3M: Profile of an Innovating Company

Business Plan

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 Executive Summary
3M, Minnesota Mining and Manufacturing Company is an American multibillion-dollar
company effective in the fields of industry, worker safety, health care and consumer goods.
Primarily known for its products like adhesives, abrasives, laminates, passive fire protection,
personal protective equipment. It is familiar all over the world for its consistent innovation.
The founding philosophy of 3M is the incremental approach of innovation and product
development and also places a high emphasis on research and development. Encouraging
individuals to continue research in the fields of their interests. The company has undergone
major transitions under the leadership driven by diversification and expansion.

Transition in Organisation structure under various leaderships

Phase – 1 William L. McKnight

McKnight, who joined as a sales manager and continued to grow as the company’s president
and then as a chairman, played a prominent role in the development of a $1 million adhesives
and abrasive company to a $1 billion corporation with a highly diversified portfolio. He
brought many technological changes like creating Central Research Laboratory –
Technological development program that resulted in Product market expansion and the
culture that emerged because of these changes led to many opportunities that encouraged
employees to recognizes the prevailing products, process or technologies that can be
leveraged into new markets. Along with the improvements in technology came many formal
mechanisms for transfer of knowledge like “Technical Forum”. These helped to maintain the
vital network of informal contacts. The recognition and appreciation methods like “Dual
ladder” and “Golden step Award Program” along with informal methods that turned the
employees into semi-legendary figures helped to thrive the innovation and provided
appropriate encouragement.

Its immense growth and expansion, it became difficult to manage the operations. The
Organization was reorganized into a divisional structure. “Grow and divide” philosophy
which helped to flourish the divisions as they grew. But still, the number of the divisions
expanded at a much faster pace which led to cluster divisions related to groups. This helped
decentralize sales, production and development to operating level and also to evolve
organically

Phase - II Lou Lehr

Following the demise of McKnight, the organisation confronted growth issues. The company
was surrounded by the economic slowdown and foreign competition that required the
company to substantial adjustment, restructuring, and even redefinition of some of 3M’s past
policies.

Lou Lehr who took charge as CEO was challenged by inflation and recession and many
internal transition issues management has been facing. The major implementations were
cross-unit coordination, a new emphasis on formal strategic planning, and the leveraging the
technological base. He clubbed all the divisions and groups into four business sectors with
the primary objective to facilitate diffusion of technology across closely related divisions. He
created 20 strategic business centres which spread across multiple divisions to gather

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 strategic information on market and competitors. During his tenure, he almost doubled the
R&D budget. But there was huge resistance to his changes. Being accustomed to informal
planning and being measured by standards they determined many divisional managers
haven’t shown interest to adopt the change in the first phases. He launched many ambitious
programs like “Cooperation for growth”, “Cross divisional sales clubs”, “Trade fairs”.
Despite his efforts, he was only able to achieve modest success.

Phase III Jake Jacobson

Technology base strengthened by adding an additional 20 new technologies. New products

came into the market. Percentage of sales from new products increased by 30% but COGS
increased by 5.8% and there is a drop of 6% in net income. This cost burden forced the
company to withdraw from several core operations like audio tapes and copying machines.
This led Jacobson to make some conventional changes to its conventional system.
In 1985, he initiated a program J35, in which J stands for “Jake” and 35 stands for his five-
year target percentage reduction in manufacturing labour content and manufacturing cycle
time. Under Jacobson leadership, Harstad and his COSD management team revolutionized
their approach by redefining the strategic objective as maintaining a 90% global market
share. For this strategic approach, there is a need for change in management mentalities as
they were resisting to absorb it. He made some changes in R&D. He emphasized on return on
investment of R&D.
OHSD created Action Teams composed various departments and charged them with
delivering new products. These structural changes brought reasonable progress in the
business and launched several new products. Other division trying to replicate the same.
Pacing programs is a new initiative by the corporate group where each division is asked to
identify development programs that could make big difference and those were given priority
for funding and management scrutiny but this reduced freedom to explore new ideas.
Jacobson focus lied on customer expectations and markets as well. As a part of which, they
increased distribution units and also encouraged off-shore investments.
Under the leadership of Jacobson, financials of the improved to a larger extent.

