From Silicon Valley to China to India
Interview with Xiaomi Global Head of Sales & Ops Alvin Tse
Alvin’s career to date has been an epic adventure, a journey that’s taken him across epicenters of technology and the world’s three largest internet markets: China, India, and the US. As a Stanford undergrad, he started ThinkBulbs, which developed 2 leading iOS photo apps and amassed over a million users before being acquired by Megatasty Labs. After college, Alvin spent time as EIR at StartX, before joining Flipboard to lead their China entry efforts. That in turn opened his eyes to the torrid growth of China’s tech sector, eventually leading to a role as Chief of Staff for Hugo Barra, the legendary Google exec who had been hired by Lei Jun to run Xiaomi Global. Today, Alvin heads up Xiaomi Global’s sales operations, and plays a critical role in developing Xiaomi’s India business.
On our podcast, Alvin talks us through his personal journey, reflecting first on his foundational experiences in Silicon Valley before taking on the Wild Wild West of China’s tech sector in the early 2010s. With Alvin, we then conduct a deeper dive on Xiaomi’s India strategy. How did Xiaomi grow so quickly in India, reaching #2 market share, with its best selling ‘Redmi’ shipping over 1m units in just 30 days? What are similarities and differences between China and India? How does Xiaomi approach localization, not only in terms of product but also on its org structure and management approach. Ultimately, what are the keys to success in this market and how will Xiaomi fend off competitors that invariably follow it into an attractive new market? Lastly, Alvin shares his experience on why it’s the right time to come out to China (and India), the need for ‘bridge’ type leaders between markets, and how to leverage a global perspective to one’s advantage.
Listen to the podcast on SoundCloud (here)
Adam: Before we dive into Xiaomi’s global strategy, tell us a bit more about your story and what brought you out to China?
Alvin: Well you can only really connect the dots looking backwards. 5 years ago, China was not part of my career plan. In my early years, I just tried to discover what I enjoyed doing most, which was creating something from scratch. That’s why I started my first company as a sophomore at Stanford. I quickly realized that I really enjoyed the process of thinking about ideas and building products, and I’ve always kept an open mind.
Next up was Flipboard, which was a great learning platform. It was one of the best iPad apps back in the day, and I thought I could gain some structured learning, since I had dived right into start ups without any formal training. Because I was the only Chinese person on the team, I was an obvious selection for the CEO to send over to China. My thinking was very simple: I had already spent 6 years in Silicon Valley, started my own company and went through a cycle. I felt I had a good grasp of how things worked in that ecosystem, and was ready for a new challenge.
So when Flipboard asked me to move out to China, I said yes.
Adam: That all makes sense. So what happened while you were in China for Flipboard, and why the move to Xiaomi?
Alvin: About one year in, I felt that we were hitting roadblocks at Flipboard, similar to what many other Silicon Valley companies go through when they try to enter the China market. I felt that there were insufficient resources to take things to the next level. Flipboard wanted to stay the course, but it’s awfully hard to out-innovate and outperform competitors with limited resources. Besides the pollution was really bad 5 years ago, so I thought about a change of scenery…
And just as I was thinking about that, the news broke that an unknown Chinese mobile company had hired Hugo Barra, one of the top execs at Google. My friend Robin Chan (successful angel investor and CEO of Operator) put me in touch with Hugo, who had just become the VP of Global at Xiaomi, and who was looking for a bilingual Chief of Staff that actually understood both China AND Silicon Valley. We hit it off immediately. His pitch was powerful: Xiaomi was like Google 10 years ago, and one day it could surely achieve Google’s potential. Again, the opportunity to learn from someone like Hugo was too good to be passed on, so it wasn’t a very difficult decision.
Working with Hugo Barra and Lei Jun
Adam: That’s so exciting. So Alvin, having had a chance to work with incredible men such as Hugo Barra and Lei Jun (Xiaomi’s Founder and CEO), what was it like? What lessons did you learn from them?
Alvin: Well Hugo is a huge inspiration. His work ethic is impeccable, he is extremely hard working and sleeps only 4 hours a day. He’s just so charismatic and good at making people feel super important, which is probably why so many journalists love him. For me, I really admire how he managed to straddle two worlds, the former being Silicon Valley which he was very used to, and the other being the Wild Wild West that was China. Despite language and cultural barriers, Hugo still managed to build up an exceptional team of 200+ people and make significant contributions to the business. Unfortunately, due to personal reasons, he needed to move back to the Bay Area, so now we’re working hard to continue to push his mission forward.
And as for Mr. Lei Jun? Well the man is simply a legendary entrepreneur. I’ve had my fair share of meeting amazing CEOs during my time in Silicon Valley, but I must say that Lei Jun is a at a completely different level when it comes to evaluating business opportunities, when it comes to how well laid out his plans are, when it comes to his insights based on 20+ years of entrepreneurial experience. He’s on a mission. The man works from 9–1 am six days a week, and he’s 20 years older than me and a billionaire at that. Yet he has the most infectious energy of all, because he firmly believes in what he’s doing, not for money but because he genuinely thinks that he can change society for the better through Xiaomi’s mission.
