MGMT 425 Business Strategy and Policy
Case Assignment 3 The Company 3M
Question 1
Although it took 20 years for 3M to earn a profit on its first invention, sandpaper, the company is no stranger to continuous innovation and product development. Many strategies have been put in place by 3M’s management to foster innovation. An example is their infamous 15% rule, which states, “technical people could spend up to 15% of their workweek on projects that might benefit the consumer, without having to justify the project to their manager” (p. C-221). Another strength of 3M’s was implemented by Mckinley, the CEO at the time; he allocated 5% of sales back into R&D.
The company earlier on realized their most significant potential to increase sales lied internally on the ability of its people to innovate. Through encouraging employee discussion, cross-division problem solving, and idea-sharing and principles established by the company. The 3M Technical Forum invites employees coming together to analyze problems and share ideas. New divisions such as a central research laboratory, and the 3M Innovative Properties Unit, help with research and application of it. They can give freedom and support their team members to develop new products using imagination, observation, and knowledge. However, a weakness that 3M for a long time struggled with is the ability to maintain costs. Former CEO, Mcknight, implemented the idea of decentralization in 1990, intending to boost innovation in various divisions; however, the company’s limited resources made it impossible to allocate the correct funds effectively. The company introduced the “Pacing Plus Program” to solve this problem. The company implemented five initiatives with the new CEO: indirect cost control, global sourcing, e-productivity, Six Sigma, and the 3M Acceleration Program. Additionally, McNerney reduced costs and improved growth within the company as a result of the new implementation of the original Six Sigma and digitalization and new IT programs as well.
Although maintaining low costs and pursuing growth has always been a challenge for 3M, the company has consistently made its biggest strengths its priority: its employees, and this puts 3M as a leading competitor in the technology industry.
Question 2
The 3M company has implemented strategies that impacted the business world on an international level. The company has over the last 100 years, carried out plans to improve and develop the company. Creating a culture and favorable work environment for employees’ specific needs instead of focusing on the company’s revenue alone.
A young CEO, William McKnight’s’ brought a new dimension of innovation and creativity. These three main areas that illustrate how the company has achieved global success: the 15 percent rule, the Central Research Laboratory, and Pacing Plus Program.
Firstly, the 15 percent rule. This method began with a product that would, in the end, be of some use. Richard Drew, an employee, was working on a product that he developed when he introduced his idea to McKnight, who was against the idea at that time. Drew then went to auto body shops showing his innovation was he realized that his product was excellent and could be sold to the public. As a result, the 15 percent rule came up. McKnight saw that the employees who are great innovators needed time to focus on the project(s) of their own to make them the best projects, spending time away from the company allows them to develop successful problem-solving techniques. And successful employees meant the company’s revenue was increased as well. However, when the employees are allowed to work on their own projects, it eventually hinders escompany as they may not focus ffully on the work at hand.
3M recognized that it was best for their ulcompany to allow employees innovate within the company which lead to innovation of new products and thus different divisions came up. As a result, William McKnight and Richard Carlton came up with a central research laboratory that would aid in undertaking research. The idea later evolved to what the company refers to as,
a Technical Forum, in 1951.The existence of so many different divisions within the company doing the same work made Technical Forum a platform for idea sharing, discussion, and problem solving between employees and divisions. The Technical Forum would expand to 9,500 members in 8 U.S. locations and 19 other countries. This platform brought employees who are like minded to help with problem solving ideas and to continue developing and complete existing innovations. Even though this method is very useful, there is no diversity on ideas of new and upcoming innovation and products as only some avenues will be explored. This creates “groupthink”, where everyone is on the same page. Employees will begin to agree with the idea that is popular thus limiting the creation of new problem solving ideas.
Pacing Plus Program policy was put in place to continue and give support to employees innovations by leading them in to R&D resource projects. The ideal that created this was that, 3M recognizes that product production needs many long-term investments and will probably fail before the product developed fully. Therefor, the Pacing Plus Program selected few programs that would receive priority funding in order to reduce cost and failures. By focusing on few possible programs, it created traction for divisions to come up with better ideas. Many ideas to be created were affected by this policy and problems arise within the years. A culture where ideas and innovation are supported, when created, makes it the idea difficult to maintain. Suddenly, there were great ideas that were passed on to receive funding yet money was always a problem.. This creates a disruptive environment for employees whose ideas are passed making it impossible to keep employees happy. The amount of money being allocated to these Programs, can drive the company to a loss in the long run.
Question 3
3M’s international growth happened in stages. First, exporting to other countries and through subsidiaries, operating the sales of their products. According to the company, this would make them to better understand the culture before deciding to move into that country. Secondly, 3M would build warehouses in the country. Thereafter, in order to adhere to the local culture, changing the products packaging and size. Finally, building manufacturing plants and begin operations. 3M started to externalize most of its Research & Development function in the 1980s. 3M uses “FIDO” framework or “First in Defeats Others” which include hiring local talent and merging with the local community, culture and economy while tailoring products to local needs and enforcing patents as its strategies. In order to support 3M’s vision of encouraging its R&D outsourcing, the Pathfinder program was started. As a result of this program and the developments it brought along, the company saw its international operations exceed by 50%. 3M began to move towards a more traditional regional management versus country by country as a change of its strategies. With competitive pressures still helping 3M’s traditional ideas of focusing ond differences of local market and local R&D operations still make it possible to creat an integrated global network.
Question 4
New strategies should be implement that focus on agile development as opposed to waterfall. In agile development, a company fights for flexibility and adjust their developments according to demand for a specific product, or when functionality of a product changes. Agile development execution has over the years determined the success of 3M and its products. Implementing a waterfall strategy will benefit the company by setting a plan for the development of a new product as well as the eventual success of a company. However, change is inevitable in the current world and for a company to be successful, ability to adapt and respond to change successfully is key.
3M has adapted to change successfully since their early years thus making products that are as a result of observed need. Using the same strategies that have been successful in the past would be the best ideas and strategies to strengthen 3M’s innovation field.
Continuing to have teams that monitor their lead customers at work in “demanding situations” are some of the strategies. 3M’s developers have in the past observed the needs of hospital surgeons, the needs in auto shops, and the specific needs of developing specific countries, as some examples. This same way, the company should keep on observing current trends, technology changes and advancements in the medical field. Ideas of products that do not align with our current modern world should be discarded and focus should mainly be on innovation as has been done in the past 110 years.
3M should use the strategies from past CEOs that were successful to ensure 3M reinvigorates their R&D return on investment. Ideas from past CEO Jim McNerney’s, should be used to only fund the most promising products, reduce the number of developments put in place, and increase the best products funding that has potential of becoming profitable. McNerney as well, in the early 2000’s helped 3M, in cost reduction which brought profits on the capital invested. 3M’s new CEO George Buckleys’ vision should be kept in place for continued success This vision stated that 3M “must solve its customers’ needs through the provision of innovative, differentiated products that increase those customers’ efficiency and competitiveness” (Hill, Jones, Schilling, 2017, p. C-232). This vision was proven to be successful as 3M was making around $30 billion in sales, $6.5 billion in net income, and 19.5% return on invested capital as by 2012 (Hill, Jones, Schilling, 2017, p. C-220).
Citation
Hill, Charles W. L.; Jones, Gareth R.; Schilling, Melissa A. (2017) Strategic Management: Theory and Cases: An Integrated Approach. Cengage Learning