Important: This document and all its contents are SIGMA CONFIDENTIAL. This version has been prepared for a special off-site meeting of Omicron directors; a subset of this information may be revised and reused in communications to the division as a whole.
After researching Kappa's current assets, I have found three that would complement Omicron's current efforts and add great value to our division.
Kappa holds five significant patents on algorithms that allow data sets to be quickly transformed.
This high-quality jelled team can be annexed as a group. Omicron has considered launching such a group; here's an even better opportunity!
Kappa's EU distribution network is state-of-the-art, and dramatically under-exploited.
Three arguments support Omicron's annexation of three Kappa assets that are critical to the performance of our mission.
Argument re Patents: We need these to win Far Eastern markets. BATNA: both Omega and Omicron could use the technology?
Argument re Skunk Works: Omega has its own existing skunk works w/ powerful support from upper management. Need to explain how it'd cause less disruption to move this jelled group to a division where it could start fresh...?
Argument re EU Network: Good news: Omega shows little interest in the Dutch bonded warehouse system; has called it "risky"!
Kappa holds five significant patents on algorithms that allow data sets to be quickly transformed. All five transforms could be integrated into our primary product lines, providing great benefit to customers. So far, they've been wasted! See Arguments.
While exploring Os Kennell's dream for the 1000x product line, which never materialized, Kappa mathematicians and engineers successfully developed, tested, and patented five new transformations that provide a variety of types of flexible data handling.
Their internal names are: pretzel | corkscrew | rhizome | tortellini | noname
For example, one application of these patents allows incompatible data sets to be cross-indexed despite being co-located. This technology was never added to Kappa's viable 720 family and the patents are now languishing unexploited.
As part of preliminary work for this study, I commissioned a small-scale test of the first patented transformation type (pretzel - patent 9073583) by Allan Weinstein of Omicron Engineering. Allan's first tests suggest that if this transformation were applied to our mid-range products, in place of the progressive transformations we are currently using, performance (as perceived by the end user) could increase fourfold. See Allan's spreadsheet, below, for details.
[Spreadsheet goes here. Not provided. See the LAN.]
The other patented transformations are similarly powerful and I am confident we could effectively apply them throughout Omicron's product lines. If management needs further demonstration of their benefit, further tests could be run, but my own view is that another hurried test is unnecessary to demonstrate the attractiveness of this technology. It is very attractive and I do not hesitate to recommend that we either grab it or (in the worst case) share and co-develop it with Omega.
Once the decision to annex has been taken, and additional resources have been officially allocated, Allan's team can work quickly to provide further data to support management strategic decisions (especially those we will have to make about where first to apply these advances).
To date, these patents are unchallenged, but they will need to be fiercely defended once Omicron deploys related technology. We have full confidence in Sigma's legal team(s) but their attention must be called to this technology via its incorporation in viable products.
This high-quality jelled team can be annexed as a group. Omicron has considered launching such a group; here's an even better opportunity! Omega would absorb - and potentially mismanage - this group; see Arguments.
In imitation of Omega's successful group with the same nickname, Os Kennell and his team established Kappa's own high-tech R&D "skunk works". After an initially rocky start, and the departure of two of the original seven engineers, this team has jelled and has begun contributing significantly to Kappa's product line.
This group did the original work on the Sigma Socket (now used by all divisions despite our rivalry - it's that good!) and contains two holders of the transformation patents we also covet. It is solely due to this group that the 720 family of modular devices was able to compete (on both price and performance) in the same marketplace as Omega's equivalent consolidated product.
Its personnel include Senior Scientist Marianne Nolling, Senior Scientist Diego Cruz Escobar, Researcher Thomas Chiang, Researcher Elizabetta Koenig, and Researcher Vladimir Brezniak. I have included their shortened CVs for your review.
Omicron has several times considered launching a skunk works, but has demurred, due to Sigma's overall poor track record in using this approach (viz. the years before Omega's group got sorted out) and fears that its efforts would not produce results within a reasonable time frame. However, we can definitely annex this proven group with far lower risk than starting a new group from scratch. Their technical backgrounds will immediately be relevant. Given Omicron's status-free culture, we may change the group name, but to sum up, it would be a crime to let this group slip away or, worse, start a competing technology company.
Kappa's EU distribution network is state-of-the-art, and dramatically under-exploited. This valuable resource must not be disbanded! Fortunately, indications are that Omega isn't interested - their existing system has entrenched admin support. See Arguments.
Under its hard-charging director, Os Kennell, who had many contacts in the EU, Kappa has developed a sophisticated EU distribution system. Finished goods are shipped to Rotterdam, where they're kept in a bonded warehouse. Order confirmations are routed to a computer system which simultaneously produces bills of lading and customs documentation. Shipments are pre-cleared before transshipment; they arrive at destination airports and are picked up by hand-picked freight companies in each region.
Simply put, this network is first-rate. It's been small, because it serves 720's only at present, but the warehouse and the system have room to expand. Simply put, we MUST have this system. Our high volumes make it especially attractive.
These progressively more detailed maps show Rotterdam and the location of the Kappa warehouse:
[Maps not provide. See the LAN.]
The following arguments support Omicron's annexation of three Kappa assets that are critical to the performance of our mission. I expect these notes to be revised and expanded at our off-site meeting.
We need these to win Far Eastern markets. BATNA: both Omega and Omicron could use the technology?
