Please provide response for the following for the illustrated scenario:
1) Purpose and scope of document
2) Summary of the situation
3) Key points relating to the situation
4) Conclusions
5) Recommendations and actions to be taken, and why
BRIEF BACKGROUND:
AcuScan, Inc produced iScanner, a retinal scanning security business. It is used airports and claims 40% of the market. The company has 1500 employees and has hit a revenue of $100 million. Last year, there was a labor reduction of 500 employees due to the economy slowing down. The project revenue fell with both sales and service revenues. The company needs to reduce budget by 15% in the coming quarter.
You were hired in early February as the new VP of Organizational Development for AcuScan, Inc. The CEO hired you to help AcuScan make the transition into retail markets with a new product while maintaining its traditional product quality and excellent employment environment. Provide an executive summary for the situation below:
PROGRESS REPORT FOR iSCANN:
OUR CHARTER: A NEW MARKET TO CREATE NEW REVENUES
AcuScan created the retinal scanning security marketplace with the cutting-edge technology of the iScanner, But today, ten years later, AcuScan is barely sustaining 40% of the market share in a mature and competitive market. Prices for the iScanner and similar devices are dropping, as the product becomes commodity. Service revenues wuth their lower profit margins and higher overhead, are rapidly becoming the mainstay the company’s income. AcuScan needs to expand its technology into new markets, and again become the cutting-edge leader by creating a solution to an as-yet unrecognized customer need. To make this leap successful, AcuScan must act quickly: competitors are already looking into new ways to apply their technologies, and if we are to carve out a new niche, the time to act is now.
DEFINING THE PRODUCT: REVAMPING ISCANNER
In January of this year, the CEO requested that Marketing and Product Development conceive of a use for iScanner technology in a new marketplace, to address ongoing revenue and market share declines. After initial design meetings with Product Development, Marketing developed a product concept in line with past new product trends. We developed our marketing objectives, and contracted with Wilson Marketing for the initial prototype tests (concept tests and focus groups). We concluded that a strong potential existed to use iScanner technology and equipment in a retail setting – thus, “Operation Optimize.” By enabling retailers to identify incoming customers and track their movements, information about each consumer’s needs, wants, and desires can be linked to the consumer’s unique retinal scan.
Data about the customer, down to actual eye color, can be reported to retailers to help them tailor their products and displays to maximum effect. Relational data bases can be built on top of the iScanner technology to enable retailers to call up reports in a multitude of formats, from purchase patterns and trends to individual consumer tastes.
Initial research done in the AcuScan Marketing Department reveals that no competitor has the technology to date to create an application similar to the iScanner retail application described above. However a confidential source states that Secur-A Corp. is in the process of developing some kind of retail application. It is only a matter of months before Secur-A will come to market with a competitive product.
COSTS: MINIMAL INVESTMENT, MAXIMUM REVENUES
Because of present revenue pressures, capital to invest in new product development is minimal. Thankfully, because of the flexibility and power of the iScanner’s present software and operating system, Marketing and Product Development foresee that developing “Operating Optimize” sufficiently to take a small test market will require minimal investment of existing staff time and effort. Essentially, the retail application of the iScanner involves additional software programming, with little need for redesigning the hardware components. Some repackaging will be required to fit the product into a retail environment and eliminate the “high security” look of the outside housings, but this is not foreseen to be a major roadblock in the development of the product itself.
Based in initial analysis, we project that “Operating Optimize” will require the following minimum investment:
Software design and reprogramming $200,000 *Existing staff costs
Repackaging design and development 75,000 *Existing staff costs
Launch Marketing
50,000 *Existing staff costs
Advertising costs
Total cost to market 250,000
TOTAL COST TO MARKET $575,000
Given the potential return on this product in the first year, this is a reasonable capital outlay with a substantial ROI.
DEVELOPMENT PROGRESS:
To deliver “Operation Optimize” before our competition gets a foothold in the market, AcuScan must announce and deploy its first instillations within six to eight months. Marketing has already identified a potential customer for a beta test, who is expecting to begin the test in late August. Given the minimal alterations to the original iScanner device, this deadline seems to be a reachable, if aggressive, objective. To date, progress on developing “Operation Optimize” seems to be stalling, due to concerns within Product Development that software programming aline cannot be completed before the beginning of FY 2004 in order to deliver all of the features outlined above. PD engineers also claim that initial analysis of the application requires that all features be implemented in the first release, as opposed to creating a staged release that would enable AcuScan to establish a foothold in an emerging market.
The financial implications of this kind of delay are significant. Based on estimate of programmers time alone from PD engineers. AcuScan would have to add about $250,00 to the budget outlined above.
Coming to the market in early 2004 may put AcuScan at a disadvantage in terms of the competition, which is already in progress on its own version of a similar application.
CONCLUSIONS:
Based on initial market research and the slowdown of the product development, Marketing concludes that “Operation Optimize” needs a significant increase in its product development budget to reach August product launch goals. This capital outlay could be used to hire contract programmers to augment existing staff, to speed the redevelopment of the software running the product. Because of contractor costs, this would significantly overreach the estimated $250,000 needed in existing staff time, but would enable AcuScan to bring this product to market on time.
To resume progress on “Operation Optimize.” We need approval of the following revised budget as soon as possible to meet deadlines:
Software design and reprogramming $200,000 *Existing staff costs
Contract software reprogramming
350,000
Repackaging design and development 75,000 *Existing staff costs
Launch Marketing
50,000 *Existing staff costs
Advertising costs
250,000
TOTAL COST TO MARKET $925,000
This is a significant increase, and would reduce our ROI over the first year of the product’s life. However, given the “shelf life” that the iScanner has had in the industry (10 years), we conclude that over the coming decade, the ROI justifies this capital investment, even in a tight economy and with company revenues in flux.
REACTIONS OF EMPLOYEES
Letter from Marketing to CEO:
It’s clear to me that, in spite of a great vision and commitment by the top ranks of management to make “Operation Optimize” come alive, there are certain factions within the company that do not see a path to the product launch.
Accordingly, I would like to talk to you about alternative, namely, contracting with an outside software design firm to manage our project and develop the software to bring the iScanner into a retail environment.
May I request about 30 minutes of your time this morning to talk about this? I’ll have some numbers by 10:30 a.m. for you to look at.
Director of Marketing
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Response from Vice President of Product Development:
Well, folks, the pressure is on. Our project revenues are still falling, with both sales and service revenues sinking. It’s time for us to take extreme action.
As you know, I’m working with Pat Lambert on a new product that we will launch by the end of the year. But in the interim, we have to get serious about our budget crisis.
As a department, we must find ways to reduce our budget by 15% in the coming quarter. This is a heavy load, but I’m confident we can make the tough decisions together and maintain our department’s strength and productivity. So during the coming week, look at your personal budget areas, and highlight potential savings. Next Tuesday, be prepared to walk all of the department’s managers through your thinking, your results, and your concerns. We will work as a team to determine the final cuts that will make this 15% reduction a reality.
Don’t panic – I am determined to see this budget cut through without laying off existing employees. We are open to early retirement packages and similar voluntary reductions, but I prefer that we all tighten our belts equally and in small increments to reach our budget goals.
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Other notes:
CEO The budget is problematic. Can we make our deadlines with about 2/3 of the initial budget request – the $575K? The mil is out of the question.
Senior Engineer says that there are some inaccuracies and conclusion. He also says that the Director of Marketing has lack of knowledge of how iScan works, and throwing money doesn’t make it go away. He also states that relational databases aren’t some thing you can just add on and make work with few more lines of codes.
How can AcuScan maintain the existing service with the already short staff and find time to make up something new?