3M Case Summary

Adam BerkWayne AndermanVince RubieraSteve Sherwood

Frontr

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Prod

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Why it is important for a firm to study and understand its internal organization?

“Strategic competitiveness and above averagereturns only result when core competencies are

matched with opportunities “

The Case Analysis Process

• Familiarize• Critical facts• Recognize the symptoms.• Conduct a brief analysis• Identifying predicaments and

problems• Recommendations and alternatives

History and Facts1902 Minnesota Mining & Manufacturing founded

• To sell aluminum oxide to grinding wheel manufactures• Abrasives used for smoothing and sanding. • Think assembly line revolution and an innovative

industrial staple TBKA “sandpaper”.

1905 Company taken over by two stakeholder’s that the founders raised working capital from

1916 Declare 1st Dividend & not missed one since

1925-30 Scotch Brand Masking & Scotch Cellophane Tape

1931 Pension plan: Employee Centric Culture

History and Facts1947 Magnetic Recording Tape1950 Dry print Copying Machine: Foundation of Duplicating Division

1960s Photo Paper, Carbonless Copy, Medical & Dental products1970s Radiology, Pharma, Energy Control & Office Markets1980 Post-it Notes—Innovation of scientist needing page

markers for his church hymnals1990 Acquired sponge maker O-Cel-O; 1996 Settled lawsuits with faulty breast implants, divested of

other unprofitable product lines.2000 James McNerney chosen as CEO (GE contender for

Welch’s office).2005 McNerney resigns Boeing; George Buckley

(Brunswick) takes helm

Current Overview

“The Spirit of Innovation. That’s 3M”Model of corporate innovation

55,000 Products30+ Core Technologies6 Business Segments

35% Revenue products <5 years old15% Rule: Key to Success

James McNerney 2000-2005 • First outsider to lead the company in

100 years• Landscape McNerney Sees

– Profits and Revenues in decline – 1998 Reorganization & Right-sizing– 1999 Reorganization into Six Business

segments– Continued Commitment to Innovation

prevails– Redundant processes and inefficiencies

McNerney 2000-2005 Cont’d

• New Landscape Creation– Replicates GE’s model to cultivate

leadership talent. – Reorganized Business lines again.

• Electronics & telecommunications, • Industrial & transportation, • Consumer and office, health care, • Display & graphics• Safety and security

McNerney and the Scalpel• 2001 Six-Sigma instituted: Operational Efficiencies

Take Off• Short Term Results Oriented Culture• Products to market faster • 2002: Rev Increase marginal: Net Inc up 20%• 2003: Realigned Co. again ; cuts R&D Expenditures• 2004: 15% Rule: Unintended casualty

Interesting note: net income was up in 2004 but sales revenue is off. Begin to miss analysts and stakeholder expectations.

• June 2005 CEO is at Boeing with his scalpel.

Net Sales under Six-Sigma

2001 2002 2003 200402468

101214161820

Chart Title

Net Sales in Billions

Internal Analysis Dynamics

Resources Capabilities Core competency

Competitive Advantage Strategic Competitiveness

Steve: Technological Capabilities Adam: Other Resources of Strength

Vince: Core CompetenciesWayne: Recommendations

Technological Capabilities

• Sharing technologies, R&D, manufacturing and other resources across business lines

o Shared technology modelo Increasing speed and efficiencies

•Technological platform wove together 3M’s diverse business lines•Typical budget exceeding $1 Billion annually•Highly flexible machine tools

oCan make multiple products oCan be used in multiple manufacturing lines

Technological Capabilities• R & D Intensity

• Typical budget exceeding $1 Billion annually• 1930’s 45% of profit into new product

research• 2003 - 6.3% of sales• 2004 - 5.9% of sales• 2005 - 5.9% of sales

Other Strengths

• Corp Culture–Creativity– innovation-centricity–Accelerated leadership

development

Other Strengths

• Innovation–Streamline purchasing

functions–15% Rule–Technology cross fertilization–Researcher networking

Other Strengths

• Interdepartmental cooperation–3M Acceleration–Cross business use of

technology• Hedging strategy

2006 Technology PlatformsAd Am Bi Rf

Adhesives Advanced Materials

Biotech Reclosable Fasteners

Ab Dd Mr Pe RpAbrasives Drug Delivery Micro-

ReplicationPredictive

Engineering & Modeling

Radiation Processing

Ac Dm Nt Nm Pm SmAcoustics Display

MaterialsNano

TechnologyNonwoven Materials

Polymer Melt Processing

Specialty Materials

As Do Fi Fs Is Md Mi Pc Po SuApplication

SoftwareDental &

Orthodontic Materials

Films Filtration, Separation, Purification

Integrated Systems design

Medical Date Mngmnt

Microbial Detection &

Control

Precision Coating

Porous Materials & Membrane

Surface Modification

Ce Ep Fl Im Lm Me Mo Pd Pr WoCeramics Electronic

PackagingFluoro-

MaterialsImaging Light Mngmnt Metal Matrix Molding Particle &

Dispersion Processing

Process Design & Control

Wound Mngmnt

Cp Fc Fo Ip Pp VpChemical

Power Sources

Flexible Converting &

Packaging

Fiber Optics Inks & Pigments

Precision Processing

Vacuum Processing

Other Strengths

• Invent and experiment–Incremental approach to

capacity and strategic planning

Core Competencies

• Applying coatings to backings – Adhesives, coatings, substrates

• Criterion to determine which capabilities are core competencies– Valuable, Rare, Costly to imitate, Non-