Phase IV DeSimone

He was highly energized, consensus builder who got results in a looser style. He combined
the attributes of his three predecessors Ray Hezrog’s charismatic motivating style, Lou Lehr’s
ability to bring the best out of an individual and Jake Jacobson’s discipline focus and
objectivity. Greater command and control capability has been overlaid on the old 3M model.
He made a better architecture for better intervention. He made an environment where people
valued 3M’s way of operating. Respect and innovation for an individual was the main culture.
Supported initiative while breaking down bureaucracy and cynicism. He quickly reorganized
and regrouped the company’s business from four to three. He initiated five-year targets i.e.
reduction in manufacturing cost by 10% and 35% reduction in cycle time. He also re-
energized and refocused on quality in order to ensure customer satisfaction. He ensured the
upper management trusts bottom-up innovation and the lower level should trust when they
intervene or control their activities. He retained 3M’s financial goals and increased its
objective of achieving 25% of sales from products introduced within 5 years. He set a target
of 30 % of sales from products introduced in the last 4 years, made new strategies and
development. He increased the R&D development by $1 billion.

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 Suggested Organizational structure

One of the major problems of 3M was facing was the change in its innovative or
entrepreneurial culture to a more disciplined one, where innovation was not fully restricted
but it was getting more and more regulated. This happened mainly due to changing
environment which affected the level of revenue 3M was getting and adding to the changing
environment the organization was just too diversified which made it harder for the top
management to control effectively.
The organizational structure we suggest is a bit similar to what Mr Lehr applied but it's a bit
more integrated which made it easier for top management to control the organization more
effectively.

MD

Central R&D

Product Category Product Category Product Category

1 2 3

P4 P6
P1 P2 P3 P7 P8
P5

PRODUCTION DEPT.
MARKETING DEPT.
R&D DEPT.
.
.
.

 R&D Department-
There would be 2 types of R&D departments in the organization, one being the central R&D
department which will focus more towards radical innovation i.e. developing a totally new
innovative product to meet certain demand in the market.
And the other one is product R&D department which will focus towards incremental
innovation i.e. improving the existing product quality or production process which will make
it more competitive.

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 Dividing R&D departments into 2 parts will help and having 2 teams to look over it will help
the organization to be more competitive in the market, as now there is 1 team that will focus
on coming up with a new product in a market and another one will focus mainly towards
making the product more competitive in the market which in end will help the organization
to increase the life-cycle of the product.
 How to retain the innovative culture?
 The management will try to motivate the employee to devote a certain amount of
their time to come up with more innovative ideas that may help the organization in
the future. This can be done in many ways like telling the stories about different
ideas brought up by different employees or giving them some kind of reward or
recognition etc.
 One of the issues that 3M previously faced was the high R&D cost they incur
because many of the project they invested in ended up failing.
 To tackle this issue, there will be a selection process through which every innovative
idea will pass. Having a selection process will help the organization reducing the
level of investment they made in the projects that ended up failing.
 As 3M already has a large amount of information related to different projects/ideas
from the projects they have previously invested in, these data can also help the top
management in selecting the profitable projects in which they invest.

 Product department
After segregating R&D department into 2 parts i.e central and product R&D, 3M is further
divided into further groups according to different product categories like adhesive and
abrasive, which are further subdivided into different products like 3M sandpaper in abrasive
and scotch-tapes in the adhesive department.
So each of these product categories will have the same functional department as in adhesive
department all the products will have some financial, marketing, R&D etc departments.

Benefits of The Structure

 Better R&D department

 Better control
 Retention of the innovative culture
 More competitive

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