08
Xiaomi's flaws
The total market value of global Internet companies is approximately US$3.5 trillion, of which US companies account for approximately 60% and Chinese companies account for approximately 30%. In the past 10 years, there have been two Internet companies that have successfully achieved a market capitalization of US$100 billion: Facebook and Alibaba. After the turnover exceeded 100 billion yuan, the news of Xiaomi's IPO this year will arrive as scheduled. For Xiaomi's valuation, the smoke bomb-like internal news is dazzling.
Management guru Edward Deming said: “Everyone except God must speak with data.” The story that Xiaomi tells the capital market is “China’s Apple”, so let’s look at a set of financial data on Apple and Xiaomi. From the price point of view, Xiaomi mobile phones are about half of Apple's. In terms of profit, data from Counterpoint, a market research organization, shows that the profit of a single Xiaomi mobile phone is US$2, which is one-75th of Apple's US$151 (1,000 yuan). On average, it is one-sixth of Huawei, OPPO and Vivo, and their single-unit profits are respectively US$15, US$14 and US$13. In other words, Xiaomi and Apple are the two extremes on the profit axis of the mobile phone market. In this sense, Xiaomi is definitely not China's Apple.
Mobile phones are already a red sea. At the end of last year, Xiaomi Chairman and CEO Lei Jun disclosed that its IoT platform has more than 85 million connected devices and more than 10 million daily active devices, making it the world's largest intelligent hardware IoT platform. The Internet of Things is known as the ultimate form of the Internet. Some people predict that it will overturn the traditional lifestyle and industrial structure, and its future social and industrial value is immeasurable. With such a glamorous concept, can the Internet of Things support a market value of 100 billion US dollars?
Although Xiaomi is a great company, it still has its shortcomings: Home IoT is not the most valuable IoT, scenarios and data lack monetization capabilities, and there is no real innovation. From these three points, Xiaomi still Is overrated.
Home IoT is not the most valuable IoT
Generally speaking, academic circles believe that there are two basic types of connected objects in the world: physical first or digital first. For example, a paper book is the number one in physics, and the Kindle version of a book is number one. The physical store is the physical first, and the online store is the digital first. Although many physical objects can be digitally acquired through digital technology, for example, books with RFID tags can indicate their location, but they usually cannot achieve the same data level or similar cognitive level.
The reason why the Internet of Things is so powerful is that it connects physical first items to each other and connects them to digital first devices. The physical world and the digital world are mixed to form a unified space, a world where humans and machines are integrated. What kind of commercial value and social value it will have is beyond imagination.
Almost all revolutions in connection concepts have brought huge opportunities, and the Internet of Things is therefore high hopes. A large number of well-known research structures have issued quite amazing predictions. For example, a report by the BI Think Tank in 2015 stated that by 2020, there will be 34 billion devices connected to the Internet in the world. By last year, this number will plummet to approximately 22.5 billion. In the next 5 years, global investment in IoT devices will reach US$6 trillion, and the latest forecast is US$4.8 trillion. Indeed, in the past two years, the global Internet of Things electronic equipment market has stagnated, and the growth rate of the global consumer electronics market has also slowed down significantly. Even for the most popular wearable devices such as smart bracelets, IDC predicts that such products will maintain a single-digit growth in the next four years, with a compound annual growth rate of only 1.5%.
Although it is still unknown where the Internet of Things will lead us, it is certain that the Internet of Things will be a technology-centric world, so it is destined to become a new battlefield for all technology giants. The real value of the Internet of Things is the Industrial Internet of Things (IIOT), which some people call Industry 4.0. Accenture worked with Frontier Economics to estimate the cumulative GDP impact of the Internet of Things on China's 12 industries. Analysis shows that with the help of China's current policies and investment trends, in the next 15 years, in the manufacturing industry alone, the Internet of Things can create a cumulative GDP growth of US$196 billion. The manufacturing industry accounts for the largest proportion of the economic benefits of the Internet of Things.
Throughout the history of technology, we can find that almost all fundamental applications originated in national defense, aerospace, or research institutions. After long-term promotion and popularization by enterprises, they finally reached the level of individual consumers and entered thousands of households, such as civil aviation, Computers, microwave ovens, and the Internet are countless examples. However, we have never seen this process be reversed, that is, from household to enterprise, from civil to industrial, because this is uneconomical. Therefore, Xiaomi started from the home Internet, it is difficult to go to commercial use, it can only be limited to the home Internet of Things. This limitation may be safe in the short term, but in the long run, this limitation may be fatal. Because the wave of shifting from industry to civilian use is almost unstoppable, what kind of reconstruction and subversion this impact will bring is not optimistic for Xiaomi.
