The most effective firms recognize strategic competitiveness and above average returns only result when core competencies (which are identified by studying the firm’s internal organization) are matched with opportunities (study of the firms external environment). We will briefly examine a few key components of this equation in our presentation today.
In the case of 3M we will familiarize you briefly with the Who What How, Where and when of the history of the firm and the critical facts of the case. This will help us recognize some of the symptoms. We will conduct a brief analysis using just a few of many theories and models to illustrate; Diagnose by identifying predicaments and problems-discrepancies between the goals and performance- and explore some recommendations and alternatives that might be implemented.
1905: Be careful of selling too soon, 1916: What all great companies do or would like to, 1925-30 cementing the future, 1931 says it all .. 4 years before Unionization legislation is even passed Wm. Mcknight, a book keeper hired in 1907 and now CEO reflects mgt. values.
For decades a model of corporate innovation; Logo; “The Spirit of Innovation. That’s 3M”55,000 products derived from 30+ core technologies stemming from 6 Business lines. This is the competency structure Vince will articulate to.Proud history 1/3 revenue from products introduced in 5 years or less15% Rule: Key to their success and culture of innovation is the Time Segment of employees career dedicated to follow personal projects for innovation….You will hear from Adam soon on that.
Bringing us right up to date,Facts and figures of the 2000-2005 McNerney Tenure….First outsider to lead the company in 100 years after DeSimone’s retirementLandscape McNerney Walked into….Company profits and Revenues in decline despite 1998 Reorg and right-sizing (layoffs) plus theCompany reorganized again in 1999 into Six Business segments….Continued Commitment to Innovation prevails….So he gears up in his GE Surgical Greens and gets that operational scalpel out…
Creates his own Crotonville with HR at 3M. Identifies weakness in lack of leadership succession planning.ID’s even a more effective structure of business segmentation and moves on that…all in this first year. Steve and Adam will address this next.
2001 Institutes rigorous Six-Sigma: improves productivity, increases profits, enhances customer service. New evolving culture: Short term result oriented Products to market faster2002 Revenues increase marginal…net income increased by 20%2003 Realigned company again cuttingand relocating R&D. Unintended Victim is 15% Rule: In the quest for efficiency Innovation the revered culture of innovation was woundedStill exists…In theoryDifficult to act on it under new culture and changed infrastructureTime constraints to accomplish other goalsJune 2005 Resignation: CEO is at Boeing with his chainsaw and scalpel.Interesting note: net income was up in 2004 and presently but sales revenue is off and begin to miss analysts and stakeholder expectations.
Steve: Speak to the technological capabilities while Adam: speaks to the components that form 3M’s Strategic flexibility. Vince: examines implementing strategies competitors find difficult or too costly to imitate, where it derives is competitive advantage. We will wrap up with a brief diagnosis of what hindered 3M’s value creation strategies & and make suggestions to grow core competencies back into SC.
Perception too highly diversified org, should get out of some not base on competencies, but they are all based on a few well integrated core products
Perception too highly diversified org, should get out of some not base on competensies, but they are all based on a few well integrated core productshttp://www.youtube.com/watch?v=-YV5h6xzGKo 15% Rule, Corp entrepenuership
Significantly at first DFSS reduces waste and increases efficiency and innovation changesunder McNerney six sigma program. Buckley’s first year 2005 recognizes the second side of the transaction which isinnovation & efficiency counter each other at times.With Six Sigma initiative embedded into the company’s culture, its focus to measure, define, improve and control, doused creativity. AS a result innovation became suffocated. Bottom line is driven by operational efficiencies instead of organic growth.
Small bolt on acquisitions will keep transactions costs low and indirect merger costs below major M&A deals. Wall street should applaud it.Great way to build in new spaces faster than ground upStrategic managers shouldalways be looking for Opportunities presented by current trends in society.
Don’t homogenize intangible resources of human capital &innovational traits, foundationsof reputation & brand in a culture of creativity. Reemphasis on 15% rule while retaining highly efficient work processes as priority too.Especially adhesives, abrasives, tapes and films.Maintaining the ability to form competitive advantages such as innovative product development complements the first pointRevitalize the foundation of creative culture inside
Brilliant Strategy puts you on the map, only solid execution keeps you there. Most struggle with implementation due to relying on structural change such as the reorgs of both Buckley’s predecessors. Structural has its place but produces ST GainsWho owns each decision in Buckley’s hierarchy and who provides input. Second: given the dept. structure changes promote managers laterally to rebuild networks needed for cross unit collaboration innovatively…re-integrate with the ops network in place.Only then after things are flowing should he alter structure making certain to realign incentives to support the moves.