Adam: I can attest to that from Shunwei’s perspective and having seen Lei Jun in action. He’s not just a legendary entrepreneur but also a very successful investor. And while he spends the vast majority of his time at Xiaomi, he’s certainly engaged at Shunwei, where he’s very insightful, very sharp, and helps guide the discussions that we have. Having a broad coverage of the tech sector, I imagine, probably also helps him think through Xiaomi’s strategy and his personal vision for the future.
Now Alvin let’s get back to you. Tell us more about your experiences at Xiaomi and what you do these days.
Alvin’s Role at Xiaomi Global
Alvin: First of all, I consider myself a generalist at Xiaomi. The role Chief of Staff meant whatever the company required me to do, I’d slot in and perform to the best of my ability. So since I joined Xiaomi, I’ve managed countries like Singapore and I’ve built program management teams. After 2 years of experimentation, after we’d realized that India was the single most important market of our global strategy, Hugo asked if I could help take up some of the responsibilities of operating India from headquarters. To which I was unsure about to be honest. India is a very foreign country to me, but I understood where Hugo was coming from. He needed someone trustworthy, who had the language capabilities, and who had been at Xiaomi for a while so truly understood how the company works.
So I signed up. The idea was to help the global team look after sales and ops for the India business from headquarters. And of course this requires close collaboration with the India General Manager Manu Jain.
Adam: Xiaomi appears to be doing well in India. The recent news was that you sold over a million Redmi 4s in just 30 days. What’s happening over there?
Alvin: Right now we’re witnessing very similar growth to China in 2013–14, when we became #1 in China in 2 or so years. My understanding is that the India market is still very much about affordability, whereas in China consumers are looking for aspirational purchases. So when the core consumer proposition is value for money, Xiaomi falls in well with the India consumer’s mindset. We’re lucky that we picked some good products to start with, both the Redmi Note 4 and Redmi 4 have broken a lot of sales records. Currently we’re #2 in the overall India smartphone market, right behind Samsung. And for online purchases, we’re the clear #1 with 40% market share. As we continue to strengthen our grasp on the #1 spot online, we’ve also started offline expansion efforts which will be crucial for future growth.
If I have to summarize, I believe our success is due to our fan-centric philosophy of picking the right products and providing them at the most affordable price, which has sunk in well with India consumers.
Adam: Can you describe your core products for the India market in more detail?
Alvin: Our best selling model is the Redmi Note 4. It’s a 5.5 inch full HD smartphone packed with the top tech, and starts at 999 RMB (10,000 Rupees). That phone is particularly popular right now because Reliance Jio (India’s largest mobile network operator) has basically enabled millions of users overnight by providing free data for a period of time, which means Indian users are starting to consume much more content. And with that usage increasing, owning a phone with larger screen makes a lot of sense. 5.5 inches these days is a very acceptable form factor. And with its 4000mAh battery, you can use the Redmi Note 4 for up to 2 days. It’s basically a steal for the mass market in India.
Because of Redmi’s success, its has elevated Xiaomi’s brand in India, which is currently considered mid to high end. And of course we follow with the Redmi 4 model, which is the 5 inch HD version and has similar design language. The two sibling phones are at the crux of our India product portfolio. As we dominate this price band of between 600 RMB — 1,400 RMB, which consists of 50–60% of the entire smartphone market in terms of price band, we’ll slowly expand beyond these. More and more Mi-fans demand the latest technology, and as we grow our user base and try to reward these loyal fans, we’ll start thinking about bringing our flagship devices over to India as well.
Adam: Beyond smartphones, what about products from the so-called ‘Xiaomi Ecosystem’. In China, Xiaomi sells innumerable products from smartphones to power banks to air purifiers, when will those arrive in India?
Alvin: We’ve already introduced a few ecosystem products to India. We carry power banks, Mi Bands, earphones, and some others. Our selection criteria is quite simple, we want to bring in products that we believe have the potential to create a big market in India. Right now, the disposable income in India is very low. While a power bank that costs between 70–100 RMB is considered very cheap, in India you can find much poorer quality bands at 20–30 RMB. At this point, Chinese consumers wouldn’t mind paying up for quality, but for Indians if the product is not essential they’ll opt for the cheaper version. We need to be careful which products to bring in. Of course we don’t want to make a loss on our portfolio, and timing needs to be right.
We could bring in laptops, hover boards, the iRobot vacuum cleaners… but there are a lot of localization considerations we need to think about. So we do have plans, and we’re looking into many different categories, but the key is that we need to balance cost with expected sales.
Adam: Also looking at the production side. In China Xiaomi makes minority investments in many smart hardware start ups, helps them develop their products, and then sells through the Xiaomi sales channels. Does this happen in India?
Alvin: Yes this is crucial to our success and differentiation when compared to other mobile manufacturers. Shunwei and Xiaomi together have already invested in 5 India start ups and we plan to do more. In the long term we need to build great relationships with local players in India, we want to be part of the ecosystem, to co-develop that ecosystem. India is like China 5–10 years ago, and investing a small amount and coaching these budding entrepreneurs means a much brighter future for everyone.
