3M in 2006: Strategic Analysis

“Management that is destructively critical when mistakes are made kills initiative.”

Ryan Dear
3325727
MGMT 4P90
Overview:

Minnisota Mining and Manufacturing (3M) faced financial ruin from its inception in 1902. The
founders had originally intended to mine corundum on the North Shore of Lake Superior in Michigan,
where it still exists today. But what they had discovered was anorthosite, a significantly cheaper
mineral that was useless for their intended market back east where it was used for industrial grinding
equipment. Despite this mistake, 3M continued to pursue production of sandpaper by importing new
raw materials from Spain, until they faced their second disaster in 1914. Their inventory of garnet had
been tainted by olive oil during transport overseas. Rather than cutting their losses, the first real R&D
initiative was rolled out to develop a crucial solution. By washing and baking the garnet, the company
was able to solve the quality problems of their sandpaper.

The ability for the founders to innovate initially unsuccessful products into real world solutions is a
testament to how this company was able to evolve into what it is today. Currently, 3M has
manufacturing competencies in everything from Scotch tape to missile guiding technology. It is also a
powerful anecdotal symbol of the importance of 3M’s entrepreneurial proclivity, a principle value
engrained into every employee.

Current Mission:

The current mission statement from 3M as posted on their international website is as follows:

“3M is fundamentally a science-based company. We produce thousands of imaginative products, and

we're a leader in scores of markets – from health care and highway safety to office products and
optical films for LCD displays. Our success begins with our ability to apply our technologies – often in
combination – to an endless array of real-world customer needs. Of course, all of this is made possible
by the people of 3M and their singular commitment to make life easier and better for people around the
world.”

Mission Amendment & Rationale:

“3M actively synergizes its vast technological competencies to successfully serve international
markets. We are leaders in imagination, facilitating the creation of real world solutions through the
creative genius of our personnel.”

Though the original reads well on a personable level, it does not reflect the high professional quality of
3M’s innovations, or the intelligence driver of this business. Quite simply, it is not a refined mission
statement. The company needs to commit itself in a sustainable direction as it proposed back in 1982,
as well as investing in capital assets to manufacture sustainable fuels and the like technology.

Core Operational Values & Goals:

I. Act with uncompromising honesty and integrity in everything we do.

II. Satisfy our customers with innovative technology and superior quality, value and service.

III. Provide our investors an attractive return through sustainable, global growth.
 IV. Respect our social and physical environment around the world.

V. Value and develop our employees' diverse talents, initiative and leadership.

VI. Earn the admiration of all those associated with 3M worldwide.

Monetary Goals:

Positively disrupt the stagnant nature of 3M’s stock price to reach $100 per share in 5 years.

Current Strategies:

The value frontier is a model that illustrates how 3M generates value (Appendix 1).

Internal New Venturing

3M’s success is driven by opportunity recognition at the functional level. Other building blocks of
their competitive advantage are systemic of this fact: functional level innovations in timely response to
customer demand for quality real world solutions. Illustrated By effective cross functional
communication between separate business departments, 3M can realize synergies by integrating
solutions from these departments to serve desired market segments. If the product is successful, the
company centralizes the initiative into an autonomous strategic business unit for further development.
This increases the speed to market, the quality, and therefore the continued success of the product.

Product Differentiation
In theory, this strategy is accomplished in a variety of ways. Because 3M’s market orientation is so
broad based, entrepreneurial proclivity in employees is essential to developing products. In this way,
the products that 3M offers become more valuable to customers than it’s competitors. 3M utilizes
innovation and quality as excellence to competitively differentiate.

Product Proliferation & Economies of Scope

3M grew to X million in sales over X years due to incremental successes in disparate market niches
worldwide. Because of 3M’s size and financial capabilities, building a wide product line serving many
markets makes 3M a difficult adversary. No matter what the product is, resources like employees and
cash are shared between functional groups to support growth. Establishing a strong foothold in
different markets allows for a natural hedging strategy. Some products may suffer in some markets
while others will be successful elsewhere. In this way, 3M can leverage profits to offset losses in ailing
sectors. This gives 3M more stable revenue generation given an infinitely many market scenarios and
fluctuations.

