Anny Chan, founder of Otto2 Artistic Aesthetics
Not Giving Up Was Worth It
She saw her business go from profitable to hemorrhaging money in the blink of an eye. Scarred by the global financial crisis and a misguided investment strategy, she clawed back to breaking even, meanwhile learning to recognize her weaknesses and stop trying to do everything herself.
Not Giving Up Was Worth ItBy Yueh-lin Ma
From CommonWealth Magazine (vol. 618 )
Speaking of his work, celebrated architect Frank Gehry, the creative force behind the Guggenheim Bilbao Museum and the new Parisian landmark, the Foundation Louis Vuitton building, once said that if we knew in advance what we’d have to go through, we’d probably never go ahead and do it.
Even masters have moments of sadness and doubt, not to mention regular people. Yet perhaps that little extra measure of rebelliousness and commitment makes all the difference.
Exquisitely made up and dressed in a white dress and black high-heeled shoes inlaid with crystals, Anny Chan moves among a gathering of guests. Otto2 Artistic Aesthetics, the organization she founded 11 years ago, has moved to a new headquarters in Taichung, overlooking the National Opera House 27 floors below. Through the mist, the opera house’s curved walls appear somewhat surreal.
Like the surreal detours on the entrepreneurial road, Chan could never have imagined what would transpire before she experienced it herself. Otto2 is currently Taiwan’s largest children’s arts education institution, spanning 140 direct operation and franchise branches in Taiwan and China, with bases as far off as Changchun in Jilin Province and Yinchuan in Ningxia. Last year it achieved a turnover of NT$160 million.
Chan has just returned from Shanghai. Having finally gotten regional rights and franchising models squared away, business in China has taken off, and the organization is projected to reach 200 branches sometime this year. In order to keep up with it all, Chan must spend three weeks out of each month across the strait in China.
Despite everything looking fabulous on the surface, Otto2 only managed to break even last year, finally crawling out from the NT$90 million of debt accumulated three years ago.
Asked to speak to the defeats she suffered at first in the mainland market due to strategic miscalculations, Chan recalls her changes in attitude. “Back in 2013, I thought I could push through anything, but now I can own up to my weaknesses and tell my team what I need, so as to change the belief that ‘I can handle it all,’” she says.
Her confidence was justified, though, as she saw Otto2 through the financial crisis and established over 30 branches in Taiwan alone, yielding NT$100 million of revenue.
Son’s Special Needs Spark Venture
Chan got into business out of personal interest, having worked as a curriculum planner and training center manager for Mitac Computer in Taipei before moving to Taichung with her husband. It was there in Taichung that she founded Songlin Education in 2000 with NT$2 million in capital, partnering with Da-Yeh University and handling student recruitment and curriculum planning in the outreach department.
Facing signs of her 8-year-old son’s hyperactivity and the possibility of him being branded a “problem child,” in 2005 she took him to see a psychologist, who prescribed art therapy.
“My son would cry at school, saying he didn’t want to live. Meanwhile, at the university outreach education department, people often told me how happy they were in their studies. You can imagine what was going through my mind.” After looking at all the children’s painting and art classes on the market, she finally decided to establish her own children’s arts education organization.
Carried by her strength as a mother, Chan used the resources at hand, and, working with Da-Yeh University professors, mapped out a theoretical framework for material intended to stimulate children’s potential, establishing a teaching system based on creative guidance and diverse experiences for children ages two to 12. This approach quickly separated itself from the fine arts programs on the market emphasizing drawing skill and emulating the work of others.
In the effort to raise her brand’s profile, Chan ventured into the department store sphere in 2007, reaching consumers at counters offering creative clay-making and baking classes and starting a trend of young children going to department stores to take arts and crafts classes. At its height, Otto2 reached 34 counters at department stores across Taiwan.
Global Financial Crisis
Before she could even celebrate her success, Chan found herself staring the global financial crisis in the face. Her department store operations began hemorrhaging money to the tune of NT$2 million in losses each month.
“You want to stick to your guns, yet you don’t know how long you can hold on,” she recalls. Facing a gloomy economic outlook, Chan looked everywhere for funding, going so far as to pawn her wedding ring, sell off her insurance policy, and re-mortgage her home. Even worse, she had to face the doubts of her friends.
“They would tell me: Do you really have to do this? As a woman, why must you risk everything for your business. Such single-mindedness is dangerous!” Fortunately, she had the support of her husband, and as they tallied their losses at NT$8 million they wondered whether they should cut their losses and close up shop.
Only when she received a small- to medium-sized business guarantee from the Ministry of Economic Affairs did she manage to secure a NT$6-million bank loan to keep the operation afloat through difficult times. Regaining balance after rebounding, by 2010 Otto2 reached the NT$100 million revenue mark.
Student of Finance
The lessons of the global financial crisis made Chan acutely aware of the importance of cash flow. These lessons in hand, she started taking classes, participating in trade associations, learning how to prepare capitalization increase proposals, and actively seek capital infusions. Meanwhile, she had decided to make a move across the strait into the Chinese market.
An infusion of US$3 million in venture capital funding in 2012 boosted Chan’s spirits and made her more anxious to achieve something. The following year, Otto2 plunked down NT$90 million to invest in four branches under direct company operation, three of which were located in China. In spite of such ambitious designs for gaining brand momentum, things did not quite work out as hoped, as the top-performing branches faced constant complaints and were ultimately forced to shut down.
Failure in the China market put Chan, who had been focused simply on expanding funding and operations, in the awkward position of nearly being replaced as executive director in 2014, unable to continue leading Otto2’s direction. Ultimately, input from Dreamfield Image Company director Su Li-mei and Neil Shen, chairman of Taya Venture Capital Co. helped her to change course from heavy capital investment in direct-operation branches in China to lighter investment in franchising licensing - a strategy that finally put Otto2 back on track.
“Anny’s familiarity with children’s education and passion for arts education is exceptional, but she was comparatively weak in operational management, and finance and direct operations consumed too many of her resources. Now that she has adjusted her strategy, things are looking much better, and her ability to get things done is finally shining through,” observes Shen.
“Anny strikes people as determined and willful, and always so full of energy, speaking with great excitement,” relates Tan Tian, director of an Otto2 franchise in the Hunan province city of Changsha, who first discovered Otto2 at a Taipei department store during a visit to Taiwan in 2012. “I approached them about signing up as a franchise. I really appreciate Otto2’s philosophy of respecting every child’s unique personality, which is so different from the cookie-cutter model typically practiced in China.”
From interest and ideals to a profitable organization, from personal responsibility to experiencing the capitalist market, Chan has endured two especially trying junctures along the way. Asked for advice to entrepreneurs, she offers, “Find a reason to do it that cannot be denied.” And looking back at those difficult times, she adds, “Fortunately, I didn’t give up easily.”
Translated from the Chinese by David Toman