Manu of Xiaomi: The Making of India’s Favorite Smartphone Brand

Hans Tung: Today on the show we have Manu Kumar Jain, the Global Vice President of Xiaomi and the Managing Director of Xiaomi India. Xiaomi is currently the world’s fourth largest smartphone brand and besides smartphones, they’ve come now to make other smart devices connected through its IoT platform. It is the youngest company on the Fortune Global 500 list for 2019.

Rita Yang: Manu joined Xiaomi in 2014 as the first employee and Managing Director of Xiaomi India where he has grown Xiaomi to India’s number one smartphone brand for six consecutive quarters. Before joining Xiaomi, Manu co-founded the fashion e-commerce company, Jabong, and worked as a consultant at McKinsey. He holds a bachelor’s degree in mechanic engineering from Indian Institute of Technology in Delhi and a post-graduate diploma in management from Indian Institute of Management, Calcutta. Welcome to the show, Manu.

Manu Kumar Jain: Thank you so much. Thanks for inviting me.

Rita Yang: Manu, what about Xiaomi that made you join the firm in the first place? India had a lot of fast-growing startups back when you started at Xiaomi, and why Xiaomi?

Manu Kumar Jain: Okay, it’s an interesting story. This goes back to 2011 and ’12. We were about to start my previous company, which is Jabong.com, and at that point in time I thought it was a horrible idea because we were supposed to sell clothes online and I thought, I spoke to my co-founders, why are we setting up this business? Nobody would ever come and buy shoes and clothes online. They said, no, it’s a great idea. We will figure this out. A few months down the line, we were doing tens of thousands of transactions every single day, but that was not surprising for me. The most surprising thing was majority of people, more than 60% of them, were coming and buying using a mobile phone and mobile phone they were using was small, two-inch, three-inch, which we call widget phones. That got me excited about mobile phones and I started searching and I read a blog from one of the US bloggers that said the company to watch out for in the mobile handheld space is Xiaomi. It’s a company, they’re disrupting the space, it’s a small startup from China, nobody heard of it. That got me excited and I got introduced to Xiaomi founders through some common friends. We were in touch for more than a year, through the time I was running Jabong, and when I exited Jabong, Ben, who was one of the co-founders and president of the company, he approached me. He said, “Hey, do you want to do something in mobile? We want to start a Xiaomi business. Would you like to start it for us?”. I thought it was an incredible opportunity, so that’s how this whole journey started.

Rita Yang: Hans, you’re an early investor in Xiaomi. How does that fit into your side of the story with Xiaomi, with them coming into India?

Hans Tung: I knew that- I’d run a model on Xiaomi back in 2010, even before I had the phone, and did a forecast on how this could be as big outcome as they wanted it to be. Through that calculation, it’s very obvious that if Xiaomi stayed as a China-only business, you’ll never reach the lofty goal that Lei Jun had for Xiaomi, so you had to be a global player. They’d look around the world, where the next billion users are going to come from, India is definitely on the top of that list. Based on that, it has to work, but in reality, no Chinese brand had ever done well in India, so thus it appeared as a mission impossible. When Manu was hired, I was very thrilled to see how it was going to turn out. I don’t think anybody back in 2014 had ever imagined that Xiaomi would be number one in India today and the number of phones being sold in India is comparable to China, so kudos goes to Manu and his team.

Manu Kumar Jain: Thank you.

Rita Yang: Manu, for people who are not aware of just how successful Xiaomi is in India, can you give us a few descriptions on how would an Indian consumer, how crazy they are about the Xiaomi phones?

Manu Kumar Jain: Sure. I would say today Xiaomi’s probably the most loved technology brand in the country.

Rita Yang: Wow.

Manu Kumar Jain: Why do I say this? In just three years, from 2014, May to 2017, May, we became the largest brand in the country, smartphone brand, and since then, for the last eight quarters, last two years, we’ve been the number one smartphone brand. We introduced many more categories. We introduced smart TV’s last year. Soon we became the number one smart TV brand. Now, we have been the large smart TV brand for five consecutive quarters. We are also the number one wearable brand, fitness wearable brand, with more than 40% market share. We are the number one power bank brand in the country with more than 35% market share. We are just building many more IoT products and categories and consumers, even though we don’t do any advertisement, consumers just love it and they continue to buy multiple Xiaomi devices.

Rita Yang: How do they get to know the brand in the first place?

Manu Kumar Jain: It’s a tough question because most of the users can’t even pronounce the name. They can’t pronounce Xiaomi. If you ask many users, they will call it as Zyo-mi, Zio-mi, Gio-mi, Gao-mi, but all of them know one thing, which is Mi. That’s what they recognize as us. That’s our brand identity. Most of the people come to know us from three different sources. The first and the biggest one is word of mouth. People who buy our devices, they become big fans and they told other friends and family, this is the product that you should buy. Second is PR articles and a lot of videos that people do on Xiaomi products. Third is just social media. We actively put everything on social media. All our employees encourage everybody to do it. People just see good reviews, good comments on social media and hence decide to buy Xiaomi products.

Hans Tung: When I open my LinkedIn app, the first thing is the post from Manu, and you come with it. It’s impressive how active Manu and his team are on social media.