Economies of Scale
Not only does 3M have a broad based differentiation strategy derived from a wide range of innovative
products, but it also has the capacity to reduce production costs if production quantities increase. This
manufacturing competency gives a competitive advantage to 3M, as it is able to realize cost savings
where competitors do not have manufacturing capabilities and therefore are more vulnerable to price
fluctuations from suppliers.
SWOT Analysis:

Strengths
Facilitating Internal Change
CEO McNerney successfully implemented his Six Sigma strategy, training not only management but
functional level employees in quality control and cost management. This not only increased average
sales per employee from $234 to $311, but $750 million were cut out of overhead costs. This
demonstrates a particular competency to facilitate important strategies within the organization, largely
systemic of the creativity and entrepreneurial proclivity of the employees. This may also explain the
low turnover rate as well. Focused autonomy is a key factor to the continued success of 3M, and they
have demonstrated their understanding of this by separating their 6 core operations into 35 individual
business units.

Cash Rich Flexibility & Financial Management

In context of the case, year end 2005 net income totaled $3.2 billion. This gives 3M a lot of flexibility
as far as considering acquisitions to secure market share, leveraging profits against products that need
further development, and entering new markets worldwide. For over 100 years, 3M has been
generating value for shareholders, which makes them a very attractive stock option for risk adverse
investors. 3M’s historical competency to evolve by retaining earnings indicates a particular strength in
3M’s financial management.

Recognition of Innovation Drivers

With 15% of an employee’s week devoted to developing potentially profitable solutions, proposals are
systematically filtered to discover the most promising ideas so as to not waste time and money. Both
management and employees have high morale because they are permitted to work autonomously on
projects that could benefit the company. 3M is one of few companies that values employee innovation
as much as they do.

Weaknesses
Ambiguous Corporate Direction
3M is so large that it makes goal setting difficult from the corporate perspective. Overall, profitability
and maximizing shareholder value are key components, but perhaps 3M lacks clear-cut direction
because its components are so dissimilar and decentralized. Specific goals should be developed for
each strategic business unit, because 3M should be greater than the sum of its parts.

Lack of consumer level brand resonance

Despite many campaigns that emphasize innovation, 3M is most commonly known for the creation of
the Post-It Note. 3M has not convincingly portrayed the level of creativity that drives the core of the
organization, despite international recognition. This is likely systemic of the lack of individual goals
for the 6 different business units: marketing efforts are untailored and generic, thus not reaching the
customer as effectively.

Change in Development Process

Historically, 3M was a firm believer in perfecting an innovation before it was introduced to the market.
After CEO McNerney implemented the Six Sigma doctrine, the focus shifted from patient money to
timely market delivery. In effect, 3M sacrificed the quality of excellence of their innovations for
speedier customer responsiveness. The result of this is the loss of promising projects that may have
required more development to reach full potential, and continued proliferation of redundant products
with lower margins.
Opportunities
Brand Leverage
3M's worldwide presence requires a uniform set of identifiable characteristics. Although “3M” is
synonymous with “innovation,” of the thousands of new innovations created very few match the iconic
resonance with the customer like that of the PostIt Note or Scotch Tape. 3M should seek larger
opportunities for brand exposure, and tailor their marketing message to individual products it offers in
order to generate a greater resonance with stakeholders.

Emerging Sectors
Aligned perfectly with their competency of continuous innovation, 3M could easily leverage their
technological competencies to explore emerging markets. Their transportation sector could focus on
renewable fuel technologies, sustainable energy technology (solar, wind, hydro power), and other eco
friendly alternatives. This could include the introduction of their own green standard for consumer
products or manufacturers who are seeking reductions in costs and their ecological footprint. Even if
3M has investment (either domestic or foreign) in a company that is already developing these
technologies, 3M could give the necessary financing to bring the idea into fruition quickly, and
distribute through their existing network.

Falling Trade Barriers

Globalization means the gradual disintegration of trade barriers which means a number of things for
3M. First, emerging markets like China and India will have cost advantages in terms of asset
acquisition. Labour is cheaper, along with the land and buildings. These markets are aching for
practical solutions to everyday life, so it seems logical to surmise that 3M would be quite comfortable
in developing products for these countries.