This document highlights five key patents issued to Kappa Division that have never been incorporated into products. Paradoxically, these are more interesting to Omicron than the patents that were used. The market has tested the Kappa product line and found it wanting, which means that the other Kappa patents, the ones that were incorporated into products, are less valuable (although they should still be defended by Sigma Legal according to our usual practice).
The more general patents, if incorporated into Omicron's products, can result in dramatic increases in performance. See Allan Weinberg's preliminary results for an example of how effective they can be - especially the most widely applicable transformation, "pretzel."
The Omicron planning team believes these performance improvements are critical to any attempt to increase market share in the Far East/Pacific Rim territories.
Our Best Alternative To a Negotiated Agreement (BATNA) is that both Omega and Omicron would have full access to this technology. We believe that Omega's products, due to their smaller size, can't take full advantage of these performance improvements, but just as the Sigma Socket was shared, these patents are "theoretically" the property of all of Sigma for use as needed. However, Sigma's previous experience has shown that if theoretical improvements are not to languish in the lab, they need champions who will put them into production products. Ultimately, we should argue that Omicron is willing to put resources behind these patents and intends to take full advantage of them.
A related issue is custody of the skunk works where the patents were produced.
Omega has its own existing skunk works w/ powerful support from upper management. Need to explain how it'd cause less disruption to move this jelled group to a division where it could start fresh...?
Our key argument here is that Omega already has a skunk works. It's been operating for over a decade, after the usual rocky start (which also occurred with Kappa's effort).
In our opinion, Omega's skunk works is too large for optimum efficiency. With many layers of bureaucracy and frequent routine status meetings, it is not an ideal place for scientific work. [Our critique, plus the start-up costs and potential personnel issues, has led to Omicron's research staff being organized instead in our current system of free-roaming pods.]
We believe that Kappa's researchers would be disenchanted and discouraged by the infighting at Omega, and hope to offer them a chance to move their research under our funding umbrella with little disruption. At the same time, we'd be open to suggestions previously made by Marianne Nolling, about how to make the group even more productive and less hierarchical.
Good news: Omega shows little interest in the Dutch bonded warehouse system; has called it "risky"!
We don't anticipate a serious struggle over this operation. Although amazingly effective, Kappa's system is small - most other groups at Sigma don't yet see the potential benefits if applied to high-volume lines.
Omega's swollen administrative group has a vested interest in maintaining their present cumbersome distribution system. It provides travel perks--global travel--for senior staff when bottlenecks have to be "straightened out" on site! A quick review of related expenses shows this is a serious vulnerability for them.
Also, as our most conservative (consumer) division, Omega is slower to innovate. I've heard their planners call the Dutch bonded warehouse system "risky"! Our opinion: the top EU companies are already using this system and have demonstrated real cost savings relative to country-specific warehouses. How much more demonstration do they want?
I have strong recommendations about parts of Kappa we don't want to annex.
In general, Kappa personnel tend to be imbued with Kappa's distinctive "crazies on a quest" culture and unless there are strong influences to counteract this (as in the case of the skunk works) we would not want to move over any group in its current form. Acquisition of talented individuals should not pose significant problems if they are integrated into Omicron one by one (as opposed to in a group).
Omicron specifically does not want or need the following assets:
Sales and Support. The 720 Sales and Support group should rightfully move to Omega, since 720's will be replaced by Omega products (see Kappa Close-Out for details). We have no interest in the others (see layoff information from SHAG).
Manufacturing. We already have excess capacity and the Kappa production techniques do not lend themselves to easy combination with ours.
Utility Programmers and Engineers. We will review Kappa personnel for all our open jobs, as directed, but do not expect skills matches with most of the personnel outside the skunk works.
Managers and Adminstrative Staff. Omicron's division's staff-to-line ratio is the lowest within Sigma, and we are proud of this.
Announced in 9/97, the dissolution of Kappa Division and close-out of Kappa products are expected to be complete by 3/98. This 'Kappa at a glance" summary draws on information provided by Arlene Myers of Sigma Reengineering. Thanks Arlene!
Here are close-out details for Omicron personnel who may not be up to speed on the Kappa situation:
The following material is to be regarded as extremely sensitive. It is based on continuing discussions with Sigma Human Assets Group and is subject to change.
Kappa VP Os Kennell has long been known as a "true believer" in pushing for the Kappa vision (high performance with sets of small, modular components). When Kappa growth did not materialize, upper management made several efforts to get Os to refocus his own efforts and/or re-target the product line. His abrupt departure, referred to in Tom Balpheimer's memo of 16 September 97, reflects his unwillingness to even discuss these changes.
The Sigma Reengineering Group is managing Kappa Division during this transition (from Kennell's departure through its dissolution).
As the product lines are closed out, the month of January has been set aside for discussions aimed at incorporating some Kappa assets into the Omega and Omicron divisions. You are reading a white paper prepared for these discussions.
Note: Zeta Division is not involved in the division of Kappa assets.
We expect final decision on the distribution of Kappa assets by February 1st. The months of February and March have been set aside for the implementation of such moves and transitions as may be necessary.
All non-human assets not claimed by other divisions will be placed in storage for eventual reuse or recycling.
By February 1st, it will be clear whether there are substantial Sigma employees, formerly of Kappa, whose work functions are not being transferred into other divisions. Sigma Human Assets Group (SHAG) has made the following provision for these employees: