(Money Sharma/AFP/Getty Images) (Money Sharma/AFP/Getty Images)

By Thomas Shambler

Xiaomi first burst into the news two years ago, when the little Beijing-based startup overtook Apple as the top smartphone maker in China. Its strategy: to produce high-end devices with ultrathin margins, offering top-notch specs for low smartphone prices. The result was a US$45 billion valuation in 2014.

Since then, Xiaomi has faced a slowing Chinese market, as well as new competition from the likes of Huawei Technologies and Oppo, both of which have taken a leaf out of Xiaomi's pricing playbook. By the end of 2015, Xiaomi had sold just 70 million mobile devices, having initially forecast 100 million.

But 2016 sees the company expanding is offerings outside of smartphones. In March, Xiaomi released a smartphone-controlled rice maker that automatically calculates cooking times based on weight.

What seems like novelty homeware is part of a much larger strategy, to build Internet-connected products for the entire home.

The company's flagship Mi 5 phone already has a few similar tricks up its sleeve. If the owner is wearing a Mi Band fitness tracker and falls asleep, the smartphone will automatically put itself into 'Do Not Disturb' mode.

Xiaomi has invested in 55 different companies that make many more of these types of products – everything from connected bicycles to app-enabled air purifiers – all of which will is released under the Mi brand.

The key to its success? According to Vice President and ex-Googler Hugo Barra, "we have introduced a crowdfunding model for our ecosystem products" he said, speaking at WSJDLive.

"It works like Kickstarter. We launch a project to the community, and they decide whether or not they want to back it. If enough people back it, then we manufacture the product." This model is infinitely scalable, says Barra, "and means we can build an entirely new business on top of what we already have today."