Threats
Six Sigma Implementation
There is reason to believe that the GE inspired implementation of the Six Sigma program could be
detrimental to 3M’s innovative culture. Cost cutting mechanisms only make the overall operations
leaner, they do not ensure survival when resources are scarce, or ensure quality product development.
Though cost cutting is an attractive means to quick improvements on the income statement, they
indicate that perhaps the firm is unable to withstand unforeseen externalities, like economic downturn,
that would require even deeper cuts the company may not sustain.

Macro Economic Fluctuations

3M’s international presence makes it vulnerable to macro economical changes. In times of recession,
sales will decrease in that market and negatively impact net income. Some countries will be more
resistant than others, and a recession in one country could be offset by growth in another. Usually
these cyclical fluctuations are variable in different countries, except in the case of a global recession
that we face today. Other economic factors include purchasing power, as dictated by rates of inflation
and currency rates of exchange. Since 3M is decentralized and has adopted a more regional structure,
each market can be dealt with somewhat independently. Economic factors in individual countries will
have a large impact on continued investment and operations in that region. To mitigate this threat,
perhaps capital spending to procure hard assets should be encouraged, thus minimizing the amount of
debt and costly interest expenses. This is especially relevant in the manufacturing sector where
technology is extremely capital intensive. To illustrate, imagine a long wooden plank supported by two
tall pillars. When stress is applied down on the plank, how far will the plank flex before it is broken?
It depends on the thickness of the plank. Thus if 3M is spread too thin amongst these countries, the
business may not sustain an economic shock of global magnitude. It should be noted however that 3M
has a history of triumph over adversity through entrepreneurship.

Equity Ownership
The preliminary buyer group of 3M is comprised of hedge fund managers and professionals who
actively who trade 3M on the stock market. Investors who sense ailing profitability may pull out of 3M
if market conditions become unstable. An increase in the amount of sold shares from 3M would signal
to other investors to pull out as well, creating a domino effect that could result in mass withdrawl in the
billions, crippling the company of financial support. Perhaps the company should purchase back shares
to reverse some of the effects of share dilution.

PEST Analysis:
Political
A company that operates on a multinational level is vulnerable to the fluctuations in political policy
each individual country indoctrinates. Given that 3M operates in 60 different countries, the firm
operates at a much higher risk than if it were solely domestic. Trade barriers and agreements evolve
over time, and are largely contentious issues that change the course of international business. 3M
needs to stay flexible by remaining true to its innovative practices, and continue create products that
transcend international boundaries and cultures.

Environmental
In 2002, 3M was ordered to pay $15.5 million to the Canadian Federal government in compensation for
polluting the water and land surrounding Krejci national park These wastes included thousands of
drums of discarded inks, solvents and photographic emulsions, along with other wastes containing
hazardous substances

As of 2007, a chemical once manufactured by 3M has shown up in fish from several east Minnesota
lakes. As a consequence, the Department of Health was forced to issue warning to residents not to
drink the water. The toxins are thought to be the result of the chemical PFSOS (perfluorooctane
sulfonate), produced by 3M from 1950 till 2002. These are highly contentious issues that could
compromise the legitimacy of the company.

Social
Antitrust Violations
There are a number of social offenses that can be uncovered with research. In an article written in
Time Magazine, Friday, Dec. 22, 1961 describes 9 charges of illegal competitive behaviours according
to the Sherman Antitrust Act devised in 1910 in response to Rockefeller’s mass Standard Oil
Monopoly.

Bomb Components
From an ethical standpoint, it is questionable whether or not building components for killing is aligned
with the business mission and values. Society has become much more conscious of manufacturers like
Lockheed Martin, proliferators of death through producing explosives. This is precisely the sort of
contentious issue that can alienate the customer.

Technological
Systemic of the Six Sigma implementation, new ideas for technological advances are being screened
for market timeliness, and not developed in the interests of patient money. Because of this, initial ideas
that may require more costly development, but have large profitability potential in the long run are
neglected. There are several interesting areas of technology including nanosolar energy, urban wind
turbines, algaculture for petroleum production, and superconductor gravity drives are just to name a
few. Several competitors, including GE and Siemens, have already invested millions into developing
green technology solutions for everyday life. The alternative energy market is expected to reach over
$13 Trillion globally by 2013. Aside from this, as of 2005 3M owned the rights to almost 500 patents.
This gives them a particular advantage in the form of intellectual property.