Manu Kumar Jain: Thank you.

Hans Tung: Yeah. It’s an amazing job.

Rita Yang: I just have to ask this, is this something Lei Jun told you to do? He himself has enjoyed a huge success on the Chinese Weibo. He’s a big influencer there. Is this something he specifically said to you, “Manu, you should be very active on social.”?

Manu Kumar Jain: Definitely yes.

Rita Yang: Okay.

Manu Kumar Jain: I remember when I first met Lei Jun during my interview process. He asked me how much money we were spending on marketing at my previous company, Jabong. I gave him the number, whatever that number was, as a percentage of revenue. Then, he asked me guess how much money we are spending at Xiaomi. My guess was five percent. He said, “No, no, no, think again.” I said maybe three percent. He said, “No, think again.” I said maybe one percent. Then he stood up, he went to the board, and then he drew a big zero.

Hans Tung: A big, fat zero.

Manu Kumar Jain: And he said, “That’s what we spend because we use social media.”

Hans Tung: Yes.

Manu Kumar Jain: Then he actively encouraged me from day one to use social media.

Rita Yang: Interesting.

Hans Tung: Yeah. I remember the test he did to the head of marketing in China back in 2011. It was also a big, fat zero. The first campaign that Xiaomi ran was Shoujikong or a campaign about people who love phones, who are phone freaks, who are just very ardent users to talk about their experience with phones in their history of life. Lei Jun had pictures of the 50 phones he ever owned. He posted on Weibo on the website of Xiaomi to talk about the phones that he had, why he liked them, why he did not like them. Within the first week, 460,000 people shared the phones that they had and why they didn’t like it in anticipation of what the Xiaomi first phone would look like. By going through that campaign, he made it a lot easier to sell phones later. About 2,000 people showed up and about 340,000 phones were purchased after the launch. Without going to the heart of the users and the most active user, get them to share your thoughts, there’s no way Xiaomi can to that kind of social following by spending such little money.

Manu Kumar Jain: In fact, in the beginning of this year, a particular team within Harvard Business Uni, Harvard Business School, they approached us and they asked me to come down to US to give a lecture only on this topic, how we became the largest brand in the country without spending a single marketing dollar.

Rita Yang: Wow.

Hans Tung: I remember when Lei Jun talked to me in 2010, he said he has so many ideas on how to improve smartphones, but no matter how many emails he sends to iPhone or Nokia, no one’s going to respond, so he said you want to build a company where the most active users have a voice.

Manu Kumar Jain: Yes.

Rita Yang: If you were to rank the three success of Xiaomi phones, the price point, the distribution channel, and the fan-based community you just described, how would you rank it? Which factor would be the number one reason?

Manu Kumar Jain: In India?

Rita Yang: Mm-hmm.

Manu Kumar Jain: Okay. I would say the first one is definitely product. If the product is not great, we cannot succeed no matter what we do. Second…

Hans Tung: What makes Xiaomi product so attractive in the eyes of Indian consumers?

Manu Kumar Jain: Every time we launch a product, there are three key things that we keep in mind. It needs to have the latest and the best specs of innovation. Second, it needs to have the highest possible quality standards. Third, of course from a pricing perspective it has to be probably one of the-

Hans Tung: Extremely affordable, Yeah.

Manu Kumar Jain: We coined a term called honest price, which means it may not be the lowest price, but we’ll keep less than five percent profit margin for ourselves. We cut down on the cost and then keep very little margin and then pass it on to user, and that’s what we call this honest price. If you look at many of the historic brands, they were great at innovation and great at quality, but extremely bad on pricing.

Hans Tung: Yes.

Manu Kumar Jain: Some of the brands which came about six, seven, eight years ago, they had good price, good specs, but horrible quality. I believe today we are the only brand across different product categories which can take the box on all three: product, quality and price. That’s what makes our value offering so unique. I would say that’s the first thing. If you don’t have a great product with great quality and pricing, you cannot win. That’s a given, and there are products centered company. I would say second thing which makes us very different is our people. Look at Xiaomi India. It is the place you know majority of people do not come from smartphone background. They come from internet background. They come from companies such as Google, Facebook, eBay, Flipkart’s, Snapdeal, from Flipkart, from e-commerce background, from internet background. Many of them, because they have never done anything like this before, they are willing to take risk. They’re willing to try out new things that have never been tried before. For example, we just launched a new IoT device, a smart water purifier, in India two days ago. The guy who’s leading it and who’s built it, he does not come from water purifying history, he comes from e-commerce background.

Hans Tung: Yeah.

Manu Kumar Jain: He just brings a very different thought process from what a traditional water purifier person would bring on the table. That’s second. The average age of the company’s around 30. Most of the leaders are in early 30’s. I’m one of the oldies in the company.

Hans Tung: You’re doing well.

Manu Kumar Jain: That’s the second one. Third, I would say the reason why we’re successful is because we haven’t done anything similar to what other companies did. You spoke about distribution. Five years ago, 94% of the market was offline. Only six percent was online. When we were launching, I went to large number of tech CEO’s, my mentors, people who had run mobile companies before, tech companies before. They said, “Manu, this is the wrong strategy.”

