http://www.icmrindia.

org/casestudies/catalogue/Simplified%20Case
%20Studies/SCHROB022.htm

Abstract

The case examines the organizational culture at 3M and the way in which it
facilitated innovation at 3M. The policies and mechanisms adopted by 3M's
management to encourage the spirit of innovation in its employees are also
discussed. The case takes a close look at 3M's environment of innovation; the
culture of knowledge sharing; and the reward system. It also discusses the
steps implemented by the new CEO, James McNerney, to accelerate growth at
3M. The impact of cultural change at 3M on the spirit of innovation is also
discussed.

Issues:

» Strategies for developing a culture of innovation in an organization and

examine the influence of such a culture on its growth and leadership

Key words:

organizational culture, 3M, facilitated innovation, 3M, spirit of innovation,

environment, innovation, knowledge sharing, reward system, CEO, James
McNerney, cultural change

Questions for Discussion:

1. Since its early years, what strategies did 3M adopt to foster a culture of
innovation in the organization? How far do you attribute the success of the
company to its culture?

2. The top management of 3M launched many initiatives to foster a culture of

innovation in the company. Which of these initiatives proved to be critical to
the company's uninterrupted success for over a hundred years?

3. Many analysts pointed out that the new initiatives implemented by 3M's new
CEO James McNerney would have a negative affect on 3M's culture. Do you
think the new initiatives would negatively affect 3M's culture? Justify your
stand.
http://www.mightystudents.com/essay/%603M%60.corporate.case.154898

Introduction

Name :

Instructor 's Name :

Course :

Date :

Table of Content

Abstract . 2

Introduction . 2

SWOT Analysis . 4

Strategic Analysis . 8

Strategic Decision Making . 9

Strategic Planning . 10

Strategic Positioning of 3M . 14

Current Strategic Posture .

15

Strategic Focus

3M . 15

Alternative Scenarios . 17

Associated Risks . 18

Strategic Issues . 18

Recommendations . 20

Conclusion . 22

Work Cited . 24

Abstract

The given paper aims to discuss various strategic issues in 3M . It

emphasizes on the strategic planning and strategic decision making

process in the company . This paper also describes the SWOT analysis of

3M in order perform strategic analysis of 3M . It also discusses about

the strategic issues and then provides appropriate recommendations to

solve these issues . At the same time , it studies about the current

strategic posture and recommend for the future posture . In the future

strategic posture recommendation , this paper provides various

alternatives to the business in relation to improvement in its strategic

position .

Introduction

Minnesota Mining and Manufacturing Company (3M ) is involved in the

offering of thousands of products such as laminates , adhesives , passive

fire protection , electrical materials , dental products and optical films

worldwide . It is known for its diversified technology in product and

service innovation for serving customers and communities . It has

worldwide presence through various heterogeneous elements . It runs its

operation in more than 60 countries around the globe . It has its

laboratories for research and development in 35 countries and

international manufacturing operations in 29 countries . 3M offers its

products and services through distributors and retailers in more...

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3M

Development of a life cycle management approach to improve the

environmental performance of 3M’s products, manage potential risks and
identify opportunities at all stages in the product’s life.

