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Hugo Barra Interview: The secret sauce behind Xiaomi’s magic

It has been a long day for Hugo Barra, the former Google VP for Android who now heads the international expansion for Chinese smartphone sensation Xiaomi. We are in New Delhi’s Lodhi Hotel for t

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It has been a long day for Hugo Barra, the former Google VP for Android who now heads the international expansion for Chinese smartphone sensation Xiaomi. We are in New Delhi’s Lodhi Hotel for the brand’s debut in India, its first major market outside China. Barra has been on his toes all day, first addressing the press conference, shuffling between media interactions and chatting with fans, followed by a two-hour long “deep dive” session with bloggers, fans and enthusiasts by the end of which everyone is enamoured. Fans are giving their ideas on what software tweaks they want to see and Barra’s excitement is visible as he goes “done” every few minutes, signifying the feature will be added soon.

It is 5:45PM and we finally get to sit down and chat. But before we can start, he rattles off a few instructions to his PR team as he wants to know how they plan to give out review units. He wants all the enthusiasts in the deep dive session to get one. “That’s the audience I want to target. It has been the best group we have ever had,” he tells them. Seems the people in the group are not the only one that were left impressed.

Despite having had a busy day, Barra is calm, relaxed and excited at the same time. During the course of the interview he tells me he has a seven-day work week “not because I have to, but because I want to.” It is slowly becoming clear why.

We chat for almost an hour discussing his move to Xiaomi, the company’s plans for India, general market trends and his life in China. He emphasizes how important India is for the company and how he plans to be a regular visitor here.

Read on for some edited excerpts from the interview.

Let’s go back a year, and talk about you moving from Google to Xiaomi. What were your key reasons for this move?

I think when you watch us talk about the company in an attempt to describe what I can only call magic, you understand why. What we are building is very unique, and it is something the world hasn’t seen before. It is a kind of company that has not existed before, and a company that combines different expertise that are rarely found in one place, like hardware, software and services. You can find these in pairs, but not all three together.

With a very disruptive business model and a disruptive marketing and social media, it is a very unique kind of company. I think that there are so many things about Xiaomi that the world is yet to understand, but will become clear in the next few years. I also think that the company is going to have a pretty deep impact on the industry, and I think a lot of things could change if we do our jobs right over time. So if I was to summarize why I have joined the company in one phrase, it is because I haven’t seen a company with such disruptive potential before.

Only Apple and Samsung make profits by selling smartphones. Even Xiaomi for that matter is almost at cost that you are selling the devices. How does the industry make money?

The industry makes money by adopting different business models. The traditional method is spending an absurd amount of money and charging huge gross margins, but that system is limiting. I see companies out there trying to rescue themselves by making a super high-end device and then trying to sell it for $800. But I don’t think that is the way out, if those companies want to try and reinvent themselves they should be moving in the other direction, which does mean cutting margins. But hopefully in doing so, they will sell larger volumes, if the product is good. So I think it is the shift in the economics of the industry and it is going to take years.

So what would be Xiaomi’s business model in India, considering typically on Android people don’t want to pay for content or services, as most of them are free, unlike China, where you don’t have a Play Store or Google Play Services? So considering the kind of prices you have announced here, what would be your business model?

Our economics are a combination of a lot of things. We do sell devices at cost, and costs falls overtime, so for the entire life of the product we do make some profit. We will bring a services strategy to India where we only need to make a little bit of money, for it to be considered a success. We have our entire accessories ecosystem, and you can go to our China website to see an example. We have close to 1,000 SKUs, meaning different types of accessories, and most of them commissioned by us, and they work only with our products. There are also a few speakers and other such products that are more universal, but we still recommend them to be used with our products. We sell those accessories at an extremely aggressive price, so for example we would sell a back cover for as low as Rs 400, whereas anybody else would sell it for much higher. We are earning a bit of money through accessories, though not a huge amount. So if you add it here and there, collectively it amounts to a good business overtime and we are very long term focused.

You are talking about entering 10 countries this year, including Brazil, Mexico and Latin America. Are you prepared for such an expansion? How do you plan on scaling up?

We do have an ambitious scaling plan, but only for a couple of the very large markets we are going after like India or perhaps Brazil and Indonesia, wherein there is a need to allocate a good share of our product capacity. The other markets are not really that significant comparatively, because they are much smaller. While being successful in those markets is important to us, it is not necessary for us to allocate a huge share of our products.

In India we are coming in full force, and we are making a significant commitment to allocating our production to the market. What we believe is that customers here are less tolerant and word goes around fast. So we do have to be very transparent, but we also have to be very fast. So if it turns out that people like our product (and I hope it is the case), then we have to move fast.

