Ototo is a Singapore-based, family-run technology company. It made money in the early 2000s from the manufacturing of OEM printers, scanners and facsimile machines for the Asian office market. In the past decade, the patriarch had started hiring R&D engineers to build its own product line as the OEM business becomes a struggle. These R&D engineers had been successful in launching Ototo’s first LED-based Monochrome Laser Printer in 2015. One year prior to the COVID-19 pandemic, Ototo has also managed to successfully launch its LED-based Colour Laser Printer to the market. After the first wave of the COVID-19 pandemic, the patriarch decided to bring in one of his children into the business as the Designated Successor (hereafter denoted by “DS”). The plan was for DS to plan and execute a new business plan. It was the patriarch’s hope that a successful product launch will convince the non-family management that DS is a worthy successor. 

This will allow the patriarch to fade into the background and retire. DS had wanted to copy HP’s success in the Zink printer, Sprocket. The patriarch was more careful and decided to hire an external consultant to study the market potential for Zink printers and provide recommendations for Ototo. The consultant was paid handsomely for the detailed work and this left a big financial hole in the budget for the R&D efforts for the Zink printer and the purchase of Zink paper supplies. In DS’s hurry to create a new revenue source, DS had gone against the advice given by the previous consultant. The previous consultant in the report strongly suggested against building this Fast Moving Consumer Goods (FMCG) product as Ototo did not have a wide distribution network, unlike HP. DS had thought otherwise and believed that Ototo could emulate the success of HP’s Sprocket printer. DS had pulled R&D resources away from the development of LED printers to the Zink printer without consultation with the R&D Manager. DS also created a huge marketing campaign to promote its Zink printer.

The Current Situation

The company is currently facing a financial crisis. The banks are threatening to repossess Ototo’s assets as the company faces challenges trying to repay the loans taken out to finance the Zink business. After a good initial sales start, the Zink printer was plagued by reliability issues and this news quickly became a talking point among netizens. Comments such as “a waste of money”, “bought a lemon”, and “stay far, far away” was regularly posted and reposted on Ototo’s social media pages. Sales slowed down and Ototo is currently stuck with over 20k Zink printer units and 500k of Zink paper supplies in the warehouse. Besides meeting the banks' demand, the cost of storage in the warehouse is $10,000 monthly. The patriarch is keen to come up with a quick business idea to revitalise the seemingly ailing ship. He hopes that the new business revenue can come in to help with Ototo’s dire financial status. He is willing to take out S$2 million of his personal fortune to underwrite the next new venture that can provide a quick revenue source. One of the criteria of the new venture is that it must be deemed as an essential service. 

This is so that the business can continue to operate during the next public health crisis - Pandemic X. He had decided to appoint the General Manager (“GM”), who is a non-family member, to head the post-mortem investigation of the Zink business failure and then to lead the turn around with the new venture. In order to be deemed fair and not to handicap the GM, the patriarch has also approved the GM’s plan to hire a new external consultant to assist in the report. On another front, the R&D Manager is facing difficulties in attracting and retaining talent in the R&D Department since the Zink printer fiasco. The engineers’ morale had been affected as they had to report to the R&D Manager and DS. Some of them were pulled out of their pet project - the new generation of LED printers with scanner and facsimile capabilities. They were asked by DS to work on the Zink printer with the backing of the patriarch. Several of the senior engineers have resigned and a few key engineers are showing signs of leaving. At a recent job recruitment fair at a local university, there were fewer than a dozen potential applicants from the graduating class visiting the company’s booth and expressing interest. This was stark in contrast in 2016 when there were ten times more applicants for the three career openings after the rollout of Ototo's first LED monochrome printer. This disturbing HR trend within Ototo is also playing on the patriarch’s mind.

The New Opportunity

The patriarch has a former secondary classmate who ran a very popular Ayam Penyet store that is located in a shophouse. It is regularly pulling in $10,000 worth of sales per week. One of the key factors of the success of this Food & Beverage (F&B) business has been the sweet chilli sauce, made from a secret family recipe. His classmate was thinking of retiring as his only child has a high-paying job with a bank and has no interest in taking over from the soon-to-retire parents. During the initial discussions between the patriarch and his classmate, they had verbally agreed that the patriarch will to take over the Ayam Penyet business, and access to its secret chilli sauce recipe for S$1 million. The shophouse is on a long-term lease. The patriarch’s plan was to use the next $500,000 to further grow the F&B. This foray into the F&B business will fulfil the patriarch’s dream of having an “essential services” company when Pandemic X comes around. As the GM has been a safe pair of hands to Ototo for the last decade, the patriarch has decided that the GM will be the ideal candidate to lead this. The GM has been allowed to spend the remaining $500,000 in any way he deems fit; this would include the hiring of an external consultant to do a post-mortem of the Zink printer fiasco and also to develop the service aspects of this upcoming F&B venture. The patriarch’s hope of getting out of this financial mess, restoring confidence in the banks, and finding out the root cause of his employees’ morale now lay squarely on the GM’s shoulders

Question

Conduct research to develop the service innovation idea that Ototo can apply to their future F&B business. Your service innovation idea should take into consideration the characteristics of Pandemic X and the services that are considered essential during a health crisis. Please include the sources of your research and the sources of inspiration for the service innovation idea in the answer.

Answer rating: 100% (QA)

In my opinion Oteto can increase its total profitability by adopting the following strategy Expanding Into Untapped Markets While Maintaining Focus on ... View the full answer