With 40,000 global patents and patent applications, 3M, maker of Post-it notes,

Question

With 40,000 global patents and patent applications, 3M, maker of Post-it notes, reflective materials (Scotch lite), and 55,000 products in numerous industries (displays and graphics, electronics and communications, health care, safety and security, transportation, manufacturing, office products, and home and leisure), has long been one of the most innovative companies in the world. 3M codified its focus on innovation into a specific goal, “30/5,” which meant that 30 percent of its sales each year must come from products no more than five years old. The logic was simple but powerful. Each year, five-year-old products become six years old and would not be counted toward the 30 percent of sales. Thus, the 30/5 goal encouraged everyone at 3M to be on the lookout for and open to new ideas and products. Furthermore, 3M allowed its engineers and scientists to spend five percent of their time, roughly half a day per week, doing whatever they wanted as long as it was related to innovation and new product development.

3M’s growth lasted only for a while. A decade ago, the Boston Consulting Group, one of the premier consulting companies in the world, ranked 3M as the most innovative company in the world. In subsequent years, it dropped to second, third, and then seventh. Today, 3M doesn’t even crack the top 50. Dev Patnaik, of Jump Associates, an innovation consulting firm, says, “People have kind of forgotten about those guys (3M). When was the last time you saw something innovative or experimental coming out of there?” So, what happened?

When the company’s predecessor became CEO ten years ago, he found a struggling, inefficient, oversized company in need of change. He cut costs by laying off 8,000 people. Marketing and research and development funds, which had been allocated to divisions independent of performance (all divisions got the same hike each year), were now distributed based on past performance and growth potential. Poor performance would affect the funds negatively. Likewise, with U.S. sales stagnating and Asia sales rising, management decreased headcount, hiring, and capital expenditures in the United States, while significantly increasing all three in the fast-growing Asian markets. Six Sigma processes, popularized at Motorola and GE, were introduced to analyze how things got done, to remove unnecessary steps, and to change procedures, which caused defects. Thousands of 3M managers and employees became trained as Six Sigma “black belts” and returned to their divisions and departments to root out inefficiencies, reduce production time, and decrease waste and product errors. And it worked incredibly well, in part. Costs and capital spending dropped, while profits surged 35 percent to record levels. But, product innovation, as compared to the 30/5 goal sank dramatically, as only 21 percent of profits were generated by products that were no more than five years old.

So, what should 3M do? From inception, 3M has been an innovator, bringing a stream of new products and services to market, creating value for customers, having sustainable advantage over competitors, and delivering sizable returns for investors. Thanks to the predecessor, 3M had lower costs, was highly efficient, and much more profitable. But it no longer ranks among the most innovative firms in the world. In fact, the use of Six Sigma procedures appears to be inversely related to product innovation. If that’s the case, should 3M continue to focus on using Six Sigma procedures to reduce costs and increase efficiencies, or should it strive again to encourage its scientists and managers to focus on innovation? Which of these will make 3M more competitive in the long run?

When people think of innovation, they tend to think of game-changing advances that render current products obsolete, for example, comparing the iPhone to text-based “smartphones.” Innovation, however, also occurs with lots of incremental changes over time. What are the advantages and disadvantages for 3M of each approach (experiential and compression), and when and where would each be more likely to work? Finally, some companies innovate from within by successfully implementing creative ideas in their products or services. Sometimes, though, innovation is acquired by purchasing other companies that have made innovative advances. For example, although Google is generally rated as one of the most innovative companies in the world, most people have forgotten that Google bought YouTube to combine its search expertise with YouTube’s online video capabilities.

o   What went wrong?

o   Over time, how much should companies like 3M rely on acquisitions for innovation?

o   Should 3M acquire half, one-third, ten percent, or five percent of its new products through acquisitions?

o   What makes the most sense and why?

o   If you were in charge at 3M, what would you do?

Ø  Make a valid point based on your overall position.

Ø Cite said point in keeping with MLA guidelines.

Ø  Provide other evidence that is credible to the topic.

Ø Illustrate, define, explain, et cetera, said point in a meaningful manner.

v  Do not be afraid to critically analyze the information and/or cases you are analyzing.

Ø Deploy, based on valid academic data, your theoretical analysis.

v  The theoretical analysis can be based on your expertise, experience and course material.

Ø  Whenever prudent, provide an application and/or impact example.

v  Generally, when someone personalizes their work, it reads more like an opinion editorial than academic work.

Ø If the student can get to the how and the why of their points, and thus their overall position and/or argument they will generally be able to put a robust effort and support their position.

v  Again, get to the how and the why as this will assist you.

Ø You need to add a level of innovation to your work such as what unique approach you would take or potential consequences and how they could be addressed.

v Look at innovative option, solutions and perspectives.

v You must break from the status quo

Explanation / Answer

What went wrong?

It is believed that same system when used over a long duration gets into the habit and the employees do not find it very challenging , mostly when the staff is talented and skillful.

So, with the same system running for long duration employees were less motivated, they had products and innovation but those were not relevant to the world outside.

And to increse the 30/5 , if the revenue from others are reduced it will automatically increase the share of newinnovations, which were neither many nor contributing highly.

Over time, how much should companies like 3M rely on acquisitions for innovation?

When there are falling sales, it is a question of sustenance. Though they had a very innovative culture but it was less useful to bring in enough sales and revenue to have a sustainable growth. And as they had always targetted massive innovations, they should also focus on incremental innovation, as that way everyone is motivated and the much needed revenue for sustenance is within reach.

Should 3M acquire half, one-third, ten percent, or five percent of its new products through acquisitions?

What makes the most sense and why?

3M has been targetting huge innovations and not incremental innovations, which has led to the debacle they are in. Hence they should start with 5% and should increase it to atleast 10%. These acquisitions provide scope for higher innovation in terms of incremental ways and also provides scope for leapfrog innovations. These provide new directions and learning opportunities.

If you were in charge at 3M, what would you do?

I would have the original plan of 30/5 but also focus more on incremental innovation. Tie the incentives to performance as was done, but most importantly not all should be looking at inefficiencies through six sigma, it restricts innovation and implements process orientation. So, there should be dedicated employees who should be trained and working in such a manner, they will be the checkers and align the production and would make suggestions.

Rest all should work in their way with regular guidance from these checkers.

There should be relevant acquisitions of new technology and innovations, as developing everything from scratch is time taking and ads lag, it better to acquire and then develop technologies.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.