Porter Analysis
Industry Definition
Because the organization is segmented into 6 markets (Consumer and Office, Display and graphics,
electro and communications, health care, industrial and Transportation, safety, and finally Security and
Protection Services, it is impossible to situate 3M inside the typical confines of industry definition
usually designated by a NAICS code. From its inception, 3M was forced to adopt and innovate or
perish approach to survival. By actively seeking solutions in emerging markets and evolving products
internally, the aggregate identity 3M is able to stay competitive. Thus it is not too abstract to surmise
that 3M is a company that could loosely be classified as an multinational opportunity recognition
vehicle. 3M is more of an aggregation of individual thoughts and creative insights co-operating with
hard assets to bring those ideas into fruition. There are very few firms that can be compared to 3M at
this scale, but it is the only appropriate definition given the goals of future growth and product
diversification worldwide.

Threat of New Entrants - LOW

Capital Requirements & Supply Side Economies of Scale
At the aggregated corporate level, it is impossible for another firm to enter 3M’s market by virtue of
3M’s broad based differentiation strategy. 3M competes across several different industries in 60
different countries. This means a prospective firm would have to acquire millions of dollars in assets,
and develop networks in worldwide markets just to satisfy the capital requirements to be considered a
competitor. It is threatening however if larger firms spearhead individual components of 3M's core
revenue generation. The fact that 3M spends billions on research and development every year, and
owns 487 patents (2005) certainly restricts the products that can be challenged by virtue of the law.
3M also mitigates this threat by having superior manufacturing capabilities that warrant economies of
scale. The firm is so large that any small competitor would likely be priced out simply by scaling up
production. It is more likely however, that 3M would purchase the firm and it’s assets.

Threat of Substitutes - MODERATE

Despite its extensive innovations, 3M has a serious lack of products that create long term consumer
level brand resonance. Milestone innovations like the immensely popular PostIts and Scotch Tape are
approaching maturity and decline in the product lifecycle. Several large competitors offer substitutes
to these core revenue drivers, and 3M has failed to sufficiently leverage brand equity to make
customers believe 3M is the best quality. As far as the 487 patents are concerned, there are no direct
substitutes until they expire. 3M must continue patent or face certain vulnerability to second mover
advantage.

Bargaining Power of Buyers – HIGH

The buyer groups for the purpose of this analysis are primarily comprised of end users of 3M products
(the customer) and those that support the company by purchasing stock, the investors. These two
groups drive the revenue generation and financial capital support the company needs to survive.
End Users
3M’s products, aside from a few anomalies, are largely standardized and undifferentiated. This creates
the assumption that 3M and its rivals are interchangeable, and are fairly price sensitive as a result.
Research and development costs, despite reductions due to company culture, are still high fixed costs in
several of 3M’s strategic business units. Pharmaceuticals and chemicals are two examples of high
development cost industries where 3M operates, which may result in discounting to recover costs
quickly. The end users have essentially no switching costs, as 3M offers no incentive program at the
consumer level to stimulate loyalty.

Investors
Like 3M, this buyer group is comprised of people who understand opportunity. They have diverse
portfolios of firms with varying degrees of risk. Savvy investors earn large profits, and are not solely
dependent on 3M’s performance and returns. This gives them a considerable amount of power because
the stock market is so liquid. As a result, investors have a considerably formidable influence over the
operations of the company.

Bargaining Power of Suppliers - LOW

The supplier to 3M are the raw materials suppliers. The scale of 3M’s operations means that a rise in
raw material costs would dramatically influence Net Income for the worse. 3M would be a huge
portion of the suppliers revenue, and a major asset to the future continuity of their business. 3M is so
technologically competent and cash rich that suppliers have to be wary of vertical integration: including
the suppliers of raw materials.

