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Lei Jun to Reconstruct Xiaomi Before Going Public

May 5, 2018 by Yun Nie
Lei Jun to Reconstruct Xiaomi Before Going Public

On April 27, Lei Jun, the co-founder and chairman of Xiaomi, announced two significant changes in a letter to the employees: (1) CFO Zhou Shouzi was assigned as senior vice president, and (2) co-founders Zhou Guangping and Huang Jiangji relinquished their current positions.

Structural reconstruction and management shifts are commonenough in giant companies like Xiaomi. However, the overhauling sent out a clear message about the company’s past crisis, current adjustment, as well as future business plans post its renaissance.

Sophisticated strategist Zhou Shouzi

Ever since Zhou Shouzi joined Xiaomi in July 2015, he has shown prominent leadership and executive abilities through remarkable contributions to the company. Xiaomi appointed him as CFO and senior vice president, relying on his leadership for new breakthroughs in financing, investing, and human resources management.

Zhou Shouzi’s track record has been illustrious. After graduating from University of London, having specialized in Economics and obtaining his MBA from Harvard Business School, he helped DST significantly invest in Xiaomi. He also played an important role as a major motivator for further investments in JD.com, Alibaba, Didi, etc.

Sometime before, when rumors about Xiaomi’s public listing began to spread, Lei Jun denied it, saying that the company had no inclination to go public. He highlighted the fact that the driving force behind Zhou’s succession to CFO was the need for effective agenda setting, strategic planning, relationship managing, and investment budgeting, rather than preparation for going public.

He said that Zhou’s involvement would upgrade Xiaomi’s financial and investment systems, which in turn would support technological innovation, economic ecology, and globalization. Ironically, when Zhou Shouzi became CFO, he announced that Xiaomi’s going public was in full swing.

The position shift for Huang Jiangji

Huang Jiangji was the previous chief development officer of Microsoft, based in China. After 13 years at Microsoft, he joined Xiaomi as a vice president. Huang enjoyed an immensely respectable reputation for a time as one of the eight co-founders of Xiaomi and was expected to improve the mobile messaging app, Mi Talk. However, the results failed to meet expectations.

Another of Huang Jiangji’s tasks was to promote Mi Cloud and MiWiFi. But, intensive testing and debugging was unable to save their waning popularity. In February 2016, Xiaomi announced a laboratory to develop VR, AR, robots and other advanced technology. One of the project managers was Huang Jiangji, but a series of obstacles, like betting in VR and long-term operating cycle, led to a bleak future for the laboratory.

In 2017, Huang Jiangji was assigned the vice president-ship, assisting Lei Jun to build the company’s plan of action for the next three to five years. In the company newsletter, Lei Jun simply outlined Huang’s rearrangement while keeping silent on his contributions to Xiaomi in past years.

Big shot Zhou Guangping

Zhou Guangping has been an important person at Xiaomi, inseparably connected to the company whilst at its lowest.

In 2017, Xiaomi was hit by a major catastrophe - its total output volume had decreased sharply from 2015 to 2016, the results of which were felt in 2017. According to the company’s analysis, it was the supply chain that was to be blamed. At that time, the supply chain was under the supervision of Zhou Guangping and Guo Junyi. Their team crushed future collaboration between Xiaomi and other significant partners, including a Japanese supplier called, Samsung Semiconductor.

In this crackdown, the clash with Samsung Semiconductor was the most fierce; one that resulted in a longtime shortage of product supplies. Talks between the two corporations were halted as “grumpy” Xiaomi and “bossy” Samsung got into arguments, which resulted in three of Samsung’s senior managers leaving the meeting room. Since then, Samsung stopped supplying AMOLED screens to Xiaomi in spite of the large volumes involved.

This fallout led to two destructive consequences: (1) Xiaomi failed to achieve its sales goal in 2015 and (2) the company’s market shares declined from 15.1% to 8.9% in addition to a 36% reduction in smartphones output.

Rebirth from the crisis

In the first half of 2015, Xiaomi had to deal with immense pressure. Screen scarceness resulting from the supply chain problem postponed the debut of new products and consequently pushed Xiaomi’s users to its rivals like OPPO and Huawei. According to big data analytics, 18.23% Xiaomi’s fans switched their smartphones to OPPO R9.

After the shuffle in management in 2016, Lei Jun sent a letter to the employees in November 2017 announcing a thorough overhaul of internal structure. Lin Bin was positioned as general manager of the smartphone business, aiming at improving management. The co-founder and senior vice president, Li Wanqiang would be Xiaomi’s brand strategy director, underscoring brand building and promotions. At the same time, he would be responsible for reinforcing the partnership between Xiaomi and Shunwei. Vice President of marketing, Liang Feng would report directly to Lei Jun about daily affairs. General manager of business, Tang Mu was vice president of ecosystem chain department, reporting to Liu De. Moreover, the company’s senior presidents would include Hong Feng, Liu De, Wang Chuang, and Qi Yan.

In Q2 2017, Xiaomi’s staggering output volume put it back in the global top 5 list. In Lei Jun’s terms, no cellphone company would have been able to turn the tide from such a sheer decline in sales, except for Xiaomi. In 6X Release Conference, Lei Jun declaimed in the Board Resolution: Xiaomi promised a less-than-5% after-tax profit margin covering smartphones, IOT, daily commodities, and hardware business. If after-tax profit margin exceeded 5%, the surpassed portions would be returned to users. The rash promise again drew Lei Jun into public controversy, but perhaps Xiaomi has already gotten accustomed to such brash business measures.

Yun Nie

Yun Nie is a New York-based tech reporter. She focuses on India-China financial market, global IT giants and technology-centric market trends. She can be reached at Yunnie@thepassage.cc.

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