The company
3M is a global technology company. Its brand names such as Post-ItTM and ScotchgardTM are
familiar throughout the world selling in nearly 200 countries. 3M’s structure of seven business
companies (consumer and the office; display and graphics; electro and communications; health
care; industrial; safety, security and protection services; and transportation) reflects its market
presence. Through these businesses 3M has companies in more than 60 countries employing
over 67,000 staff and generating worldwide sales of $20 billion.
Within 3M there is substantial inter-company co-operation in research, manufacturing and
marketing of products that is underpinned by four core values. These are to:
1. provide an attractive return for investors through sustained, quality growth;
2. satisfy customers with superior quality, value and service;
 3. respect its social and physical environment;
4. be a company employees are proud to be part of.
3M’s approach to corporate social responsibility and sustainable development (economic, social
and environmental issues) is explicitly linked to its values and the company prides itself on
employing the right people, ‘3Mers’, who share the company’s ethical standards and belief in
openness, honesty and integrity. Within economic sustainability there are business plans to
achieve optimal efficiency in manufacturing and logistics – so saving costs. Environmental
sustainability is included with 3M’s strategies. There are business processes that monitor life
cycle management of products and lead to identifying new products and market opportunities
as well as ways to reduce impacts.
This case study focuses on the company’s life cycle management approach to its products.
The drivers
The importance of environmental sustainability to 3M is demonstrated by its successful 3P
(‘pollution prevention pays’) programme that was established 30 years ago. The programme
has been a driver within 3M for its life cycle management approach as it has demonstrated
ways of savings costs through, for example, reducing raw material use. In the last three years,
environmental sustainability has become increasingly important within 3M. This is because
merely meeting compliance targets does not fulfil the values of the business. Furthermore,
compliance alone is not enough to achieve the tough operational targets which it sets itself over
five year periods (e.g. 2000-2005). These targets cover reductions in waste – including volatile
organic waste, C02 emissions and energy use.
Another driver has been its customers who have told 3M’s sales staff that environmentally
responsible products are important for their reputation. The combination of these three drivers
together with the need to reduce risks within its product range to maintain and increase its
market share led to 3M’s life cycle management (LCM) approach.
Taking action
The LCM is a tool to manage all potential risk associated with a product, whilst identifying
opportunities at all stages of its life cycle from research and development, sourcing of materials,
manufacturing, operations, customer use, to ultimate disposal. The four particular areas of risk
that LCM deals with are the potential risk of certain materials in their products, the safety and
environmental risks in manufacturing and sourcing the product, the risks to customers in using
the product and the risks both current and future in terms of forthcoming legislation in disposal
of the product.
Within 3M the corporate toxicology and regulatory unit and the corporate environment, health
and safety unit take joint responsibility for LCM development, since combined they can best
represent manufacturing and customer perspectives. LCM is based on existing literature, in-
house experts and 3M’s own experience of benchmarking other companies in this field.
Guidelines and standards for the application of LCM were developed through consultation with
all of its seven businesses.
Part of the LCM approach includes a matrix that is applied to products in development or
existing products in review. The matrix provides a means of measuring the LCM by scoring
performance in all parts of the product’s lifecycle. It assesses the impacts of the product in the
following categories: environment – air, water, solid waste; energy; resource use; health –
chemical, physical, biological; safety – chemical, electrical and mechanical. If, on applying the
matrix, the product has achieved a satisfactory score it can continue its development. If not, the
risk areas are assessed and a decision is made as to whether to proceed with its further
development.
The matrix overcame the challenge for 3M of needing a practical way of assessing all products
without each one undergoing a comprehensive life cycle assessment. The period for
assessment varies with the complexity of the product and can take several months to
complete. The matrix was ideal as it allowed a review to identify risks and environmental health
and safety (EHS) performance in a relatively simple way. The end result is that the matrix
identifies what needs to be done (such as further research) and can lead to innovations. An
example of innovation was the development of the Super Sticky notes as a direct result of the
application of LCM to Post ItTM notes. The LCM revealed that Post ItTM notes used a solvent
base. For 3M it was important to reduce the use of solvent in the manufacturing process of new
products for two reasons; first, it improves factory safety as it eliminates the risk of explosions
and fires caused by solvents, and secondly, it overcomes the issue of recycling/disposing of the
solvent afterwards. So 3M developed a water-based adhesive for the Super Sticky notes that
had the same functionality and performance as the solvent based adhesive.
LCM reviews are prioritised based on perceived EHS risk – a risk register is kept for all the
products and this is reviewed – and public opinion. The latter is assessed through scanning of
media and relevant websites. For example, persistent chemicals (those which can accumulate
within the environment and in humans) are a fast moving area of science with regular
improvements to 3M’s knowledge and understanding of them. Products containing these
chemicals are reviewed first.
Another example of the LCM application has been with the development of 3M’s NovecTM, a
hydrofluoroether based product used for fire fighting. This product has been developed so that
it has zero ozone depletion and global warming potential and replaces 'perfluorocarbon' based
products that had significant global warming potential.
The application of LCM has not been without challenges. It has required 3M staff to go through
training in technical (EHS) and regulatory areas so that the approach can be consistently
applied. However, that has led to development of new expertise amongst staff.
“Staff have welcomed the approach as they can see how it can help us in achieving our internal
targets as well as demonstrating how we are being true to our values and acting responsibly”
said Dietrich Sinnaeve, Environment, Health Safety and Regulatory Manager for 3M Europe,
Middle East and Africa.
The business benefits
The LCM approach has improved governance within the business as it leads to greater
transparency through better communication with its customers, who tell 3M what product
specifications they require. This in turn leads to new market opportunities and sustainable
growth as the company makes products that the customer needs in a way that increases
commercial longevity. This is because products that could be a long-term risk due to issues
such as impending legislation are identified by LCM.
In general, LCM has provided benefits in enhanced reputation and strengthened brand names.
It has helped to improve relationships with customers. Because risks have been significantly
reduced, customers can rely on 3M’s products without the threat of damage to their own
reputations. It has led to reducing environmental risks, and promoted operational excellence by
improving efficiency – a cost benefit to 3M. Lastly, it has been a source of innovation as the
LCM reviews have led to new market opportunities for customers and 3M products. Ultimately
LCM links to sustainable growth and the manufacturing of products that will stay for a long time
within the market place. In this way it meets 3M’s values and delivers innovation.
Why is it CSR?
All 3M products are compliant to existing legislation. The LCM approach provides actions to
improve the environmental impacts of the products either through manufacturing, use or
disposal that is additional to meeting legal requirements.
What next?
All new products undergo LCM and 3M has set the objective that by 2010 all 3M products will
have had LCM reviews. Data collected from the review process should enable 3M to further
revise its environmental targets and will be used to demonstrate to its customers how 3M is
tackling issues of environmental responsibility. It is envisaged that LCM will help further
optimise manufacturing operations.

http://en.wikipedia.org/wiki/3M

3M
From Wikipedia, the free encyclopedia

Jump to: navigation, search

For other uses, see 3M (disambiguation).