Localization for the India Market
Adam: Can you walk us through Xiaomi’s approach to India localization in more detail?
Alvin: Classic market entry involves taking whatever products the home market already sells and praying those work in the new market. 3 years into India, we understand our customer preferences much better. For example, we know that in India, the consistent availability of electricity is a big issue. A lot of times, electricity can go out, which means much higher faulty rates with the adapters that we provide. So we redesigned the adapters and raised the voltage limits to account for the environment.
There are many other examples as well. India is hotter than China, so when you design the thermal layout for the phone you need to take that into consideration. On the ecosystem front, in China we’ve launched 30–40 products. But not all are suitable in India. Per the earlier example, because electricity often goes out, all water purifiers in India include a water tank, so even if electricity goes out, the household will still be able to use water they had purified earlier. Our model in China doesn’t include a water tank, so we need to create a localized SKU for India. That work has already been kickstarted — some of our Chinese ecosystem partners have been brought in to evaluate and come up with proposals for more localized products.
Adam: Beyond product market fit, what about org structure and management style when it comes to the India market?
Alvin: This has been one of the most interesting management topics when it comes to building a global division of a Chinese company. You can imagine how many issues we’ve run into because of language, culture, and geography. When you’re so far away from the team, and with a very weird 2.5 hours time difference, lots of communication issues can occur. When you don’t communicate well, people start making harmful assumptions and build up negative emotion that make things much more complicated.
For us, we experimented a lot, and realized that for certain functions it’s much better if we send someone from HQ to lead in India. For others, it makes more sense for the India local team with some support from HQ, for example marketing. It’d be very difficult for someone from China to come up with local viral ideas and determine what campaigns to run in India. Of course when it comes to global branding, HQ provides guidance.
Our current India strategy is still very product and sales driven, and we’re working on marketing and branding campaigns. But down the road we’ll need to figure out how to truly replicate the entire Xiaomi model in India and let a local team run it, which is unique and rather complicated.
In the meantime the org structure continues to leverage our HQ team members’ experience but also remains flexible enough to accommodate local needs, with the goal of helping India colleagues get up to speed as fast as possible. Over time, HQ can take a step back and play more of a supporting role.
Adam: So once again you play a bridge role in India.
Alvin: Yes exactly. And that current role is a rotational one that was created by Lei Jun himself. He strongly believes that young professionals must build up their fundamental skills. Let’s say you’re working in retail — well it’s important for you to stand in the retail store and observe and talk to customers. At a senior position, it’s hard to learn those fundamentals back, and therefore when you’re young and can take risk, you should be on the front line of the battle field. That way, for future meetings, Lei Jun will feel much more confident when surrounded by colleagues who have actually been in India and understand it from a ground level up as opposed to just high level, ivory tower strategy.
Adam: Your strategy in India makes sense: bring over the best products and localize, bring in a flexible org structure. But as you saw what happened in China, Xiaomi’s market share has declined over the past few years compared to Oppo, Vivo, Huawei, etc. Tell us more about the competitive environment in India, and how you expect to sustain your growth and leadership position there.
Alvin: Competition is very fierce in India as well and an attractive market for other Chinese manufacturers. This time around however, since we saw what happened in China, we can sidestep some mistakes. Namely, the fact that we focused way too much on the online sector. Unfortunately the online sector hasn’t grown as much as we expected. In 2013, the online market comprised about 35%, but it had hit saturation and decreased to about 20% of the overall smartphone market, so it’s a small pond to play in.
The same could happen to India, where the online channel comprises about 30%. The offline market will inevitably grow because people are switching from feature phones to smart phones, and there is increasing demand from a rural consumer base. Besides, with Flipkart and Amazon burning so much money, online market growth isn’t going to last forever. So with that in mind, we’ve started our offline planning much earlier than our China counterparts. And because we have great momentum in the entire market, starting offline is much easier with this tailwind. We will focus on providing the most competitive products and lowest prices across all channels.
For Those Interested in China and India…
Adam: The future looks bright. One last questions before we close — any advice for folks back home (in the US) who are interested in coming out to China or India for career opportunities?
Alvin: My advice is always to take the risk so you have no regrets. For you to make any headway, you need to be on the ground. If you aren’t tied down, China is still a fascinating market for young professionals. Take a trip out here, spend 2–3 months, do an internship and get a taste for yourself. The opportunity is definitely still here, don’t miss the boat.
India is like China 5–10 years ago. If you’re someone who is brave enough, India is another fascinating place. And these days there is so much Chinese interest, with a ton of Chinese capital flowing into the hottest start ups in India. This is a good time to get out there, build a network, start something. And if your career takes you from the US to China and eventually out to India… well then you’re aligning yourself with the world’s 3 largest internet economies.
Adam: Thanks Alvin. You’ve sure convinced me to come out to China, India just may be next!