Industry Rivalry - INTENSE

The main players competing for 3M’s market share include Johnson & Johnson, GE, Seimens, P&G,
Dupont, Avery Dennison and Rubbermaid. Each and every one of these firms is large, and possess
both innovative and technological competencies. Margins are high when new markets are created, so
firms race to deliver a solution to market as quickly as possible.

Problem Identification:

3M has had a static stock price of $70-$80 since 2003. Because it is publicly traded, 3M is required to
deliver maximum value to the shareholders. While the Six Sigma doctrine lowered costs by cutting fat
and improving efficiency, the company has sacrificed innovation and patient money as a consequence.
The rigor of this program improves quality as excellence, but as a result, projects that require more
time to develop are neglected, and some projects with low margins are carried for too long and drive up
costs. Six Sigma is about risk minimization, more competent management means higher quality, and
better performance. But the core of this organization, the aggregated creative singularities in each
individual employee is compromised because of these restrictions. While international expansion is
attractive by proliferation of existing products tailored to individual cultures, the values that kept this
company alive in the beginning to dissipate. 3M needs to positively disrupt its mediocre performance
by delivering innovative products in emerging markets domestically and internationally.

Criteria:
1. Must increase brand equity and loyalty
2. Must positively disrupt share price to $100 in 3 years
3. Must capitalize on an emerging market opportunity that has blockbuster product potential.
Alternatives:
1. Capital Spending on Green Technology

Investment in sustainable energy shows extremely attractive growth. Capital spending on green
technology increased from $27.5 billion in 2004 to $49.6 billion in 2005 and $70.9 billion in 2006
(Appendix 2). Investment of $85 billion is now forecast for 2007. The next boom: The Alternative Energy Industry
(New Energy Finance, 2007) It seemed surprising that a company
of multinational proportions would have so little invested in
actively promoting their efforts in these markets, if they exist at all.
The 43% increase in investment in sustainable energy from 2005 to
2006 was also driven by the persistently high oil prices,
which averaged more than $60-a-barrel over the 12 months of
2006. (New Energy Finance, 2007)

Biodiesel from Algae – See Appendix 3

With the current biodiesel feedstock, such as corn, soy and palm, it is not feasible
to grow quantities great enough to supply all of the transportation needs in the
united states. The current crops would actually require twice the land area the US
currently devotes to soybean production, in order to meet current heating and
transportation needs (Hodge, 2008) Biodiesel derived from algae is a completely
different story. Algae grows at an extremely rapid rate, do not require fertile land,
and can be harvested daily. Algae, could supply all U.S. diesel power using a
mere 0.2% of the nation's land (Hodge, 2008). In fact, enough algae can be grown
to replace all transportation fuels in the U.S. on only 15,000 square miles or 9.6
million acres of land. That makes algae the highest yielding plant for biodiesel,
producing 24 times more oil per acre, on average, than the next leading feedstock -
palm oil at 635 gallons/acre/year. Algae is the fastest growing organism on the
planet, able to double its size in 24 hours in a closed loop system. This organism is
filled with opportunity in the petroleum market, as species can be engineered to
produce different chains of hydrocarbons that yield gasoline as well as jet fuel.

Criteria Analysis:
An excellent benchmark competitor successfully building a green brand is
General Electric:

“General Electric’s improvement is attributable almost entirely to its

environmental efforts. The company’s highly visible “ecomagination”
campaign aimed to more than double its annual research budget for cleaner
technologies – like energy-efficient refrigerators and wind turbines – from
$700 Million in 2005 to $1.5 billion in 2010. Last year those research
efforts generated $12 billion in revenues from 45 products and services.”
(Fortune, Nov.12, 2007)

Competitors like General Electric have been designing and installing large scale wind turbines years
before they were mainstream solutions. This industry is a perfect fit for 3M: a place where it can
leverage technological, and innovative competencies to create a vast amount of products to serve
various practical elements of being environmentally conscious. This is a proven concept, and 3M has
the entrepreneurial intelligence, and capacity to facilitate internal change for successful
implementation. This is precisely the sort of brand building strategy 3M needs to better resonate with
the customer on a more individual basis. Investors that actively trade both companies will recognize
the potential in 3M diversifying into eco-opportunities, which theoretically should drive the stock price
up if they can deliver the same value as General Electric. Algae production was purposely chosen
because of its long term profit, further diversification potential (into other fuel types and applications),
and is an effective means of differentiating from competitor’s efforts to build a similar brand image, so
as not to compromise legitimacy

2. Strategic Relationships to Strengthen Foothold in Domestic Markets

3M could explore the benefits of being the exclusive supplier to Staples, a leading retailer of office
supplies in North America. This situation would create a win-win scenario for both companies with
respect to brand equity, although it may warrant an investigation from the FTC due to 3M’s history
with anti-trust violations. The relationship would function on a number of different levels based on the
nature of the respective industries. At the consumer level, office supplies are highly substitutable and
largely standardized. Staples could build brand equity by manufacturing privately branded office
supplies, but lacks the technological competency and assets to produce such a product. Staples has an
existing relationship with 3M, but locking other competitors out allows for much higher margins. An
exclusive agreement between 3M and Staples would give mutual brand leverage due to increased
visibility, not to mention an impressive revenue stream for 3M. If deemed necessary, 3M could also
forward integrate, that is, purchase Staples entirely. This is the sort of capital investment that might be
better put to use by purchasing new assets to manufacture green products, but there is certainly a high
probability of synergy between these two companies.

Criteria Analysis:
A contractual agreement for Staples to exclusively retail of 3M office supplies meets all but one
decision criterion. 3M would instantly solidify its presence through Staples’ distribution network. Such
an alliance would translate into global growth and increased market share in the Office Supply sector
for 3M, and give Staples a new advantage with respect to unequal distribution channels. Visibility
would be built not only domestically, but also worldwide as Staples forges on into new market
opportunities in Europe and India. 3M’s international brand awareness, resonance with the customer
will improve as a result of the exclusive relationship granting maximum product visibility for 3M. The
only missing element is the blockbuster potential of a product society has never seen before, and
seamlessly integrates into their everyday lives. The problem with this is that the value generated for
Staples is greater than 3M – 3M being one of their biggest suppliers. Staples does not have the
distribution or draw to substantiate an exclusive deal of this nature.

3. Divestment in Slow Growth Business Units

3M operates business units which are worthy of divestment consideration. Primarily speaking, the
pharmaceutical component is of particular concern, hosting low returns and high development costs to
realize a marketable product. Even when a product is devised, the FDA can shut efforts down if the
drug does not meet testing standards. By selling off this business unit, 3M will be able to focus its
finances on researching and developing other aspects of technology, likely with more attractive
payback periods.
Criteria Analysis:

Divesting out of the pharmaceutical industry will do a number of beneficial things for 3M. Positive
branding can result from divestment by removing the root cause of contentions to healthcare and big
business. This sends the message that 3M is committed to adopting societal change and expectations,
and is more interested in focusing on customer responsiveness rather than the next blockbuster drug.
The real opportunity is the freed up investment capital to be diverted into new emerging business
sectors, like green energy. This alternative meets all three criteria, with some speculation as to whether
or not the opportunity realized from the new investment capital will help 3M achieve new profitability
goals. It is without question that because of the satisfaction of the criteria, 3M should immediately
divest in hopes that the funds be reinvested into more profitable ventures.

Recommendation:

3M should carry out a combination of the aforementioned alternatives. To first free up available
capital for investment, the divestment alternative with respect to pharmaceuticals should be
implemented. This will free an approximated $2.1 billion for unrelated diversification efforts,
improving internal processes like manufacturing and research, lowering production costs, or for scaling
up funding for employee innovation projects aligned with new product opportunities. While
competing on a multi-national, multi-dimensional product offerings, it is better to perform the best at
few, than mediocre at many. This money would then be able to fund research into developing alga-
culture technology as suggested in the first alternative. Algaculture is one of the cheapest technologies
to develop, and has tremendous growth potential in the energy sector. This alternative, while not as
“market ready” as GE’s ecomagination, has far greater impact on the environment as it deals with a
renewable source for the global dependence on petroleum. This is precisely the sort of innovation that
requires the technical competencies boasted at 3M, which is why the opportunity should be seized
while it is ripe for the taking.