3M Company

Public (NYSE: MMM)

Dow Jones Industrial Average
Type
Component
S&P 500 Component

Industry Conglomerate

Two Harbors, Minnesota, U.S.

Founded
(1902)

Henry S. Bryan
Hermon W. Cable
Founder(s) John Dwan
William A. McGonagle
Dr. J. Danley Budd

Headquarte
Maplewood, Minnesota, U.S.[1]
rs

Area served Global

George W. Buckley (Chairman,

CEO, and President)[2]
Patrick D. Campbell (Executive
Key people Vice President and CFO)[2]
Frederick J. Palensky (Executive
Vice President, Research and
Development and CTO)[2][3]

Products Adhesives
 Abrasives
List of products

Revenue ▲ US$23.1 Billion (FY 2009)

[4]

Operating
▲ US$4.85 Billion (FY 2009)
[4]

income

Net income ▲ US$3.19 Billion (FY 2009)

[4]

Total assets ▲ US$27.2 Billion (FY 2009)

[5]

Total equity ▲ US$12.8 Billion (FY 2009)

[5]

Website 3M.com

3M Company (NYSE: MMM), formerly known as the Minnesota Mining and

Manufacturing Company, is an American multinational conglomerate corporation based in
Maplewood, Minnesota, a suburb of St. Paul.
With over 76,000 employees, they produce over 55,000 products, including: adhesives,
abrasives, laminates, passive fire protection, dental products, electronic materials, electronic
circuits and optical films.[6] 3M has operations in more than 60 countries – 29 international
companies with manufacturing operations, and 35 with laboratories. 3M products are
available for purchase through distributors and retailers in more than 200 countries, and many
3M products are available online directly from the company.

Contents
[hide]
• 1 History
○ 1.1 Founding
○ 1.2 Expansion
• 2 Environmental record
• 3 Operating facilities
• 4 Products
• 5 Corporate governance
○ 5.1 Current officers
○ 5.2 Presidents
○ 5.3 Chief executive officers
○ 5.4 Chairmen of the board
• 6 See also
 • 7 References
• 8 External links
• 9 Additional resources

[edit] History

3M started out on the North Shore of Lake Superior in Illgen City before moving to Two
Harbors, Minnesota in 1902. The company moved to Duluth, Minnesota, and then to Saint
Paul, Minnesota, staying for 15 years before outgrowing the campus and moving to its
current headquarters at 3M Centre in Maplewood. The new campus in Maplewood is
475 acres (1.92 km2) and has over 50 buildings, including an Innovation Center that displays
products 3M has taken to market. The company began by mining stone from quarries for use
in grinding wheels. Struggling with quality and marketing of its products, management
supported its workers to innovate and develop new products which developed into its core
business. Twelve years after being founded, 3M developed its first exclusive product: Three-
M-ite cloth. Other innovations in this era included masking tape, waterproof sandpaper and
Scotch brand tapes. By 1929 3M made its first moves toward international expansion by
forming Durex to conduct business in Europe. The same year, the company’s stock was first
traded over the counter and in 1946 listed on the New York Stock Exchange (NYSE). The
company is currently a component of the Dow Jones Industrial Average and of the S&P 500.
[edit] Founding
3M was founded by Henry S. Bryan, Herman W. Cable, John Dwan, William A. McGonagle,
and Dr. J. Danley Budd. The founders' original plan was to sell the mineral corundum to
manufacturers in the East for making grinding wheels. After selling one load, on June 13,
1902 the five went to the Two Harbors office of company secretary John Dwan, which was
on the shore of Lake Superior and is now part of the 3M National Museum, and signed papers
making Minnesota Mining and Manufacturing a corporation. In reality, however, Dwan and
his associates were not selling what they thought; they were really selling the worthless
mineral anorthosite.[7]
Failing to make sandpaper with the anorthosite, the founders decided to import minerals like
Spanish garnet, after which sale of sandpapers grew. In 1914, customers complained that the
garnet was falling off the paper. The founders discovered that the stones had traveled across
the Atlantic Ocean packed near olive oil, and the oil had penetrated the stones. Unable to take
the loss of selling expensive inventory, they roasted the stones over fire to remove the olive
oil. This was the first instance of research and development at 3M.
[edit] Expansion
The company's early innovations include waterproof sandpaper (1921) and masking tape
(1925), as well as cellophane "Scotch Tape" and sound deadening materials for cars. 3M's
corporate image is built on its innovative and unique products, with up to 25% of sales each
year from new products.[citation needed]
After World War II 3M opened plants across the United States. During the 1950s the
company expanded worldwide with operations in Canada, Mexico, France, Germany,
Australia, and the United Kingdom in large part by Clarence Sampair. In 1951, international
sales were approximately $20 million. 3M’s achievements were recognized by the American
Institute of Management naming the company “one of the five best-managed companies in
the United States" and included it among the top 12 growth stocks (3M).[8]
In the late 1960s and early 1970s, 3M published a line of board games, largely under the "3M
bookshelf game series" brand. These games were marketed to adults and sold through
department stores, with easily learned simple rules but complex game play and depth and
with uniformly high quality components. As such, they are the ancestors of the German
"Eurogames". The games covered a variety of topics, from business and sports simulations to
word and abstract strategy games. They were a major publisher at the time for influential
American designers Sid Sackson and Alex Randolph. In the mid-1970s, the game line was
taken over by Avalon Hill.