3M Case Summary
Why it is important for a firm to study and understand
its internal organization?
“Strategic competitiveness and above average
returns only result when core competencies are
matched with opportunities “
The Case Analysis Process
• Critical facts
• Recognize the symptoms.
• Conduct a brief analysis
• Identifying predicaments and
• Recommendations and alternatives
History and Facts
1902 Minnesota Mining & Manufacturing founded
• To sell aluminum oxide to grinding wheel
• 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 Facts
1947 Magnetic Recording Tape
1950 Dry print Copying Machine: Foundation of Duplicating Division
1960s Photo Paper, Carbonless Copy, Medical & Dental products
1970s Radiology, Pharma, Energy Control & Office Markets
1980 Post-it Notes—Innovation of scientist needing page
markers for his church hymnals
1990 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
2005 McNerney resigns Boeing; George Buckley
(Brunswick) takes helm
“The Spirit of Innovation. That’s 3M”
Model of corporate innovation
30+ Core Technologies
6 Business Segments
35% Revenue products <5 years old
15% Rule: Key to Success
James McNerney 2000-2005
• First outsider to lead the company in
• Landscape McNerney Sees
– Profits and Revenues in decline
– 1998 Reorganization & Right-sizing
– 1999 Reorganization into Six Business
– Continued Commitment to Innovation
– Redundant processes and inefficiencies
McNerney 2000-2005 Cont’d
• New Landscape Creation
– Replicates GE’s model to cultivate
– 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
• 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
• June 2005 CEO is at Boeing with his scalpel.
Net Sales under Six-Sigma
2001 2002 2003 2004
Net Sales in Billions
Net Sales in Billions
• Sharing technologies, R&D, manufacturing
and other resources across business lines
oShared technology model
oIncreasing speed and efficiencies
•Technological platform wove together 3M’s diverse
•Typical budget exceeding $1 Billion annually
•Highly flexible machine tools
oCan make multiple products
oCan be used in multiple manufacturing lines
• R & D Intensity
• Typical budget exceeding $1 Billion annually
• 1930’s 45% of profit into new product
• 2003 - 6.3% of sales
• 2004 - 5.9% of sales
• 2005 - 5.9% of sales
• Corp Culture
–Cross business use of
• Hedging strategy
2006 Technology Platforms
Ad Am Bi Rf
Ab Dd Mr Pe Rp
Abrasives Drug Delivery Micro-
Ac Dm Nt Nm Pm Sm
As Do Fi Fs Is Md Mi Pc Po Su
Ce Ep Fl Im Lm Me Mo Pd Pr Wo
Imaging Light Mngmnt Metal Matrix Molding Particle &
Cp Fc Fo Ip Pp Vp
Fiber Optics Inks &
• Invent and experiment
–Incremental approach to
capacity and strategic
• Applying coatings to backings
– Adhesives, coatings, substrates
• Criterion to determine which capabilities are
– Valuable, Rare, Costly to imitate, Non-
• Bundled resources/sum of capabilities core
– 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
– Invent and experiment approach
•Allowed complex supply chain to grow naturally
• Innovative Spirit/culture
– Sales people getting closer to end
users to see product application
• Dust free sandpaper
• Painters tape
– Invention and Manufacturing
– Entrepreneurial foundations
• 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
Roll to Roll Tape and Cut Out
Final Product Configuration
Modified from: George Buckley’s presentation to investors in May 2006; http://www.3M.com
Ec In Nw
Em Mf Op We
2008 New Technology Platforms
Recommendations: The Dilemma
• Six Sigma significantly increases
• Six Sigma hurts intangible resource of
• 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 Pillars
1. 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
• Filtration, energy and mineral extraction, food
4. Increasing Investment in International
• BRICP and remains their largest growth
• Refocus Innovation to encourage new
• Balance creativity and efficiency
• Rebuild & expand its core
• Extend product lines to meet customer
• Increase R&D investment year over
• Improve inefficiencies in manufacturing
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)
• 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 predictions
Dee 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.
• 3m Retired employee newsletter
• 3M CEO outlines long term strategy for growth Filtration Industry Analyst. Oxford:
May 2006. Vol. 2006, Iss. 5; p. 1
• Hit, Ireland & Hoskisson, (2007). Strategic Management. Mason, OH: South-
• 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