Hans Tung: Right.

Manu Kumar Jain: “You are going after a small six percent market. Ninety-four percent market is offline. The way to sell a smartphone is spend a lot of money on marketing and sell offline. You are doing none”.

Hans Tung: Right.

Manu Kumar Jain: I was worried. I said maybe we were doing something wrong, but we have never done what others did. When at the time the market was going offline, we went online. We now have close to 50% market share within the online segment. We grew that. When everybody was going after feature TV’s, we went after smart TV’s. Almost an entire growth of smart TV’s, we have captured 85% of that growth. A lot of things that we have done differently, but it is our channel, whether it is distribution or it is marketing using social media, and that has helped us to differentiate from any other brand which has been traditionally here in India.

Hans Tung: I remember with the product design, Lei Jun specifically wanted to make sure that if he doesn’t spend money on marketing, which for Apple is about 20% of the sales, he doesn’t spend money on distribution to sell in offline stores, not initially anyway, and not go through the carrier offline stores. He said no 100%. This is why the phone’s going to be a lot more affordable, because he doesn’t have these costs, and that’s why he can keep the operating expense at only five percent of the sales. One or two percent on R&D, three percent on operations, that’s it, so extremely lean and almost didn’t even pass through the hand of the consumer, yet can still be a profitable business.

Rita Yang: Xiaomi is probably one of the first direct to consumer brand out there.

Hans Tung: Right. This happened after Google failed with the initial launch of Nexus to sell phones online and this happened right when Motorola was acquired by Google, so nobody believed that Xiaomi could’ve worked.

Manu Kumar Jain: In fact, to point on direct selling, we have our own e-commerce platform, Mi.com, M-I .com.  You’d be surprised to know it has become the third largest e-commerce platform in the country when it comes to electronic and smartphone sales.

Rita Yang: Wow.

Manu Kumar Jain: After Flipkart and Amazon.

Hans Tung: Right. Because people come, they share comments on how the phones could be better, give advice and so forth, and I’ll share tips, and I’m supposed to buy products.

Manu Kumar Jain: Yes.

Hans Tung: Yeah.

Rita Yang: Can you tell us what is the whole market strategy Xiaomi has for India? That’s a term that has come up again and again for the Indians as a market. Can you share with us on that?

Manu Kumar Jain: We at Xiaomi believe that India is almost like a second home for us. Everything that we do in China, we are replicating here. We are designing phones, we have R&D, we have product team. We have manufacturing. We have end to end all operations that we do in China, we are doing it in India. A lot of products we are designing for India in India. I’ll give two examples. One is some of the phones are completely redesigned for India. For example, in China we launched a phone called Redmi Note 7, but we launch a different one in India, which was meant for Indian consumers with a much higher pixels and a different camera, different specifications as Redmi Note 7 Pro. This year we launched something called a beard trimmer, which was a product which does not exist anywhere else in the world within the Xiaomi ecosystem and that’s because a lot of people are clean-shaven when it comes to the rest of the world and China, but in India, thanks to the latest fashion of some of the cricketers having beard, life and one of youth have beards, so we designed and launch a beard trimmer in India for India. The product that I was speaking about, water purifier, we have something in China, but it’s very different because in China there’s no power because of Watercart. We had to re-develop the entire product in India for India because in India there are a lot of power shortage and water shortage, so you need a big tank to hold the water in this power kind. A lot of these products are being completely redesigned for Indian market, and that’s why we think this is a second home for us.

Hans Tung: Right.

Rita Yang: For the beard trimmer you just mentioned, I think it’s absolutely fascinating. Does Xiaomi in India also goes the same way how it builds different products in China by investing in them instead of doing everything themselves?

Manu Kumar Jain: True. When you buy products that we design ourselves, which are phones, TV’s, laptops, routers, and OS.

Rita Yang: Okay.

Manu Kumar Jain: Everything else is designed by one of our ecosystem companies. The way that we did Mi Beard Trimmer, we enter our product specification in India, then we found the right ecosystem company. We have 200 such companies where Xiaomi is invested in, more than 200. We found the right partner who could then work our product design into a reality and then we work with them to launch this product in India.

Hans Tung: What are these other products you guys were thinking of that will be launched soon or that you think are quite unique to India as well?

Manu Kumar Jain: Some of the products which we did in China do not make sense for India. For example, we have drone. Now, drone is not illegal in India. Or you have 9 bots scooters, the self-driving scooters. Indian road conditions would not allow that. I’ve tried it myself. There is nowhere you can drive it on Bangalore roads. I would say there are three broad categories of products. One, which are there in China, and we can just launch them in India by small modification.

Hans Tung: Some examples include?

Manu Kumar Jain: Such as TV. On hardware, we had to make some modifications. For example, add more number of connecting points, sockets, because Indians have far more things. They have cable TV, they have dish TV, and many other things.

Hans Tung: Sure.

Manu Kumar Jain:  We do change brightness and sound level because watch TV during daytime unlike China where most of the people watch TV in nighttime.

Hans Tung: At night.

Manu Kumar Jain: The brightness levels have to be different.

Hans Tung: Sure.