Will China remain to be Xiaomi’s main focus?

For this year yes, as we have only just begun our international business. Next year, India will take a significant share of our mental investments. Bin (Lin, Xiaomi’s co-founder and president) and I are going to be here a lot, where we are planning on spending time with people we are recruiting and partners, and the community that includes tech bloggers as well Android fans and evangelists. I think India will represent a massive effort for us in 2015.

So can we expect some made-for-India products from Xiaomi?

I would not discard the possibility at all. I do think the difference between a product made for India or Brazil or Indonesia, is actually in the software and not in the hardware. If you are talking about the overall product, the answer is a huge yes. We absolutely will be investing a disproportionate amount of effort in made-for-India products from software perspective. In this blogger meeting we had, there were a bunch of ideas some of which universal, while others were India specific. So we plan to have an engineering team here, and we plan to build features in India for India. In that sense we will go the farthest anyone has gone to build products that are tailored for this market.

From your perspective on Xiaomi’s smartphone portfolio, you have an entry-level smartphone, you have an entry-level phablet and you have a seemingly high-end product, are these three key categories that you are looking at right now? Or is there something else that really excites you?

Those are the key categories we are looking at for sure. There is a lot to do in those categories, and we really think about them as two categories. One is the super high-end and, two, the highest possible spec under a specific price, which is definitely not entry-level, rather it is mid to high-end. They are for different users and they are perfectly complimentary to each other, so that’s our portfolio going forward. We are always responding to the market and changing things, but we are committed to Mi and Redmi as our portfolio strategy.

There is this thing about people wanting stock Android on their phone. Even at Google that was one of the things that even you were pushing, which was to give the pure Android experience as far as possible, even though lot of OEMs would obviously want to differentiate. Now we are seeing a lot of companies — not your tier-one companies like Samsung or LG, but new companies — that are completely forking Android and still giving access to Google Mobile Services. What are your thoughts about where the trend is headed?

I think what we are doing is probably what the founders of Android envisioned when they were building an open-source platform, and give OEMs the power to differentiate. I think they probably underestimated the challenge and difficulty in doing so, which is why it is taking so many years for OEMs to get there.

I think it does take a new kind of company and different type of focus to be able to do that. So the companies that come from a traditional background tend to focus on form, instead of function are not the ones who are able to do it, instead, it is companies that focus on both function and form.

There are some great companies out there and I like what I’m seeing from the likes of Oppo and One Plus and I think there are some really cool products. I really do like what Motorola is doing — they apparently didn’t have a choice, given their operational challenges. They cut and cut to simplify as much as they could and they arrived inevitably where they are today, which is a very small portfolio of devices with the simplest possible software. There is a strategy that they had to take and it seems to be working for them.

So I’m excited by the ecosystem we are in and there is a ton of competition, and I think the new players are going to challenge the traditional players. It is not only us at Xiaomi, but the whole ecosystem. What makes me the most excited is that at the end of the day, it is more competition, better prices, and as a result a win for end users.

So can we also expect weekly updates like you have in China?

Absolutely. We do weekly updates to be clear on the need of a product line. So for example, we do not do weekly updates for the Redmi, as it has two build trains, which is the daily updates for the internal users, and the stable updates for everyone else. Mi has the alpha channel, which you can flash to if you want to be living on the bleeding edge. Then we have the developer’s build, which is the beta, which is updated religiously every Friday and there is a stable, which has a variable time frame largely driven by the developer community that is responsible for the beta. So we absolutely will continue to have weekly builds for users of Mi phones. Right now it is just the standard version of our software with local tweaks. But I’m actually thinking that we could actually have a different fork for India.

How is the relationship between Xiaomi and Google?

Our relationship with Google is completely standard and it is the similar to other OEMs. We have got contractual commitments to them and vice versa. We have a dedicated partner manager who does everything to help us. I reach out to my ex-colleagues when I need, and they are always listening and always helpful. I think that we will continue to have a healthy relationship and we are making Android successful in ways perhaps they weren’t expecting. But I think they are happy with what they are seeing. We are among the first to implement security patches and so on and so forth.

What are your thoughts on Android One? That is seen as the next big thing, with smartphones priced at Rs 6,000 that offer pure Google experience.

