Losing Money to Be a Tycoon

In Otto Technologies…

Chang You, Lin Wan, and the core members of the company had gathered in the conference room, ready to discuss the general direction for the new cell phone.

Lin Wan had just arrived from Shang Yang Games.

Research and development of Be Quiet was underway. Ye Zhizhou, Wang Xiaobin, and the other designers had already produced a design manuscript. At the same time, the other employees were working on foundational tasks like obtaining art resources.

Lin Wan did not have to get involved in such tasks. Thus, she could spare some time to travel down to Otto Technologies and sit in the meeting about the new cell phone.

All the employees sat upright and still with somber expressions. They looked very serious.

At Otto Technologies, they were still employees working on cell phones, just like they had been at Hongcheng Technologies. However, everyone's attitudes seemed slightly different here.

Chang You had been the Vice President when they were at Hongcheng Technologies. However, he had not had much say.

There had been many other Vice Presidents with the same authority as Chang You. What's more, there had still been a CEO above him.

Since those at management level had had different mindsets, there had been a lot of conflict and wrangling.

Since even Chang You—as Vice President—had not had much freedom, the friends who had been working under him had had it worse.

Yet, now, Chang You had gained Boss Pei's trust. Thus, he was allowed to decide on the general direction of the new cell phone. He had much more authority now than before.

Naturally, the friends working under him no longer looked so sullen as well.

Furthermore, when the previous company had gone bust, everyone had had to go their separate ways. Now that they were reunited, most of them felt like they could finally see the light at the end of the tunnel. As a result, all of them felt grateful to be where they were.

Chang You hung up and addressed everyone. "Boss Pei said that he's busy at the moment, and so he won't be able to come down. He said we can make the necessary decisions.

"Let's begin, then.

"Director Lin, as Tengda's representative, please feel free to raise any opinions you have."

Lin Wan nodded. "Alright."

She did not think that she would have any problems. After all, everyone seated in the room was more experienced than she was. Still, she had to maintain the right attitude as the head.

Chang You commenced the meeting according to the established agenda.

"The new cell phone model will be based on the research and development plan we created for Hongcheng Technologies' flagship model back then. I think all of us likely have plans that we were forced to stop midway. Some of us had probably even negotiated a procurement plan with suppliers in detail. If there are no legal risks, we can make use of them.

"Our company's first cell phone must use Original Design Manufacturing. I don't expect anyone to have questions about that.

"At the moment, we mainly have two things to work on. First, we have to research and develop a system that belongs exclusively to our brand. Second, we have to set a general direction for our products and communicate this with the manufacturers.

"It goes without saying how important the system would be…"

Lin Wan listened quietly by the side, taking down notes from time to time.

Although she had not conducted research on the cell phone industry on purpose, she understood the basic concepts from her observations of her family business.

Original Equipment Manufacturing (OEM) and Original Design Manufacturing (ODM) were two common modes of manufacturing in the cell phone industry.

A tech company producing cell phones did not have to take care of everything—from designing to manufacturing, branding, and selling. They just had to outsource the various tasks to the relevant producers.

For OEM, the company itself would design the product and outsource the manufacturing. That was what companies like Pineapple did.

On the other hand, for ODM, the company would merely communicate their standards and requirements to the manufacturers. The manufacturers would then design and produce the products. This was more commonly known in the market as 'private labeling'.

Of course, cell phone manufacturers could make custom requests. As long as they were willing to pay more, everything was negotiable.

Otto Technologies had only just been established. It was not possible for it to independently research and develop every part of a cell phone. Thus, ODM was the better option.

Going for 'private labeling' did not mean that the quality would be worse off. There was also nothing embarrassing about it. Most local and foreign cell phones were ODM products. Many cell phone models, including Shenhua, were also completed using ODM.

Many Original Design Manufacturers had been designing cell phones on behalf of other companies for a long time. They had good plans for everything from the products themselves to hardware assembly. They also had tons of experience, good quality control, a stable supply chain, and reliable efficiency.

Some cell phone manufacturers even managed to produce low-end models using ODM that were of better quality compared to high-end models produced using OEM. This was a phenomenon that had confused many consumers.

Of course, things were different for large, stable companies like Shenhua or Pineapple. In those cases, taking over the designing work and creating a flagship model using OEM would increase the high-end brand's value. OEM would obviously be the better choice.

However, for Otto Technologies, it was still too early to take this step.

ODM was akin to private labeling, but they could still create custom cell phones. Of course, the more custom requests they had, the more money they would have to spend.

At that moment, everyone focused on coming up with a general plan for the new cell phone—in other words, how to integrate the various existing plans.

They spoke freely, to their heart's content.

"We definitely have to use the latest microchip."

"We also have to use the best screens, right?"

"The camera can't be too bad either. In fact, it looks like many flagship models have two cameras now. We have to follow suit, right?"

"We need to take care of battery life, too. Maintaining a good microchip and screen would require a lot of battery."

"It should have more internal storage as well, and maybe add some RGB?"

"Wait, we'll only be purchasing in small quantities. Can we get good microchips and screens?"

"If we can't, we can always pay more! If we don't use the best microchips for such an expensive model, we'd be criticized upside-down. We have to get them at all costs!"

They all spoke one after another, obviously excited to include the latest hardware in the cell phone.

The original design was intended to be Hongcheng Technologies' flagship model, M9. It was what Hongcheng Technologies was supposed to use to enter the high-end market.

However, M9 was only supposed to cost about four thousand yuan. Now, the current model was to be sold for eight thousand yuan.

How many more good things did they have to add?