Manu Kumar Jain: We can broadly use the same product 80%, 90%, but it’s a small change-

Hans Tung: One piece.

Manu Kumar Jain: and then launch it in India.

Hans Tung: Yeah.

Manu Kumar Jain: The second category which is there in China but does not make any sense in India, which is the example that I gave, drone or standing scooter or, say, rice cooker. It’s a small rice cooker and people in China love it. Most Indians really don’t care for it. There’s a third category, which has to be completely redesigned or developed only for India. The two example that I gave.

Hans Tung: Water purifier.

Manu Kumar Jain: Water purifier and the beard trimmers are the ones which are completely designed for India. We are working on many more such things, for example laptops. Laptop exist in China, but the average price point of laptop in China is 5,000 RMB, which is too high for Indian market. We are thinking of doing laptops in India, but whatever we do it has to be completely redesigned for India, as for user needs and/or Indian price points.

Hans Tung: Right. How much of those products you guys sell in India that’s manufactured locally versus imported from China?

Manu Kumar Jain: We started by importing five years ago and then we slowly started assembling in India, and then we started manufacturing a large number of components locally. If you look at our phones, which is our biggest business in India, almost 100% of our phones that we sell in India are made in India. Not just that, a large number of components, including PCP, camera module, battery pack, touch panel-

Hans Tung: Are local now.

Manu Kumar Jain: Are either localized, being sourced from local vendors, or are being manufactured here locally from our international partners with company here. Our smart TV’s, 80% are all made in India, 20% are still imported. Power banks are 100% manufactured in India. They will be imported sometime, only if there’s a big sale. Other categories are still imported, but slowly we are trying to figure out a way to start locally manufacturing each one of them.

Hans Tung: Right. Has your popularity here made it easier for the Taiwanese and Chinese hardware partners to expand to here as well?

Manu Kumar Jain: Yes. Five years ago, there was always a problem because when you would you go to partners, manufacturing partners, to set up a shop here in India, they were not comfortable because there was no big anchor point, plus there were no competent suppliers. When you would go to competent suppliers, there were no manufacturers. It was all the chicken and egg problem.

Hans Tung: Correct.

Manu Kumar Jain: Four years ago, we convinced Foxconn to set up a first plant in India and that really helped because we started growing our volume and all of them were made by Foxconn at that point of time. Now we work with Flextronics, we work with many other partners, because of which there was a huge incentive for competent suppliers to start coming here. Plus, they had big clients such as Foxconn in this, and Foxconn only felt comfortable because they had a big anchor client such as us.

Hans Tung: Yes.

Manu Kumar Jain: I believe because of which, in last four years in that ecosystem of electronics manufacturing has developed significantly as compared to where it was, but we still have a long way to go.

Hans Tung: Sure.

Rita Yang: What about the software side of things Xiaomi’s doing in India or content, for example?

Manu Kumar Jain: That’s an interesting question because that’s our core business. Most of the people just talk about smart phone and the way Lei Jun explains it is of course we’re a smart phone company, but we are much more than a smart phone company. We are an IoT company, we are an internet company. On the internet side, we have been building a large number of internet products for India in India. For example, we have Mi Music, Mi Video, Mi Pay, Mi Browser, many more internet services.

Rita Yang: And they came with the phone, I would imagine.

Manu Kumar Jain: Yes. Of course, phone has to distribute these services.

Hans Tung: Sure.

Manu Kumar Jain: It’s a very easy distribution. Mi Music comes with a very large library of music content and it’s free for users, and that has been done in India. Mi Video comes with more than 700,000 hours of content, which we showcase both on our Mi TV’s as well as on Mi phones. Again, that has been completely done in India because we take content from, 12, 15 different content providers and then show it in one seamless line. A lot of these internet products we are now beginning to design in India for India. We have our team here working on this.

Rita Yang: Now, let’s come to you working in a company that has its heritage in China. What does that feel- From a day to day perspective, how much time do you need to spend with the China team or the headquarters, quote/unquote? How does that reflect in the whole market strategy?

Manu Kumar Jain: Before I joined Xiaomi, a lot of people told me never to join a Chinese company.

Hans Tung: Just like a lot of Chinese people told that never join an Indian company.

Manu Kumar Jain: True. People were way off. Some people heard horror stories saying how a company beginning in China will never empower you, will never give you decision-making power. For everything you’ll have to go back to headquarters and check with them. Lucky for me, I’ve never personally faced any of these issues. I’m extremely happy with the way things have progressed over last five years. I talk to Lei Jun almost on a daily basis through chat.

Rita Yang: WeChat or WhatsApp?

Manu Kumar Jain: No, we have a Mi Chat.

Rita Yang: Oh.

Manu Kumar Jain: MiTalk.

Hans Tung: Yup, MiTalk. I still have it.

Manu Kumar Jain: Lei Jun and I talk almost on a daily basis on MiTalk and we discuss about anything and everything, about what is happening with Xiaomi globally, what is happening in India, the political situation in India.

Hans Tung: You type in English and he types in Chinese?

Manu Kumar Jain: No, I also type in Chinese. I have a team member who will do translation for me. I don’t miss any places. I send it to the team and then they will translate into Chinese and then I will send it to Lei Jun and vice versa. Lei Jun can read and understand English.