3M traffic signals installed in Shelton, Washington. Standing off-axis from the

intended viewing area, these signals are invisible to adjacent lanes of traffic in
daylight. (A faint glow is visible at night)

The same two signals above, taken in the signal's intended viewing area (a
single lane of northbound traffic). Special light-diffusing optics and a colored
fresnel lens create the indication.

After three years of testing, in 1969 3M introduced its first and only traffic signal, the Model
131. Labeled a "programmable visibility" signal, the signal had the unique ability to be
"programmed" so it was visible from certain angles. The Model 131's "programmability" was
achieved via masking a clear glass lens with aluminum adhesive tape. [2][3] It was the first of
its type and one of only two of the design in history. 3M sold these signals for special-use
applications, such as left turn signals, skewed intersections, or dangerous intersections where
a very bright indication is needed. The signals are very heavy (roughly 55 pounds per signal
head) and expensive to maintain, and removal is frequent in some areas. In addition to the 3M
Model 131 traffic signal, 3M also marketed and sold a retrofit kit for 12-inch (300 mm)
conventional signals using modified M-131 optics, a retrofit kit for eight-inch (203 mm)
conventional signals using a smaller version of the M-131 optical assembly, a Model 130
Programmable Visibility pedestrian signal (a M-131 with pedestrian signal indications), and a
few bi-modal modifications of the M-131. As of 2007, 3M no longer manufactures the
signals but has continued to supply parts.
3M's Mincom division introduced several models of magnetic tape recorders for
instrumentation use and for studio sound recording. An example of the latter is the model
M79 recorder [4], which still has a following today. 3M Mincom was also involved in
designing and manufacturing video production equipment for the television and video post-
production industries in the 1970s and 1980s, with such items as character generators and
several different models of video switchers, from models of audio and video routers to video
mixers for studio production work.
3M Mincom was involved in some of the first digital audio recordings of the late 1970s to see
commercial release when a prototype machine was brought to the Sound 80 studios in
Minneapolis. After drawing on the experience of that prototype recorder, 3M later introduced
in 1979 a commercially available digital audio recording system called the "3M Digital
Audio Mastering System" [5], which consisted of a 32-track digital audio tape recorder and a
companion 4-track digital recorder for final mastering. 3M later designed and manufactured
several other commercially available models of digital audio recorders used throughout the
early to mid-1980s.
In 1980 the company introduced Post-it notes. In 1996, the company's data storage and
imaging divisions were spun off as the Imation Corporation. Imation has since sold its
imaging and photographic film businesses to concentrate on storage.
Today 3M is one of the 30 companies included in the Dow Jones Industrial Average (added
on August 9, 1976), and is ranked number 101 on the As of 2006[update] Fortune 500 listing.
The company has 132 plants and over 67,000 employees worldwide, with sales offices in
over 200 countries. The vast majority of the company's employees are local nationals, with
few employees residing outside their home country. Its worldwide sales are over $20 billion,
with international sales 58% of that total.
On December 20, 2005, 3M announced a major partnership with Roush-Fenway Racing, one
of NASCAR's premier organizations. In 2008 the company will sponsor Greg Biffle in the
NASCAR Sprint Cup Series as he drives the #16 Ford Fusion. In addition, on February 19,
2006, 3M announced that it would become the title sponsor of the 3M Performance 400 at
Michigan International Speedway for at least the next three years.
On April 4, 2006, 3M announced its intention to sell pharmaceutical non-core business. The
pharmaceuticals businesses were sold off in three deals, in Europe, the Americas, and the
remainder of the world. Another division of the Health Care business, Drug Delivery Systems
remains with 3M. The Drug Delivery System division continues to contract manufacture
inhalants and transdermal drug delivery systems and has now taken on manufacture of the
products whose licenses were sold during the divestiture of the pharmaceuticals business.[9]
On September 8, 2008, 3M announced an agreement to acquire Meguiar's, a car care products
company that was family-owned for over a century.[10]
Today, after 100 years, 3M follows a business model based on "the ability to not only
develop unique products, but also to manufacture them efficiently and consistently around the
world (3M)."[11]
On October 13, 2010, 3M completed acquisition of Arizant Inc.[12]
[edit] Environmental record

The Target Light System, built by 3M at Target headquarters in Minneapolis.[13]

