As published in Entrepreneur 8/12/2014: In the United States right now, in some conference room or coffee shop, a potential investor is asking an eager CEO of a startup the D question: “What makes your venture disruptive?” And in the pit of that CEO’s stomach, he or she knows that the answer could make or break their venture.
The buzz word disruption has captured center stage in the U.S. investor world. Disruption grabs headlines, accelerates valuations and is so seductive for investors. Its widespread appeal comes from logic that goes something like this: Unless a startup is doing the blowing up, the company is likely to get blown up as a result of another company’s success. This line of thinking is an odd by-product of Clayton Christensen’s 1997 book, The Innovator’s Dilemma, which was of great influence at Bell Labs when I worked there in the late 1990s.
But is disruption a necessary ingredient in the startup world? A look overseas to China indicates that this need not be the case.
The stellar rise of 4-year-old Xiaomi (pronounced SHOW-me) defies the disruption myth. Largely unknown in the United States, Xiaomi is China’s largest smartphone vendor, according to Canalys.
Where’s the technology disruption usually required for a tech company to grow so fast? There isn’t any — at least not in the conventional sense.
Xiaomi’s secret could be something I saw described on a Sina blog called Internet thinking, a still evolving concept loosely defined to mean leveraging the Internet’s capability to let lots of people collaborate so that they can all create personalized product experiences.
“Internet thinking is a business model emerging from a vast customer base which has experienced tremendous base expansion and cost reduction enabled by the Internet, The Sina columnist wrote. “The guiding principle of Internet thinking is this: ‘Ordinary people [are] king, user experience is priority, and scale is key.'”
A graduate student from China working for my firm this summer explained to me this emerging mind-set, indicating that Internet thinking isn’t about disruption at all but is about a user-centric focus.
In the case of Xiaomi, it means letting people create a Xiaomi brand of one that is very personal and that will give Xiaomi a strong, yet nondisruptive competitive advantage.
Lei Jun, Xiaomi’s CEO, explained it this way in a video interview on Reuters that was translated into English: “The main difference is that it is the Internet that has made Xiaomi. Apple’s design is very simple and no matter who the customer is, there is one set solution. There are a few opportunities to meet individual preferences, but Xiaomi’s system can be changed by anyone. Thousands of designers create all sorts of functions, looks and solutions.”
Indeed the Xiaomi community has created more than 2,000 themes and in excess of 10,000 ring tones and wallpapers. Its revenue comes from selling undisruptive and ubiquitous dialing, message writing and cloud services.
The company’s high velocity growth, many observers claimed, is because Xiaomi is ripping off Apple. For example a TechCrunch article last month attributed Xiaomi’s growth “in part to its unabashed appropriation of design cues from companies like Apple.”
I believe these critics are missing the quiet, nondisruptive point. Putting aside the reality there are no clear rules for distinguishing between an iteration and an intellectual property ripoff, Xiaomi is the antithesis of Apple.
Unlike Apple, Xiaomi lets people create their own personal Xiaomi experience defying the tight user experience controls of Apple.
Also unlike Apple, Xiaomi pushes out weekly, community-driven software updates. Perhaps most unlike Apple, these updates are fraught with glitches that only mobilize the community to work even harder to help Xiamoi do better.
Perhaps it’s time for the disruption bloom to come off the venture capitalists’ rose.
The disruption myth was great fun for a while, allowing ventures and investors to say stuff like “this is so cool it will melt your face off.” I look forward to a time when the some smart money, around the world, is betting on people first and not trying so hard to fund companies that are so disruptive that, while they can kill the competition at the expense of really serving people well. That is what venture capitalists’ dreams should be made of.