Hans Tung: He’ll read English no problem.

Manu Kumar Jain: Sometimes if I’m sending something urgent, I will just send him in English, and he will read it and he will reply in Chinese and I will use Google Translate to quickly translate it back.

Hans Tung: Right.

Manu Kumar Jain: It’s very seamless. We have never faced a problem. Because Lei Jun and I speak so frequently and then I present our business case, quarterly business plan to our board and to Lei Jun every quarter, so we align on milestones on a yearly basis and on a quarterly basis, mainly on our business plan. As far as we are not significantly changing the strategy or not changing our business plans drastically, it’s openly fine for us to take decisions locally here. I’ve never seen him come or interfere, or anybody else to interfere, so that way I would say the involvement is extremely high.

Hans Tung: It’s unusual.

Manu Kumar Jain: I don’t know, actually, whether it is unusual or not because it’s what I’ve heard, but I’ve never experienced this myself.

Hans Tung: Sure, yeah. It’s very impressive that both of you guys can do that.

Rita Yang: You actually have said in an interview back in 2014 that Lei Jun was the most visionary guy you have ever met, and four years, actually five years after that, what are some of the unexpected things you have learned by working with him?

Manu Kumar Jain: I would say two things. One, almost all the leaders that I have worked with, they would either know product very well or business very well. For example, operations. How to run business, e-commerce, customer care, etc., a lot of these things. That’s what it is I know. I’m not saying he’s the only one. I’m sure there are other people, but among the people that I have worked with, I can’t think of anybody else who’s a great tech and product guy who’s also a great business and operations guy.

Hans Tung: Right.

Manu Kumar Jain: It’s amazing at how he could have a conversation about building business, building operations, building billions of dollars of business at one hand, and other hand he can go very microscopic, talking about the camera features of a popular phone and just go in depth and spend next few hours discussing that and everything.

Hans Tung: Amazing.

Manu Kumar Jain: Yup. His ability to discuss both product and business is incredible, and he spends equal amount of time on both of them. I’m yet to meet anybody else who can do this as efficiently as Lei Jun. Second, I would say, is the ability to connect with a large number of people despite him not being very comfortable speaking English. When it comes to him, he makes it a point to meet all the key leaders, team members in India, one on one. He will spend a lot of time with me, sometimes our one on ones would last six, eight hours.

Hans Tung: Right. He can talk.

Manu Kumar Jain: He can talk, he can discuss, he can debate, and it’s not easy to convince him. Sometimes our debates have lasted four hours and then one of us had to convince other person for our debate on one single topic. The thing that he really connects well with everybody and he’s very responsive. He won’t miss any messages, maybe one o’clock at our time, which is 3:30 in the morning his time.

Hans Tung: No problem.

Manu Kumar Jain: I will get a response immediately.

Rita Yang: Hans, he is like you in that sense.

Hans Tung: Even more so than I do.  Yeah.

Manu Kumar Jain: He’s amazing.

Hans Tung: He’s amazing.

Manu Kumar Jain: Yeah.

Rita Yang:  What is one of the things you guys disagree about or debate about?

Manu Kumar Jain: Anything to everything. The first thing that we ever disagreed about, the first big debate that we had almost five years ago was where should we have headquarters in India. He said it should be in Delhi, I said it should be in Bangalore.

Hans Tung: Thank God.

Manu Kumar Jain: We debated for weeks and weeks and maybe months. Somehow I convinced him to say that it should be Bangalore because-

Hans Tung: His experience is with Beijing, it’s the capital. He has to deal with the government, so he’s not there, you cannot just go past the government policy changes and influence of them.

Manu Kumar Jain: Yeah. But Bangalore is a tech capital and all the partners, Flipkart, Amazon, everybody’s here. It’s easy to hire tech talent. We were thinking of hiring and building a R&D center, so it made sense. We debate a lot about product, product strategy, what is right for India versus China because not everything that gets launched in China is launched in India. About nomenclature. This year, in the middle of this, he came to India only once this year in May, and we had a debate for almost four hours on the naming, the marketing name of a particular product.

Hans Tung: You’re kidding.

Manu Kumar Jain: Four hours we debated just the two of us.

Rita Yang: That’s why you don’t spend money on marketing.

Manu Kumar Jain: Finally, he convinced me. Then, there was a recent product that we launched a few months ago where again we debated for weeks and finally I was able to convince him. I think we have this great relationship where we respect each other’s point of view and we know if you are disagreeing with each other and we’re debating, that’s not because we don’t value each other’s point of view, but because we have the best interest of the company in our mind. He respects that and that’s why he’s willing to debate and discuss with me at length. Either he convinces me, or he gets convinced.

Hans Tung: Right.

Rita Yang: Amazing. What are the challenging part of running Xiaomi India? We’ve talked about all the good things and amazing things.

Manu Kumar Jain: A lot of them. I think the first challenging part five years ago was that nobody knew Xiaomi.

Hans Tung: Right.

Manu Kumar Jain: At first the office was a small café and every time I would go to a partner and say, hey, we should be doing something together, people would ask me how big is our team. I would say one person. I am the head, I am everybody in the team. We didn’t even have an official office. It was just a coffee shop. People would think that I was a fraud. I would just take their money or do a business contract and I would run away because it was unimaginable for them that we would talk about these, at that point millions of dollars, $10 million, $15 million dollars. There’s no office, there’s no team, there’s no legal entities for our business. Hiring was very tough, extremely tough in the beginning because nobody knew Xiaomi and a lot of people who would agree to run Xiaomi would, on the last day, on the day they would join, they would not turn up, but they would say their family’s not in India, their family’s in this company. Are you joining? What is Xiaomi? They have never heard of them. Why would you even risk it? Building up our business was really challenging because traditionally online is what our strength is and two years ago we started bringing it offline. We struggled a lot in the beginning, for almost a year, going through the process of going offline brand, and it’s taken largest offline brand in the country. Online we are number one, offline we are number two. Some of the products haven’t done well. Let me be honest. I would say 80%, 90% of the products have done exceedingly well, but there are also then 20% products which have not done well. How do you course correct? How do you solve the inventory problem? In our business, inventory is something which can really take down the company, so how do you immediately solve for it and course correct and move forward? From the time we have faced a large number of problems. Of course, from outside it looks like everything is hunky-dory, everything is going right.

Hans Tung: Everything, from outside, that’s exactly how we feel.

Manu Kumar Jain: Internally, a lot of problems that we have faced, but I would say two things: One, we have been able to course correct quickly and move forward. Second, there’s a confidence that our board has shown in me and the one that I would like to show in our team, that it’s okay to make mistakes as long as you don’t repeat mistakes.

Hans Tung: Right.

Manu Kumar Jain: We learn from them and never, ever repeat the same mistake again. Just make a new mistake.

Hans Tung: What other new apps do you think that you need to launch in India to leverage the distribution channel you have in India, but yet the app itself has to be appealing to end user, to want to spend a lot of time in engagement with your app?

Manu Kumar Jain: One of the ones that we are piloting right now is our lending platform. We believe lending app is a huge opportunity in India, just like anywhere else in the world, especially mostly in India because a large number of Indian users do not have access to organized lending or credit cards or any kind of-

Hans Tung: It’s hard to have credit.

Manu Kumar Jain: So, we believe that there’s a huge opportunity which is laying over there. There are many startups which are doing bits and pieces of this, but there could be many forms in which doing consumer lending, product lending, supply chain lending, many, many different forms of lending. We believe we are in a very good position where we can do lending across all different areas. It’s something that we’re still working on a beta phase, so it’s open to a very select number of users for testing, but if everything goes right, maybe next 6 to 12 months we should be able to launch it in a much bigger way.

Hans Tung: And then users’ behavior and what they do on the phone will help them to earn credit and build up credit over time?

Manu Kumar Jain: Yes, if they opt in.

Hans Tung: Right. Very often. That’s right. Yeah. I can see that could be a huge game-changer for this market for sure.

Manu Kumar Jain: Yes.

Hans Tung: In China you have Alipay, WeChat Pay, it’s much harder to build a new business against that, but here it’s wide open.

Manu Kumar Jain: Exactly.

Hans Tung: Yeah. Very smart.

Rita Yang: So, you have built an e-commerce fashion company before. How has that experience helped you in building Xiaomi in India?

Manu Kumar Jain: To be honest, I was very nervous in the beginning because I didn’t come from any smart phone background. I also asked Lei Jun, hey, why do you want to even hire me? I come from an internet background, not from a smart phone background. His answer was, I’m not even looking for a new smart phone guy, because we are not a smart phone company. In fact, if you look at most of the people that I said that we have hired, that I have hired at Xiaomi, are also from all internet background. Now, the reason, the way it helped me, it helped me really understand the whole e-commerce landscape because for the first years we were only selling through e-commerce in India. It helped me understand the importance of e-commerce and how we can really scale up our operations using the internet as a platform. If you look at Indian users, a large number of Indian users still do not have access to physical shops because they’re living in small towns and villages, and there’s no branded shops in their town or village, so they will have to travel three hours, four hours. For example, my aunt lives in a city called Salanpur, which is a small town, and she’ll have to travel to Delhi for four hours to buy any kind of product. Through e-commerce, we can deliver it to her home without her necessarily traveling to Delhi. I liked the importance and we were able to move very fast on e-commerce for the first few years and build a big business over there.  And because I don’t come from smart phone background, maybe we haven’t done what others have done.

Rita Yang: What are some common pitfalls for foreign brands that are trying to make inroads into the Indian market?

Manu Kumar Jain: I would say two things. One, when people come here, foreign brands, it’s very difficult to identify talent. Most of the time people go for long experience, relevant experience rather than being more experimentative. If a FMCG company is coming, they will try and hire the person with 20 years of FMCG experience, saying he or she is the right person to bring to business. Point number one. Point number two, a lot of brands don’t realize that India is not one country. India is a combination of 30 countries in a way, because we have 30 provinces or states. Every state, every province has a different language, different core, different religion, different food, different clothes, different language, everything different. When you’re building product, when you’re building your business, you have to keep in mind that it’s almost like building a business for Africa or for Europe, which has so many different countries, so many different culture.

Hans Tung: Right.

Manu Kumar Jain: You have to keep that in mind and if you cannot build it the way you would build it for US or even for China, because it’s not one homogenous thing. When you start building phones, from the day one we had it always available in 12 different languages. Now we cover almost all key Indian languages. People will want to consume content in their local, native language. My solution to anybody who comes is thinking about this very up front on how will you hire people, what kind of people will you hire, and how will you build products which can last for 30 different markets and not just one market.

Hans Tung: When you’re comparing notes with other friends who are at Google and Facebook or other big Silicon Valley firms in India, how is their relationship with their quote/unquote headquarter the same or different than how you work with Lei Jun?

Manu Kumar Jain: Very different. A lot of companies that you mentioned, their India head, or even the APAC head, would very rarely talk to the formal CEO or Chairman on a daily basis. They will typically meet once in a year for an annual review.

Hans Tung: Right.

Manu Kumar Jain: They will not have the direct access to the entire board in case of any problem or issue. In my case, I talk, as I mentioned earlier, I talk to Lei Jun almost on a daily basis. Every time I go, I meet many of our board members and even co-founders and we in depth discuss about how or what are we doing in India, how do we build up even a much more robust business.

Hans Tung: Right.

Manu Kumar Jain: Second way it is different is because many other multi-national companies, India is part of APAC, which has been part of some other organization, and then which is then part of [crosstalk].

Hans Tung: Layer by layer.

Manu Kumar Jain: Since four or five years ago, the way Xiaomi structured is horizontally. It’s China and the rest of the world. Probably the only multi-national company that I know of where there is China and the rest of the world. This also was important in getting that ecosystem, because of which the dynamics are very different. Unlike many other not just Silicon Valley company, but many other multi-national companies, where India is just a recipient. Whatever products are built for other countries. We just bring it to India and just figure out a way to sell it. Here, we’re bringing products for India, in India, and that is a huge, huge difference.

Hans Tung: How many product design folks and Indian folks do you have on your team here in India?

Manu Kumar Jain: We have four different product teams. Phones, TV’s, IoT, and OS. Each of the things will have anywhere between 10, 15 to 40, 50 people working in India right now.

Hans Tung: Okay, got it.

Rita Yang: I wanted to ask, the access you have, either to daily conversations with Lei Jun or your board, does that come after you have shown really positive results?

Manu Kumar Jain: I would say this started in the first year. Lei Jun and I, we of course interacted, but not so frequently. I would meet him similarly, maybe on a quarterly review meeting. This was in maybe May of 2015, our third quarter of 2015 when Lei Jun called me for a meeting to China and then he started discussing and I was ordered dinner, I remember, in some hotel or restaurant which I don’t remember. I don’t remember the name of the place, but I remember it was a dinner. We ended up discussing for many, many hours on Indian market, problems that we were facing in India, issues in India, and how they were very different from China. I believe that was one of the first few turning points when he realized that Indian market is, even though there are a lot of similarities between India and China, but they’re also very different. Then he realized that he should probably spend a lot more time on India to understand India. That was a moment when we somehow made it a pact that we will a lot more frequently so that he gets live a bit on what’s happening in India, what is going on so that he can also give live feedback, which is very important, I believe. It has played a big role in our success because anytime I wanted to change our plans or change a product, I had access to the entire team, and they were running behind me in making this happen.

Hans Tung: Right.

Rita Yang: How did you solve the hiring problem? When Xiaomi first started nobody has heard about the company and the families who would be like, why don’t you join Google or Flipkart or Amazon? Why this company? We can’t even pronounce the name.

Manu Kumar Jain: Yes. It was very tough. It took me almost three months to hire the first person.

Rita Yang: Three months?

Hans Tung: Wow.

Manu Kumar Jain: Three months. We had a small office with six seats, maybe a 10 feet by 6 feet kind of office, the first official office. I used to serve the coffee myself, I used to open the door myself, I used to do everything myself.

Rita Yang: You were the janitor and the managing director.

Manu Kumar Jain: Everything was like one single bad thing. I still remember the day when the person joined. I was very happy, not because somebody joined, but because I had somebody to speak to. Those first three months were so lonely. Every time I had to speak to, I could only pick up the phone and talk to either Hugo or Ben. I used to sometimes just feel I had this huge urge to talk to somebody to say, am I doing the right thing? I don’t know. I’m here for the first time. Maybe I did something wrong. I just want to bounce my ideas on somebody. The person joined, he was my junior at McKinsey, he joined, and I was so happy. Then, we slowly hired one person who was a HR member, our first HR member. Then, we hired the head- There used to be a Mi fan club in India, even before Xiaomi was there.

Rita Yang: There are fans of Xiaomi before?

Manu Kumar Jain: Thousands of fans of Xiaomi even before Xiaomi existed.

Hans Tung: That’s right.

Manu Kumar Jain: There was a person who started this Mi fan club in India, and he was the President and the Founder of the Mi fan club. We hired him, so he was employee number four.

Rita Yang: Wow.