substitutable

Core Competencies

• Bundled resources/sum of capabilities core competencies – Manufacturing efficiencies (Economies of scale)– Flexible tools allowed niche business products– Technology sharing across entire value chain– Effective knowledge management (R&D)

– Ability to output state of the art unique groundbreaking solutions– Invent and experiment approach

• Allowed complex supply chain to grow naturally

Core Competencies

• Innovative Spirit/culture– Sales people getting closer to end

users to see product application• Dust free sandpaper• Painters tape

– Invention and Manufacturing– Entrepreneurial foundations

Core competencies

• 55,000 products from film to tape to post-it notes– Appears to diverse?– Branches of the same tree– All integrated around adhesives, coatings, substrates– I.e. Post-it notes to Structural Weld Adhesive

Materials Science Surface Chemistry

Backings Coatings

Roll to Roll Tape and Cut Out Manufacturing

ExtrusionsWovenNonwovenPlasticsMetals

AbrasivesAdhesivesOxidesMedicinesPetri BrothOptical Patterns

Final Product Configuration

Modified from: George Buckley’s presentation to investors in May 2006; http://www.3M.com

Core Competencies

AnAnalytical Science &

Tecnologies

DiDisplay

Ec In NwEnergy

ComponentsInspection &

MeasurementNonwovens

Em Mf Op WeElectronic Materials

Mechanical Fasteners

Optical Communications

Accelerated Weathering

2008 New Technology Platforms

Interviews at 3M

Recommendations: The Dilemma

• Six Sigma significantly increases operating efficiencies

• Six Sigma hurts intangible resource of Innovation

• Innovation and “efficiency creation” platforms counter each other at times.

• The focus to measure, define, improve and control, douses creativity.

• Bottom line driven by?

Buckley’s Recommendation Plan

• Four Pillars1. Grow the current core business

• Small bolt-ons to product lines or geographies

2. Complementary acquisitions supporting core and expansion into adjacent markets

3. Build new businesses via Emerging Business Opportunities • Filtration, energy and mineral extraction, food

safety

4. Increasing Investment in International Opportunities• BRICP and remains their largest growth platform

Recommendations: Implementation

• Refocus Innovation to encourage new products

• Balance creativity and efficiency• Rebuild & expand its core• Extend product lines to meet customer

needs• Increase R&D investment year over year• Improve inefficiencies in manufacturing

and logistics

Advice on Successful Strategy Execution

• Strategy Puts You On Map• Execution Keeps You There• Problems with Implementation

• Use two more powerful levers;– Clarifying decision rights– Ensure info flows where needed

• (Neilson, Martin & Powers)

Questions

?

Resources• Development at 3M Leadership. Alldridge, Johnson, Stoltzfus, Vicere. Human

Resource Planning, (2006). 26(3), 45-55.• A framework for protecting your supply chain David Closs, Cheri Speier, Judith

Whipple, M. Douglas Voss. Logistics Management (2002). Highland Ranch: Sep 2008. Vol. 47, Iss. 9; p. 45

• 3M Reinvents Its Innovation Process Tim Stevens. Research Technology Management. Arlington: Mar/Apr 2004. Vol. 47, Iss. 2; p. 3

• Case History - Signs of the times Anonymous. The British Journal of Administrative Management. Orpington: Oct/Nov 2007. p. 7

• 3M balances ups, downs to beat Q1 predictionsDee DePass. McClatchy - Tribune Business News. Washington: Apr 25, 2008.

• 3M CEO: Core Businesses Continue to Drive Sales and Profit Growth Anonymous. Business Wire. New York: Sep 9, 2008.

• www.3m.com• 3m Retired employee newsletter• 3M CEO outlines long term strategy for growth Filtration Industry Analyst. Oxford:

May 2006. Vol. 2006, Iss. 5; p. 1• www.hoovers.com• www.mdm.com• Hit, Ireland & Hoskisson, (2007). Strategic Management. Mason, OH: South-western.• The secrets to Succesful Strategy Execution. Gary L. Neilson, Karla L. Martin, and

Elizabeth Powers, (accessed 10/08/2008) , HBR in Brief• The Long Case for 3M, Seeking Alpha (www.seekingalpha.com), December21, 2006