Every time they had worked on cell phones before, they had had to be stingy and try their best to reduce costs as much as possible. They could only daydream about good ideas that had often been too expensive to execute.

In the end, they had often been left with no choice but to reduce costs for things like the motor, charger, and NFC.

However, things were very different now. They could insert as many good parts into the cell phone as they wanted and still not have enough!

What's more, cell phones could be extremely expensive for different reasons. It was not as simple as throwing all the latest hardware and technologies into the design.

Take the unpopular-as-yet full-screen technology for example. Companies could make the top part of the cell phone's frame extremely narrow, but that would require them to find a new place to put the speakers and other hardware that normally occupy that space. This would undoubtedly require them to compromise other parts of the cell phone.

Although such phones would look more interesting, there were huge sacrifices involved. Moreover, practicality could be compromised.

Everyone discussed these considerations for a long time. Ultimately, Chang You decided to give up on pure aesthetics and focus on mature, reliable, and expensive technology instead. They would remain down-to-earth and pile on such resources to increase the cell phone's value.

Soon, discussions about the model's hardware came to a close.

From what Lin Wan could understand, the cell phone's hardware design sounded quite similar to Shenhua's flagship model. However, she was certain that it would not surpass Shenhua's cell phones in terms of the system, custom design, and unique selling points.

There was also a world of difference between the two brands' reputations.

Otto Technologies' cell phone design would also make use of new technologies available in the market and look quite impressive. However, it would definitely not be able to overshadow other large companies' flagship models.

What's more, Shenhua's flagship model was only priced at less than six thousand yuan.

From the looks of the current situation, Lin Wan guessed that it would be difficult to sell their cell phone for even 5,500 yuan, much less eight thousand.

Chang You said, "Think of more ideas, everyone. Boss Pei has given orders. We must sell this cell phone at eight thousand yuan.

"When I was talking to Boss Pei earlier, he made some suggestions. For example, we must only replace cell phones and not repair them. If a customer's phone breaks down, we would have to deliver a new set to their doorstep and help them to transfer their data over. Then, we'll have to initialize the old set.

"All in all… we have to think of additional services to add to the cell phones so that they are valued for money."

With this new conversation opening from Chang You, the others began offering suggestions once again.

"What if we intensify the replacement services? We could allow customers to trade in their older models each time we produce a new one. We'll give them five hundred yuan on top of their old models' valuations. This way, we could encourage customers to stick to our brand."

"I think we could make our packaging more exquisite. We'll choose the best factory-installed screen protectors and casings to increase the value of our cell phones."

"We could also partner with various application developers, such as video websites. The application could be pre-installed in the cell phones, and our customers could enjoy members' benefits when they watch videos."

Everyone discussed freely and came up with many ideas. Some were expensive, and others were not so expensive.

Still, even if they executed all the ideas, it seemed unlikely that they would be able to increase each cell phone's value to eight thousand yuan.

After all, Pei Qian had stipulated that he only wanted a five percent profit margin. If the cost of the cell phone ended up being far less than eight thousand yuan, Chang You would have a hard time explaining himself to Boss Pei.

After some time, everyone reached their wits' end and fell silent.

That was to be expected. The cell phone industry had high barriers to entry. The large companies' flagship models were also all value for money and not lacking in any way.

Even though Chang You and his team could make use of the new technologies that they picked up during their time at Hongcheng Technologies, the team's research and development capabilities were still a far cry from international companies like Shenhua.

Thus, no matter how hard everyone worked, any product they could come up with would be valued at six thousand yuan at the most. The additional benefits could push it up to seven thousand… but not to eight thousand yuan.

Chang You looked around at everyone else and said, "Please continue thinking of ideas. If we still cannot reach eight thousand yuan, we might have to buy expensive, custom-made hardware."

They could push the cell phone's value up if they purchased custom-made hardware, but such hardware had very low price-quality ratios. A small company like Otto Technologies could be seen as a foolish spendthrift.

Just when everyone was feeling helpless, Lin Wan spoke up.

"If we work together with other video websites and software companies, the most they could offer is a membership. It would be very difficult to get anything more than that.

"I can talk to the other companies under Tengda. We would probably get better benefits that would increase the value of our cell phones by much more.

"For example…

"Fei Huang Workspace could give our customers two tickets to the pre-screening of every new movie they film.

"Fish-Catching Internet Cafe could give our customers lifetime memberships, allowing them to enjoy discounted prices and a free drink every day.

"Once they link their game account to their phones, we could also give them one Tengda game every year.

"Zhongdian Chinese Network could also grant our customers lifetime membership, which could give them discounted subscription fees, additional recommendation votes, and monthly votes.

"Our customers could also become automatic VIPs of Upwind Logistics and enjoy priority delivery services.

"On top of that, they could be distinguished guests at Ming Yun Private Kitchen. If they spend a set minimum amount, they could enjoy one additional free dish.

"That'll probably be all for now. We could add on additional benefits in the future if any suitable ones pop up."

Someone beside Lin Wan raised his hand hesitantly. "Director Lin, are you able to obtain that many benefits?"

Lin Wan nodded confidently. "Of course. I'm very familiar with the people in charge of all those subsidiaries. I'll talk to them. For all we know, they might have better ideas."

Chang You's eyes lit up. "That'll be best! We'll thank you in advance, then, Director Lin!"

Lin Wan waved her hand. "Don't thank me.

"Boss Pei once told me that, as the head, I am integral to Otto Technologies. I'm not supposed to remain out of the picture.

"I think Boss Pei was hinting to me that… since I'm considered an old employee of Tengda, I should act as the bridge between Otto Technologies and the other businesses under Tengda Corporation.

"Count on me to liaise with the other subsidiaries!"