Manu Kumar Jain: And then we slowly, gradually started building team. In the first six months we had doubled the team. First three months, we doubled the team from one to two, and another two months from double two to four, and then next six months we doubled from four to eight. The first few months were very slow. Until the time we reached about 30, 40 people it was a rule that everybody who has been interviewed had to be interviewed by everybody else. Sometimes it was tough because you had to be interviewed by 15, 20 people. Everybody interviewed everybody. Then, we relaxed this condition and for the longest period of time I was the person interviewing every single person, including an intern who wants to join Xiaomi.

Hans Tung: I see.

Manu Kumar Jain: Until the time we were about 200 people, 300 people. Then, I relaxed that rule because I said it’s humanly not possible for me to interview every single person. Initially, hiring was tough, but as our  business started getting built, we started getting a lot of reputation in India. I would say first one and a half years, two years, were extremely tough. Last years have been very easy. Today, we are hiring large amount of people, including managing directors of some of the largest internet companies in India, directors from different e-commerce companies and others. They’re willing to come, even on a lower cash salary, but of course we give them stock options, because they just believe in the whole vision of Xiaomi and what Xiaomi’s been able to achieve.

Hans Tung: Right.

Rita Yang: What are some of the principles you have in hiring?

Manu Kumar Jain: I look for two things when I look to hire a person. One, I always look for passion and intelligence over experience. A large number of leaders who are very intelligent, very passionate, and have zero relevant experience, and that does not matter. In fact, I strongly recommend people to move different roles within the company and move roles radically. For example, the person who is sitting on Mi Finance business, he was a business analyst and was leading our Mi.com business, and now he’s leading our Mi Finance business and he has never built financial products. The person who was still recently leading our brand marketing, he joined us as an executive for, which is the junior-most post, for events team, and then within two years he became the head of events and then two years after that we made him head of brand marketing. He just moved from being the junior-most person to head of brand marketing in four years. So a lot of people, they are encouraged to make very different trajectory because we believe if the person is intelligent, relevant experience does not matter.

Hans Tung: Right.

Manu Kumar Jain: That’s one. Second, personally, for people that work with me and people that I interview, the second thing that I look for is will I admire this person, and do I think he has a quality of being my boss? If I respect that person, if I think I admire that person, I believe he or she’s a good person to hire.

Rita Yang: Now, let’s go to the final part of the podcast, which is a round of quick-fire questions. Just say whatever comes to your mind.

Manu Kumar Jain: Sure.

Rita Yang: What is one thing about you that is surprising to people who don’t know you very well?

Manu Kumar Jain: That I used to run a comic strip before Xiaomi and before Jabong about relationships, about husband and wife and how they tend to fight each other on everything they think.

Rita Yang: Wow. Okay.

Hans Tung: That helps you develop a strong team. I like that.

Rita Yang: What are some routines in your life that keep you grounded?

Manu Kumar Jain: I would say my wife. She’s my biggest supporter and biggest critic. Whenever she sees me doing something wrong, she’s the first one to bring me down and say, hey, you’re doing something wrong.

Rita Yang: Do you have enough time for her?

Manu Kumar Jain: I try to very consciously. I stay three minutes from office so that I cut down on commute time and then I try and spend at least an hour in the morning and an hour in the evening with my family, which is my wife and my kid.

Rita Yang: If you could have dinner with anyone in the world, live or dead, who would it be?

Manu Kumar Jain: Elon Musk. I would die to have a dinner with him.

Rita Yang: Why?

Manu Kumar Jain: The kind of thing that he is doing is amazing. Unbelievable. He’s thinking of going to Mars. He’s thinking of changing the world. Amazing. Huge respect for him.

Rita Yang: What was one thing that you used to be skeptical of and then changed your mind later?

Manu Kumar Jain: I used to be very skeptical of just Xiaomi success in the beginning because I met so many tech CEO’s who said, Manu, I am telling you, Xiaomi can never succeed in India. Manu, this is the biggest mistake that you are making in your life by joining Xiaomi. You will regret this. Since the first time you have joined, you have not announced publicly that you have joined. It’s my turn to lead. Yeah.

Hans Tung: I’ve heard that when I made my first, second, and third investment in Xiaomi, so I really appreciate that.

Rita Yang: Oh, that was before Xiaomi go public. Right. Last question. What does success mean to you?

Manu Kumar Jain: For me, all the measurable terms, such as market share, profit, or the wealth or the money that I make, these are all things important, but more than that I’m extremely proud of the team that we have built and the respect that we have earned here in India. A lot of people, they walk up to us and they tell us how their lives have completely changed thanks to Xiaomi. That is something which can never be quantified. For example, I was traveling from Delhi to Bangalore two weeks ago and met a security lady who will do frisking and who will check if everything is right at the airport. She recognized me and then she started talking about Xiaomi and then she told me she bought a Xiaomi phone, Redmi Note 4. Then, she convinced her husband, who’s a soldier in Kashmir Region, to buy a Redmi Note 7 Pro and her entire family is now on Xiaomi phones. For me, that is 100 times more valuable than anything else.

Hans Tung: Right.

Rita Yang: Thank you.

Hans Tung: Thank you.

Manu Kumar Jain: Thank you so much. Thank you for hosting me.

Rita Yang: Fantastic. Thank you.

Hans Tung: Love it.