I’m familiar with Android One, and it is a very clever move. I think it is very wise of them to be focusing on India, and I’m sure they will expand that focus. I do believe that it is a good idea, particularly because it allows some of the smaller players who don’t have a huge budget and marketing brand a big chance of success by leveraging the Google brand. Consumers will know that if they are buying an Android One device, there is a certain level of credibility and approval from Google that come with it. So I think it is a great initiative and it will help smaller players, especially local brands. Let’s see how it plays out over time. It is a lofty proposition in the sense that Google controls the build so these devices are all essentially the same. So I think it will be good, but at some point of time people will start saying that they won’t mind something different.

How do you see the Indian smartphone landscape, considering it is growing close to 200 percent year-on-year? What kind of role will Xiaomi play over here?

It is very similar in terms of growth trajectory to what happened in China probably three years back. There is no reason to believe why the growth in India wouldn’t be as spectacular. I think it is a different world with much more significant competition, so it will be a great battle.

Talking about Xiaomi’s future — last August you guys were valued around $10 billion, and that was a time Nokia minus its patents was somewhere around $4.5 billion. This year you guys have sold more smartphones in the first half than you have sold entire last year and 60 million is the target for this year, can you manufacture these many devices in a year?

This is actually Lei Jun’s (Xiaomi’s founder, chairman and CEO) production estimates for this year, and we do not exactly have a target per se.

Do you think you can grow much faster than what you currently are, and are limited by your production capacity?

It is a big challenge for everyone in this industry. The industry is still growing substantially, which means that the battle for components is going to continue for a long time. When we buy a chip, perhaps that is beyond what we told the supplier we want originally. This either means they somehow managed to increase their production capacity, or someone else did not get that chip. So it is a pretty intense supplier ecosystem, which we spend a lot of time developing relationships with. I’m not as exposed to that side of the business, and it is handed by Bin and the hardware team.

Last month I was interviewing Joe Belfiore (Microsoft’s head of Windows Phone) and we were talking about Android, and he had one interesting comment to make, saying Android is all about getting the latest hardware in terms of chipsets. It is something we are seeing right now, with a smarphone boasting 2K display, but does it really make a difference in our lives?

I think I disagree. I mean there haven’t been any hardware disruptions that are completely in vain lately. I do think looking at photos and text on 2K display is noticeably better. I disagree that Retina Display is the barrier beyond which the human eye cannot see a difference. I do think we have tapered off on this play table, in the sense we do not need more than that as far as resolution is concerned.

But there are much more that can be achieved in terms of better battery life and bendable displays. As far as processors and speeds go, games are becoming more complex. (Nvidia’s) Tegra K1 is unlocking a whole new ecosystem of gaming and that is sure to be put to great use. If anything, we aren’t seeing quick enough hardware innovations that us software guys would like. These include much better sensors, projection screens and more.

So what comes across is that Xiaomi is a company that will bring you the latest hardware specifications at less than half the cost of what a tier-one company would offer. Is that everything the company is looking for, rather than giving consumers something groundbreaking in terms of people who are ready to pay a premium?

It is hard, as that would require us to enter a lot of businesses we are not in currently, say like the semiconductor business. At the moment we are one of the first companies to roll out a product with the latest chipset — we were the first on Snapdragon 600, first on Tegra 4, first on Tegra K1. How can you go faster without developing your own chipsets? You can innovate on display technologies, camera technologies. Apple is the only company that is not originally in the business of building camera and camera sensors that has built a team.

Are there any changes to the international launch roadmap that you mentioned earlier this year?

There aren’t any changes and we are all running them parallel and they have all their own different challenges. The next to be ready will be Indonesia.

Lot of people are curious about your work schedule in China, so what is Hugo Barra’s typical week like?

So it is a seven-day work week, not because I have to, but because I want to. I’m pretty good at managing my inbox (I have zero unread mails) and I check my emails every day. I can’t go to bed until I feel like I have done with my emails, and WeChat inbox too. I’m a big tennis and squash fan, but in China I have decided to focus on Badminton and Ping-Pong. The reality is that everyone from the previous generation is amazing at those two sports. They are really intense and they like to try unique sports. I have two great instructors so that is why I do three days a week and Badminton is one of the most amazing exercises you can get.

I work pretty hard and our company hours are from 09:30AM to 09:30 PM, but rarely do I leave office before 10:30PM or 11:00PM during weekdays. On weekends, I tend to work from cafes or friends’ couches, but not home. I eat extremely well, and China food is great, and I have to say the food in India is so good. I would become a vegetarian if I live here, as I have never had such tasty vegetarian food. Between India and China, food is never going to be problem (laughs). I have a great group of friends, both expat and Chinese and I’m trying to learn the language. I watch Bollywood movies from time to time.