To: Cliff O'Connor, CEO From: Pat Lambert, Director of Marketing Re: Operation Optimize Update This memorandum reports on the current situation at AcuScan regarding the short-term budget crisis and development of the i Scanner for use in the retail setting. It will summarize the situation, discussing key points in the decision-making process and recommending actions that can be taken to address the problems described. The underlying problem is we have failed to continuously improve market share through the development of new products. The overall 40% market share is declining. The company faces declining revenues because the price of the i Scanner has dropped as it becomes a market commodity. AcuScan, despite making tremendous cost-cutting efforts (letting go 500 employees) is still in a short-term budget crisis.

To recapture our position as a market leader, we must develop the software for using the i Scanner in a retail setting by the end of the year. We must act quickly because another company Secur-A Corp is reported to be in the process of developing similar software. Departments also have to reduce their budgets by 15%. In these circumstances, we must all pull together, pool our resources and creativity, and meet the challenge before us. Developing a new product while making budget cuts has created an internal crisis among staff. Kelly, Chief Engineer of Product Software, is especially adamant about not being able to get the job done in a quality way by the deadline.

He and I have communicated. I have proposed to him that we hire contract workers to do the work that his staff is unable to complete after looking for ways his talented staff can work more efficiently. I propose that he and his staff decide, with our approval, which tasks need to be completed by contract workers. I will keep in close touch with Kelly to keep him positive about the work and to report to you any further problems.

It is my feeling that we will be able to meet our deadline if we are responsive to the concerns of department heads and staff and help them address problems as they arise. We need to emphasize to them that the future of the company is at stake with this project, that we need to increase our market share to stay competitive and increase revenues. Further communication about the importance of this project to the company, perhaps at an all staff meeting, would be helpful. Looking at the big picture, AcuScan needs to find a new market niche. The new software will be ready by the end of the year and finding a new market niche will require only minor adjustments.

To increase company profits, we must act quickly. Finding new market niches will be an ongoing priority. I recommend we continue the research already begun in this area to define more clearly the audiences for the retail i Scanner.