In 1999, the U.S. Environmental Protection Agency (EPA) began investigating perfluorinated
chemicals (PFCs) after receiving data on the global distribution and toxicity of PFOS,[14] the
former key ingredient in Scotchgard.[15] 3M, the former primary American producer of PFOS,
announced the phase-out of PFOS, PFOA, and PFOS-related product production in May
2000.[16] PFCs produced by 3M were used in non-stick cookware and stain resistant fabrics.[17]
The Cottage Grove facility released PFCs from the 1940s to 2002.[18] In response to PFC
contamination of the Mississippi River and surrounding area, 3M states the area will be
"cleaned through a combination of groundwater pump-out wells and soil sediment
excavation."[17] The restoration plan is to be based on an analysis of the company property
and surrounding lands.[19] The on-site water treatment facility that handles the plant's post-
production water is not capable of removing the PFCs, which were pumped into the nearby
Mississippi River.[18] The clean-up cost estimate is $50–56 million, which will be funded
from a $147 million environmental reserve set aside in 2006.[20] The search area for PFCs in
the Mississippi River now extends to five states, spanning approximately half of the river's
total distance.[21] Perfluorochemicals do not break down or degrade in the environment.[17]
In 2002, 3M ranked 70th on the Political Economy Research Institute's (PERI) list of the top
100 corporations emitting airborne pollutants in the United States.[22] In March 2010, PERI
ranked 3M at 98th place on the list.[23]
In 2008, 3M created the Renewable Energy Division within 3M’s Industrial and
Transportation Business to focus on Energy Generation and Energy Management.[24][25]

[edit] Operating facilities

3M’s general offices, corporate research laboratories, and certain division laboratories are
located in St. Paul, Minnesota. In the United States, 3M has nine sales offices in eight states
and operates 74 manufacturing facilities in 27 states. Internationally, 3M has 148 sales
offices. The Company operates 93 manufacturing and converting facilities in 32 countries
outside the United States.[26]
3M owns substantially all of its physical properties. 3M’s physical facilities are highly
suitable for the purposes for which they were designed. Because 3M is a global enterprise
characterized by substantial intersegment cooperation, properties are often used by multiple
business segments.[27]
Selected factory detail information:
• Cynthiana, Kentucky, USA factory producing Post-It notes (672 SKU) and
scotch tape (147 SKU). It has 539 employees and was established in 1969.
[28]

• Newton Aycliffe, County Durham, UK factory producing respirators for

workers safety, using laser technology. It has 370 employees and recently
there was an investment of £4,5 million ($9 million).[29][30]

[edit] Products
• 3M High Visibility Signals: a line of traffic signal devices, with the flagship
being the Model 131 12" vehicle signal head. Produced from 1969–2007
• ACCR
• Aearo
• Avagard Hygiene Range
• Bondo
• Cavilon
• Chrome & Metal Polish
• Clarity
• Coban
• Command Adhesive
• Comply Steam Indicators
• 3M Purification
• DI-NOC
• Dual Lock
• Durapore
• Dobie
• Dynatel
• FastBond Adhesives
• Filtrete
• Fluorinert
• Hookit sandpaper
• Littmann Stethoscopes
• Littmann Model 3200 Electronic Stethoscope with Zargis Cardioscan
• Medipore
• Micropore Hypoallergenic Skin Tape
 • Microfoam
• Nexcare
• O-Cel-O
• Post-it note
• Reddot ECK Electrodes
• Reston
• SandBlaster
• Scotch Tape
• Scotch Magic Tape
• Scientific Anglers
• Scotch-Brand Masking Tape
• Scotch-Brite
• Scotchcal Film
• Scotchgard
• Scotchlite
• Scotchcast Fibreglass casting
• Scotchprint Graphics
• Scotch-Weld Adhesives
• Steridrape
• Steristrip
• Stikit sandpaper
• Super 77 Classic Spray Adhesive
• Tartan
• Tegaderm
• Thinsulate
• Velostat[31]
• VHB
• Vikuiti
• Wetordry sandpaper
• Microtouch Touch Screens
http://wiki.fool.com/3M_Company

Company Description
It's surprisingly easy to boil down a company known for thousands of products that permeate everyday
life: Since its earliest days, 3M has specialized in making things rough, sticky, or smooth. Appropriately
enough, its early years were certainly rough, and occasionally sticky, but hardly ever smooth.
The Minnesota Mining and Manufacturing Company got its start as a mining concern, digging for minerals
used to make sandpaper. But the founders had bad luck right from the start; as it turned out, they were
mining the wrong substance, and what they had was worthless. When they tried to import another kind of
abrasive mineral from Europe, it arrived saturated with the olive oil with which it had been shipped,
making it nearly useless for sandpaper.
But this apparent misstep ultimately put the company on the right track. After clever engineers roasted the
mineral to get rid of the oil, the company founded a research and development department to make sure
such a blunder never happened again. Since 1916, the invention of new and useful products has been 3M's
bread and butter. Depending on the source you consult, between one-fourth and one-third of 3M's revenue
each year comes from new products.
In addition to the sandpaper that gave the company its start, 3M is now best known for Scotch brand
adhesive tape, Scotchgard stain protection for fabrics, Thinsulate insulating fabric, and the humble Post-it
note, introduced in 1980 after a 3M engineer devised a bookmark that would stick to a particular page, but
easily unstick itself. The company helped pioneer magnetic audio and video tape (a business spun off in
1996 as Imation), and created the synthetic fabric used in the soles of Neil Armstrong's boots when he
became the first man on the moon. Among many other products, the company also specializes in building
materials and medical supplies.
3M operates in 27 states throughout the U.S.A. and more than 60 countries worldwide. It ranked 327th on
the 2008 Fortune Global 500 list of the world's largest companies, with more than $24 billion in revenue
and more than $4 billion in profits. If you think you might have trouble remembering those statistics,
perhaps you should write them on a Post-it and stick it to your monitor. 3M would probably thank you.
Divisions
3M maintains six operating segments:

• Consumer and office

• Display and graphics

• Electro and communications

• Health care

• Industrial and transportation

• Safety, security, and protection

At 3M, A Struggle Between Efficiency And Creativity

How CEO George Buckley is managing the yin and yang of discipline and
imagination

Not too many years ago, the temple of management was General Electric (GE ).
Former CEO Jack Welch was the high priest, and his disciples spread the word to
executive suites throughout the land. One of his most highly regarded followers,
James McNerney, was quickly snatched up by 3M after falling short in the closely
watched race to succeed Welch. 3M's board considered McNerney a huge prize,
and the company's stock jumped nearly 20% in the days after Dec. 5, 2000,
when his selection as CEO was announced. The mere mention of his name made
everyone richer.

McNerney was the first outsider to lead the insular St. Paul (Minn.) company in its
100-year history. He had barely stepped off the plane before he announced he
would change the DNA of the place. His playbook was vintage GE. McNerney
axed 8,000 workers (about 11% of the workforce), intensified the performance-
review process, and tightened the purse strings at a company that had become a
profligate spender. He also imported GE's vaunted Six Sigma program—a series
of management techniques designed to decrease production defects and
increase efficiency. Thousands of staffers became trained as Six Sigma "black
belts." The plan appeared to work: McNerney jolted 3M's moribund stock back to
life and won accolades for bringing discipline to an organization that had become
unwieldy, erratic, and sluggish.

Then, four and a half years after arriving, McNerney abruptly left for a bigger
opportunity, the top job at Boeing (BA ). Now his successors face a challenging
question: whether the relentless emphasis on efficiency had made 3M a less
creative company. That's a vitally important issue for a company whose very
identity is built on innovation. After all, 3M is the birthplace of masking tape,
Thinsulate, and the Post-it note. It is the invention machine whose methods were
consecrated in the influential 1994 best-seller Built to Last by Jim Collins and
Jerry I. Porras. But those old hits have become distant memories. It has been a
long time since the debut of 3M's last game-changing technology: the
multilayered optical films that coat liquid-crystal display screens. At the company
that has always prided itself on drawing at least one-third of sales from products
released in the past five years, today that fraction has slipped to only one-
quarter.

Those results are not coincidental. Efficiency programs such as Six Sigma are
designed to identify problems in work processes—and then use rigorous
measurement to reduce variation and eliminate defects. When these types of
initiatives become ingrained in a company's culture, as they did at 3M, creativity
can easily get squelched. After all, a breakthrough innovation is something that
challenges existing procedures and norms. "Invention is by its very nature a
disorderly process," says current CEO George Buckley, who has dialed back
many of McNerney's initiatives. "You can't put a Six Sigma process into that area
and say, well, I'm getting behind on invention, so I'm going to schedule myself
for three good ideas on Wednesday and two on Friday. That's not how creativity
works." McNerney declined to comment for this story.

PROUD CREATIVE CULTURE

The tension that Buckley is trying to manage—between innovation and efficiency
—is one that's bedeviling CEOs everywhere. There is no doubt that the
application of lean and mean work processes at thousands of companies, often
through programs with obscure-sounding names such as ISO 9000 and Total
Quality Management, has been one of the most important business trends of
past decades. But as once-bloated U.S. manufacturers have shaped up and
become profitable global competitors, the onus shifts to growth and innovation,
especially in today's idea-based, design-obsessed economy. While process
excellence demands precision, consistency, and repetition, innovation calls for
variation, failure, and serendipity.

Indeed, the very factors that make Six Sigma effective in one context can make
it ineffective in another. Traditionally, it uses rigorous statistical analysis to
produce unambiguous data that help produce better quality, lower costs, and
more efficiency. That all sounds great when you know what outcomes you'd like
to control. But what about when there are few facts to go on—or you don't even
know the nature of the problem you're trying to define? "New things look very
bad on this scale," says MITSloan School of Management professor Eric von
Hippel, who has worked with 3M on innovation projects that he says "took a
backseat" once Six Sigma settled in. "The more you hardwire a company on total
quality management, [the more] it is going to hurt breakthrough innovation,"
adds Vijay Govindarajan, a management professor at Dartmouth's Tuck School of
Business. "The mindset that is needed, the capabilities that are needed, the
metrics that are needed, the whole culture that is needed for discontinuous
innovation, are fundamentally different."

The exigencies of Wall Street are another matter. Investors liked McNerney's
approach to boosting earnings, which may have sacrificed creativity but made up
for it in consistency. Profits grew, on average, 22% a year. In Buckley's first year,
sales approached $23 billion and profits totaled $1.4 billion, but two quarterly
earnings misses and a languishing stock made it a rocky ride. In 2007, Buckley
seems to have satisfied many skeptics on the Street, convincing them he can
ignite top-line growth without killing the McNerney-led productivity
improvements. Shares are up 12% since January.

Buckley's Street cred was hard-won. He's nowhere near the management rock
star his predecessor was. McNerney could play the President on TV. He's tall and
athletic, with charisma to spare. Buckley is of average height, with a slight
middle-age paunch, an informal demeanor, and a scientist's natural curiosity. In
the office he prefers checked shirts and khakis to suits and ties. He's bookish and
puckish, in the way of a tenured professor.

Buckley, in short, is just the kind of guy who has traditionally thrived at 3M. It
was one of the pillars of the "3M Way" that workers could seek out funding from
a number of company sources to get their pet projects off the ground. Official
company policy allowed employees to use 15% of their time to pursue
independent projects. The company explicitly encouraged risk and tolerated
failure. 3M's creative culture foreshadowed the one that is currently celebrated
unanimously at Google (GOOG ).

Perhaps all of that made it particularly painful for 3M's proud workforce to deal
with the hard reality the company faced by the late '90s. Profit and sales growth
were wildly erratic. It bungled operations in Asia amid the 1998 financial crisis
there. The stock sat out the entire late '90s boom, budging less than 1% from
September, 1997, to September, 2000. The flexibility and lack of structure, which
had enabled the company's success, had also by then produced a bloated staff
and inefficient workflow. So McNerney had plenty of cause to whip things into
shape.

GREEN-BELT TRAINING REGIMEN

One of his main tools was Six Sigma, which originated at Motorola (MOT ) in
1986 and became a staple of corporate life in the '90s after it was embraced by
GE. The term is now so widely and divergently applied that it's hard to pin down
what it actually means. At some companies, Six Sigma is plainly a euphemism
for cost-cutting. Others explain it as a tool for analyzing a problem (high shipping
costs, for instance) and then using data to solve each component of it. But on a
basic level, Six Sigma seeks to remove variability from a process. In that way you
avoid errors, or defects, and increase predictability (technically speaking, Six
Sigma quality has come to be accepted as no more than 3.4 defects per million).

At 3M, McNerney introduced the two main Six Sigma tools. The first and more
traditional version is an acronym known as DMAIC (pronounced "dee-may-ic"),
which stands for: define, measure, analyze, improve, control. These five steps
are the essence of the Six Sigma approach to problem solving. The other flavor is
called Design for Six Sigma, or DFSS, which purports to systematize a new
product development process so that something can be made to Six Sigma
quality from the start.

Thousands of 3Mers were trained as black belts, an honorific awarded to experts

who often act as internal consultants for their companies. Nearly every employee
participated in a several-day "green-belt" training regimen, which explained
DMAIC and DFSS, familiarized workers with statistics, and showed them how to
track data and create charts and tables on a computer program called Minitab.
The black belts fanned out and led bigger-scale "black-belt projects," such as
increasing production speed 40% by reducing variations and removing wasted
steps from manufacturing. They also often oversaw smaller "green-belt projects,"
such as improving the order fulfillment process. This Six Sigma drive
undoubtedly contributed to 3M's astronomical profitability improvements under
McNerney; operating margins went from 17% in 2001 to 23% in 2005.

While Six Sigma was invented as a way to improve quality, its main value to
corporations now clearly is its ability to save time and money. McNerney arrived
at a company that had been criticized for throwing cash at problems. In his first
full year, he slashed capital expenditures 22%, from $980 million to $763 million,
and 11% more to a trough of $677 million in 2003. As a percentage of sales,
capital expenditures dropped from 6.1% in 2001 to just 3.7% in 2003. McNerney
also held research and development funding constant from 2001 to 2005,
hovering over $1 billion a year. "If you take over a company that's been living on
innovation, clearly you can squeeze costs out," says Charles O'Reilly, a Stanford
Graduate School of Business management professor. "The question is, what's the
long-term damage to the company?"

Under McNerney, the R&D function at 3M was systematized in ways that were
unheard of and downright heretical in St. Paul, even though the guidelines would
have looked familiar at many other conglomerates. Some employees found the
constant analysis stifling. Steven Boyd, a PhD who had worked as a researcher at
3M for 32 years before his job was eliminated in 2004, was one of them. After a
couple of months on a research project, he would have to fill in a "red book" with
scores of pages worth of charts and tables, analyzing everything from the
potential commercial application, to the size of the market, to possible
manufacturing concerns.

Traditionally, 3M had been a place where researchers had been given wide
latitude to pursue research down whatever alleys they wished. After the arrival
of the new boss, the DMAIC process was laid over a phase-review process for
innovations—a novelty at 3M. The goal was to speed up and systematize the
progress of inventions into the new-product pipeline. The DMAIC questions "are
all wonderful considerations, but are they appropriate for somebody who's just
trying to...develop some ideas?" asks Boyd. The impact of the Six Sigma regime,
according to Boyd and other former 3Mers, was that more predictable,
incremental work took precedence over blue-sky research. "You're supposed to
be having something that was going to be producing a profit, if not next quarter,
it better be the quarter after that," Boyd says.