Exploring how to strengthen existing relationships, like with office supply retailer Staples, while
attractive, is not to be the focal point of change at 3M. This is simply because there is not sufficient
value to realize from any partner of 3M, as it is usually the supplier and has a lot of power over these
sellers. As such, it will not be a component of significant change.

Implementation:

The first step to revamping 3M would be to eliminate any inefficiencies as far as ROIC is concerned.
Pharmaceuticals is just one strategic business unit that should be evaluated and sold accordingly to the
highest bidder. The extra capital realized from harvesting this SBU would give some flexibility to
invest in green technology capital. At a functional level, this means inspiring employees to think green
in terms of profitable eco-solutions. A great starting point would be to redesign a system for vertical
alga-culture growing. There is still much room for research into maximizing the grow medium surface
area: greenhouses are largely an inefficient use of space until growing is facilitated on a vertical axis.
Alga-culture was chosen because of the high profitability potential, and economies of scale realized in
long-term production. If there is no existing biological focus group, it will be created immediately to
facilitate the free flow of ideas pertaining to this technology. Cross functional teams would be created
to help realize the synergy between manufacturing departments (for piping, environmental monitoring
systems, atmosphere, pH etc) and biological research regarding hydrocarbon harvesting from algae.
This alternative still speaks to 3M’s historical values and goals, so it seems to be a perfect fit for 3M’s
innovative competencies that drive the success of the organization. There would also be continued
research into developing hydro carbon chains applicable for jet fuel production. Successful
implementation will catapult 3M onto the forefront of cutting edge technology, and once again inspire a
customer that has longed for the same resonance as was realized with the PostIt Note.

Milestones:

Critical moments of success include the divestment of the pharmaceutical department to focus on more
technical competencies with higher ROIC and higher probability of cross departmental synergy. The
company will also have to deal with any managerial, or employee resistance in pushing renewable fuel
technology, although it is far less contentious than pharmaceuticals. It does not seem likely that 3M
will see resistance as the company holds the environment high in priority. 3M must also find real
estate to support a facility for algae production.

Roadblocks:

The time to develop an optimally efficient closed loop bio reactor system is highly speculative. There
are so many different types of algae, that 3M will run the risk of contamination if the bioreactor is not
set up properly. This will decrease the amount of biomass to be converted into biodiesel, and therefore
reduce the amount of potential revenue. Securing a location for the facility is another significant
roadblock to successful implementation. Because revenues would be derived as a function of the land
mass available, the more land mass available for alga-culture, the higher the potential for harvest, and
the resultant revenues. Another risk is on the part of the consumer, who ultimately makes the decision
about what renewable fuel is most convenient for their lives, and which will be adopted by the masses.

Contingency Plan:

The beauty of researching the closed loop bio-reactor system, is that it has many applications under the
same system. Hydroponic fruits and vegetables can also be grown perpetually, year round in ideal
climates. So this is to say that if alga-culture is less profitable than perceived, there are other
applications, like food production, that are both necessary and philanthropic in nature The facilities
could also be sold to other businesses in agriculture, along with all the environmental monitoring
systems that manage the grow process. 3M has all the necessary resources to facilitate these industry
disrupting changes to revitalize their share price and continue to assert itself as a leader, and an
innovator with infinite possibilities of division.
Appendix 1 - Value Frontier
Appendix 2
Appendix 3
Bibliography:

3M at 100 - on the right path for growth?

By Andrew Haeg
Minnesota Public Radio
June 10, 2002

Business and environmental politics in Canada, Douglas Madconald, pg 62 broadview press.

Study conducted by pollution probe in 1982

THURSDAY, FEBRUARY 7, 2002

WWW.USDOJ.GOV

Nine Counts Against 3M

http://www.time.com/time/magazine/article/0,9171,827171,00.html

http://www.startribune.com/local/11556796.html?elr=KArks:DCiUHc3E7_V_nDaycUeyc+D3aUU
Chemical used by 3M found in fish; advisory issued
By Mary Lynn Smith, Star Tribune

Hill, C.W.L & Jones, G.R (2008). Strategic Management: An Integrated Approach (8th edition).
Boston; New York: Houghton Mifflin Company