Scenarios and data lack liquidity
When text becomes data, a revolution that changes the book publishing industry takes place, and people's reading habits also change. When azimuth becomes data, any industries related to geographic location are all impacted, and new applications are also springing up. When communication becomes data, all people's social relationships can be digitized, and even people's emotions can be digitized. Google developed Google Glass, its strategic goal is to become the ultimate scene company. Scenes and data have become the core elements of technology companies, but for Xiaomi, its scenes are too low-end, and its data lacks the ability to monetize. From the perspective of the business model, there is almost no essential difference from a traditional manufacturer, and there is no bright spot at all.
Xiaomi’s logic is: use Xiaomi mobile phones as the entrance to capture traffic, and the Mijia APP is pre-installed in the mobile phone, which can control all products in the pan-Xiaomi ecosystem. Such as robot vacuum cleaners, smart speakers, smart rice cookers and so on. On the surface, Xiaomi has successfully imitated the concept of Apple's ecosystem, but the fatal thing is that Xiaomi has abandoned the high-end market of mobile phones. Among its 150 million user clusters, they are 18-35 years old, and 70% of them are men in science and engineering. Second, the commercial value contained in these scenarios is not much. such as. Yeelight, which produces mood bulbs in the Xiaomi ecological chain, is more than 80% lower in price than Philips' Hue lighting kit. 10% of Yeelight bedside lamps are sold in sets with Xiaomi bracelets. When the bracelet detects that the user has fallen asleep, the light will automatically turn off. In terms of product performance, such a product is high in quality and low in price, and is convenient and energy-saving, but it is not essentially different from traditional home appliances.
Today, value does not come from goods, but from software, services and data. In addition, compared to the living room, one of the most popular application scenarios of the home Internet of Things is the kitchen. The kitchen has always been a battleground for home appliance manufacturers, and it is also the most homey place. In the future, the home appliance brands' fight for the Internet of Things market is likely to start in the kitchen.
If Xiaomi is not mature in the construction and deployment of cloud services and artificial intelligence, its so-called Internet of Things will only stay at the level of "things" and lack the value of "connection".
Lack of innovation in the true sense
A true technology company should have three elements: technology, scenarios and data, and innovation. These three are indispensable. Xiaomi's shortcomings are that it is good at marketing and prefers the asset-light model, but it lacks innovation in the true sense.
The success of Mi Ecological Chain companies is not because of how much innovation they have, but more because domestic appliance companies have not caught the hot spots of smart appliances in time. Although foreign appliance brands have mature products, they are habitually eager to enjoy The high profits brought by high technology have allowed the barbaric growth of Xiaomi to successfully conquer the city, stand out, and seize a huge market space in the wave of the rise of the middle class and consumption upgrades. However, from the perspective of innovation, Xiaomi's products are not really Internet of Things products, more like using the Internet of Things as a gimmick to market products. For example, Xiaomi once invited more than 300 reporters to attend the launch of a smart rice cooker. The so-called smart is that users can use their mobile phones to track the whole process of raw rice from soaking in water, absorbing water at medium temperature to boiling on high fire. This kind of innovation neither solves the pain points of the industry, nor is it a real change. Its products are nothing more than traditional devices that increase network connectivity. This kind of connection is too simple and can only provide limited features and functions, so its commercial value can be seen at a glance.
Longing for a huge sales scale and eager to quickly realize the loyalty of fans, Xiaomi began to get involved in daily necessities, such as towels and sofas. This practice broke away from the genes of technology and deviated from Xiaomi's core competitiveness. Although in the short term, it will help to impact turnover, in the long run, it will make Xiaomi diversify its resources and lose focus on its core business.
In the past 25 years, five companies have crossed the $100 billion market capitalization threshold: Google, Facebook, Tencent, Amazon, and Alibaba. There is a saying that since, on average, a technology company with a market capitalization of 100 billion will appear on the market every five years, Xiaomi from China must be the next one. China has become the leader of the global digital economy, with retail e-commerce transactions accounting for 42% of the world's total, mobile payment business volume as high as 11 times that of the United States, and gestating one-third of the world's unicorn companies. The capital market pursues entrepreneurs who like thrills and excitement. Whether Xiaomi can become the next moving Chinese story remains to be revealed.