For a long time, 3M had allowed researchers to spend years testing products.
Consider, for example, the Post-it note. Its inventor, Art Fry, a 3M scientist who's
now retired, and others fiddled with the idea for several years before the product
went into full production in 1980. Early during the Six Sigma effort, after a
meeting at which technical employees were briefed on the new process, "we all
came to the conclusion that there was no way in the world that anything like a
Post-it note would ever emerge from this new system," says Michael Mucci, who
worked at 3M for 27 years before his dismissal in 2004. (Mucci has alleged in a
class action that 3M engaged in age discrimination; the company says the claims
are without merit.)

There has been little formal research on whether the tension between Six Sigma
and innovation is inevitable. But the most notable attempt yet, by Wharton
School professor Mary Benner and Harvard Business School professor Michael L.
Tushman, suggests that Six Sigma will lead to more incremental innovation at
the expense of more blue-sky work. The two professors analyzed the types of
patents granted to paint and photography companies over a 20-year period,
before and after a quality improvement drive. Their work shows that, after the
quality push, patents issued based primarily on prior work made up a
dramatically larger share of the total, while those not based on prior work
dwindled.

Defenders of Six Sigma at 3M claim that a more systematic new-product

introduction process allows innovations to get to market faster. But Fry, the Post-
it note inventor, disagrees. In fact, he places the blame for 3M's recent lack of
innovative sizzle squarely on Six Sigma's application in 3M's research labs.
Innovation, he says, is "a numbers game. You have to go through 5,000 to 6,000
raw ideas to find one successful business." Six Sigma would ask, why not
eliminate all that waste and just come up with the right idea the first time? That
way of thinking, says Fry, can have serious side effects. "What's remarkable is
how fast a culture can be torn apart," says Fry, who lives in Maplewood, Minn.,
just a few minutes south of the corporate campus and pops into the office
regularly to help with colleagues' projects. "[McNerney] didn't kill it, because he
wasn't here long enough. But if he had been here much longer, I think he could
have."

REINVIGORATED WORKFORCE
Buckley, a PhD chemical engineer by training, seems to recognize the cultural
ramifications of a process-focused program on an organization whose fate and
history is so bound up in inventing new stuff. "You cannot create in that
atmosphere of confinement or sameness," Buckley says. "Perhaps one of the
mistakes that we made as a company—it's one of the dangers of Six Sigma—is
that when you value sameness more than you value creativity, I think you
potentially undermine the heart and soul of a company like 3M."

In recent years, the company's reputation as an innovator has been sliding. In

2004, 3M was ranked No. 1 on Boston Consulting Group's Most Innovative
Companies list (now the BusinessWeek/BCG list). It dropped to No. 2 in 2005, to
No. 3 in 2006, and down to No. 7 this year. "People have kind of forgotten about
these guys," says Dev Patnaik, managing associate of innovation consultancy
Jump Associates. "When was the last time you saw something innovative or
experimental coming out of there?"

Buckley has loosened the reins a bit by removing 3M research scientists'

obligation to hew to Six Sigma objectives. There was perhaps a one-size-fits-all
approach to the application of Six Sigma as the initial implementation got under
way, says Dr. Larry Wendling, a vice-president who directs the "R" in 3M's R&D
operation. "Since [McNerney] was driving it to the organization, you know, there
were metrics established across the organization and quite frankly, some of
them did not make as much sense for the lab as they did other parts of the
organization," Wendling says. What sort of metrics? Keeping track of how many
black-belt and green-belt projects were completed, for one.

In fact, it's not uncommon for Six Sigma to become an end unto itself. That may
be appropriate in an operations context—at the end of the year, it's easy enough
for a line manager to count up all the money he's saved by doing green-belt
projects. But what 3Mers came to realize is that these financially definitive
outcomes were much more elusive in the context of a research lab. "In some
cases in the lab it made sense, but in other cases, people were going around
dreaming up green-belt programs to fill their quota of green-belt programs for
that time period," says Wendling. "We were letting, I think, the process get in the
way of doing the actual invention."

To help get the creative juices flowing, Buckley is opening the money spigot—
hiking spending on R&D, acquisitions, and capital expenditures. The overall R&D
budget will grow 20% this year, to $1.5 billion. Even more significant than the
increase in money is Buckley's reallocation of those funds. He's funneling cash
into what he calls "core" areas of 3M technology, 45 in all, from abrasives to
nanotechnology to flexible electronics. That is another departure from
McNerney's priorities; he told BusinessWeek in 2004 that the 3M product with
the most promise was skin-care cream Aldara, the centerpiece to a burgeoning
pharmaceuticals business. In January, Buckley sold the pharma business for $2
billion.

Quietly, the McNerney legacy is being revised at 3M. While there is no doubt the
former CEO brought some positive change to the company, many workers say
they are reinvigorated now that the corporate emphasis has shifted from
profitability and process discipline to growth and innovation. Timm Hammond,
the director of strategic business development, says "[Buckley] has brought back
a spark around creativity." Adds Bob Anderson, a business director in 3M's radio
frequency identification division: "We feel like we can dream again."