Special Focus

The Xiaomi Way to Optimize Costs

小米这样抠成本

- By Gao Xiongyong

Two interestin­g stories about the strict management of Xiaomi on the quality of the products are well known.

There was a time when we conducted a quality inspection of all the components of MIphones, which of course included cost controls, and we found something wrong with the SIM ejector pins.

These pins are used for the easy removal of SIM cards. But seeing as most people either lose the pin or don’t have it on them when they want to get the SIM card out, they often use paperclips as an alternativ­e, and a few of them even prefer using toothpicks. Anyhow, the ejector pins shouldn’t be a costly thing, as a box of paperclips is sold at RMB merely a few yuans, which contains hundreds of paperclips in each box, so the cost of every single paperclip is only a few cents.

However, when we checked the cost of the ejector pins, everyone was floored by the fact that they cost over one yuan per pin. What was up with the extreme price difference? There must have been something wrong.

There might be two reasons behind it: one, someone in the company had taken kickbacks, and the other, we were being taken advantage of by our suppliers.

Well, we trusted our colleagues implicitly, so we ruled out the first contingenc­y immediatel­y. It was then that we contacted our suppliers.

Upon hearing the news, our suppliers were uneasy, especially when they learned that our CEO, Lei Jun was handling this matter personally. After arriving at our company, they said that they didn’t overcharge us at all, and there weren’t any profits to be made from the pins.

No profits from these bucka-piece pins? It seemed that the suppliers were just making excuses? Then I asked them why the cost of an ejector pin was over one yuan while that of a paperclip was only a few cents, and they told us, “Your pins are special because they contain several kinds of rare metals.”

This answer puzzled us. Why should an ejector pin contain rare metals? And they responded, “Your test standard for the pin requires it to remain unbent after being inserted into the SIM tray 100,000 times.”

Upon hearing it, all of us were shocked. What an absurd standard! An ordinary user would barely use the pin a couple of times, yet the standard was set at 100,000 times. Who would insert the pin into their phone 100,000 times? It didn’t make a lick of sense.

And just like that, the mystery was unlocked. It wasn’t the suppliers’ fault.

We discussed the matter with colleagues from the R&D Center who felt a bit wronged. It turned out that when we first began making smart phones, we borrowed heavily from the iPhone in many ways, including Apple’s standard for mobile components, and the ejector pins were made accordingl­y.

Then our suppliers added tartly, “It’s true that Apple adopted this standard for the pins at the beginning. But later they lowered it due to cost controls. Xiaomi is such a topnotch company that you even use the high-quality pins on your Redmi Phones that are worth only several hundred yuan apiece.”

What funny logic!

Of course, we have to pursue perfection. But the blind pursuit of perfection like this simply leads to a waste of money, and is practicall­y meaningles­s to the customers.

A similar story happened before about screws. When making mobile phones, the main board has to be firmly secured to the body by 12 micro screws. Because of the thinness of the phone, the screws have to be super small. Generally speaking, the cost for such a small screw should be no more than a few

thousandth­s of a yuan, but the actual cost was close to one yuan. The screws are fixed into the phone during manufactur­ing, so they don’t need to be used repeatedly like the ejector pins. So something was definitely not kosher.

As usual, we invited the suppliers to the company to discuss the problem.

As Xiaomi has been well reputed for being its meticulous attention to detail, the suppliers took the matter very seriously, and brought lots of tools with them, one of which was a magnifying glass. When we asked about the high cost of the screws, they put the magnifying glass above one of the screws, and said, “These are incredible screws. You can see the trick through the magnifying glass.”

We bent forward immediatel­y towards it, and the suppliers continued, “Did you see it? There is a Xiaomi logo on the head of every single screw.”

We were absolutely stunned. What a BRILLIANT design! But what was the point? It’s obvious that our engineers have wasted their talent, and this was simply another case of blind pursuit of perfection.

Upon reading the two stories, you’d likely think that we have an engineerin­g crew of absolute airheads. In fact, it’s not their fault, as this is the common R&D problem for many companies. The relentless pursuit of perfection on the part of the engineers who only want to make great achievemen­ts at work, or create something that they’re proud of is beyond question. But if they forgot that their work is to serve the customers and create value for them, problems like these will just keep reoccurrin­g.

Therefore, before making a product, it’s better to raise the cost-consciousn­ess of everyone in the company, and conduct cost-conscious management throughout all the stages from planning, design to research and developmen­t. Once the design, product standard, or research and developmen­t of the product is finalized, the cost will be fixed. And then you need to analyze the cost at every stage and see if there is any waste in the cost that doesn’t serve the customers or bring them any extra value. And that’s how you get the optimal cost.

(From I AmMaking “HotCakes”at

Xiaomi , CITIC Publishing

House.

Translatio­n:

Zhu Yaguang)说:你们这颗螺钉真的很厉­害,通过放大镜就能看到了。我们一起把头凑过去,供应商说:你们看到了吗?每颗螺丝钉表面都有一­个小米的标识。我们所有人都惊呆了。这是什么天才的设计啊?这有什么用啊?我们的工程师把极致和­智慧用在这个上面,显然是用错了地方。

我相信,大家看到这两个故事时,会觉得我们的工程师太­愚昧。其实,真不是他们愚昧,这是很多公司研发的通­病。很多工程师总希望自己­的工作能做出成绩,有值得炫耀的地方,可如果他们忘了所有的­工作都是为用户服务,是给用户带来价值,这样的问题就总是出现。

所以打造一个产品,最好是从策划、设计、研发环节就注重成本,让公司每个人都有成本­意识。一旦设计定下来、产品规格定下来、研发定下来,成本就基本固定了。我们需要梳理每一个环­节的成本,看看是否存在大多对用­户没用的成本,这样,产品成本就是相对最优­成本了。

(摘自《我在小米做爆品》中信出版社)

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