The 3M Company Case Study Essay Example for Free

The 3M Company Case Study Essay Introduction The 3M Company is a $18 billion diversified technology company with leading positions in health care, safety, electronics, telecommunications, industrial, consumer and office, and other markets. Headquartered in St. Paul, Minnesota, 3M has operations in more than 60 countries, serving customers worldwide. 3M is one of the top 50 Fortune 500 companies and has been one of Fortune magazines ten most admired corporationsfor the last ten years. Since its founding in 1902, Minnesota Mining and Manufacturing Company has become one of the worlds most innovative and productive companies. 3Ms primary growth strategy is to sell more existing products into new markets and to introduce new products into new or existing markets.3M mission is to be the most innovative enterprise and the preferred supplier to customers. 3M vision is to sastisfy customers with superior quality, value, and service. A division of the 3M Company, 3M Health Information Systems, the largest and one of the fastest-growing of 3Ms seven major businesses, serves medical, dental, pharmaceutical, and personal care markets. 3M Health Information Systems is a leading provider of advanced software tools and services that help health care organizations capture, classify, and manage accurate health care data. With more than 20 years of industry experience, 3M Health Information Systems solutions help ensure the quality of data and the processes that drive an organizations ability to manage revenue, comply with regulations, improve the quality of patient care, and manage resources effectively. Read more: 3MÂ  Organizational Structure Through this paper, 4 main points will be discussed in order to identify the position of 3M strategy regarding its innovation management,especially in the health care division . First of all, lets identify the main issues of 3M affecting its innovation management. The second point will be to discuss the national system of innovation in health care.As a third point , three academical framework will be applied to 3M innovation management. Lastly , based on the findings get on analysis of the theories , some recommendations will be suggested to improve 3M innovation management. Section 1: select an organisation and outline the main problems which impact on the effective innovation management.In answering this part of the question you may, if appropriate, provide examples of recent innovation in product, services or process. In the field of innovation management , 3M is the leader. 3Ms corporate strategy shows anyway some internal and external concerns which impact the effective innovation management put in place at 3M. The first concern which come up is that 3M has established a corporate goal of generating 30% of sales from products introduced within the previous four years. In striving to attain this goal, the company spends 7 cents of every sales dollar on R D more than twice the average of U.S. manufacturing companies.It could be seen as too much concentration of innovations even if they are not necessary in the market. According to William Coyne, 2001 at 3M, in recognition that product life cycle are becoming shorter, the company has recently set up a new goal of 10 per cent of sales coming from product less than a year old. But as most business leader would acknowledge that developing genuianely new products is a high risk activity : industrial product have only a 50:50 chance of being succesfull, while consumer goods fare even worse , with a one ten chance of succeeding . In attempt to meet the 30% or 10% rule, the employees strive to introduce new innovations on the products, even if those innovations do not add any value to the customers whilst the company is heavily spending on RD. The second concern which was noted related to 3M innovation management. Gundling, E. (2000) argues that 3M declared victory too early .In fact 3M has a high publicity and reputation for innovation and this lead to over confidence resulting that every employee believe that they are all innovators .So there is noone to set the standards for innovation, against which innovation performance can be assessed. The troubles that afflicted 3M is the environment that encourages people to work around and defy their superiors and a determination to let the company follow where its scientists and customers lead.However , it is important for 3M employee not to fall into the trap of happy self deception or to be content with just incremental products.In fact , according to William Coyne (2001), the company top managers were very concerned that too much of the companys growth was coming from incremental improvement to existing products. The third drawbacks that 3M has is the fact that they produce overwhelming too many products than what overseas subsidiaries can manage to market . Ernest Gundling (2000) argues that subsidiaries employees are trying to serve the needs of numerous 3m divisions simultaneously , some employees are kept so busy dealing with US or regional headquaters that they lack the time to focus on their customers. As a result 3M is very big but acts small. Each of 3Ms 45 product divisions constitute a business in itself with its specific customer base, with its own general manager, marketing director, technical director, human resources director, manufacturing director, and national sales manager (Coyne, 1997). 3M is a highly decentralized company, but care is taken to decentralize to units that are large enough to be self-standing and, therefore, capable of funding their own RD. On the other hand, 3M attempts to prevent divisions from getting so large that individual innovations do not count. 3Ms strong belief in divisional autonomy is countervailed by the corporate requirements of a high level of innovativeness and interdivisional knowledge-sharing (Goold et al.,1994, p.203). Fourthly , according to Gundling, E. (2000),3M still unofficially practices lifetime employment. It is possible to get fired, but normally only for a serious ethical breach, gross imcompetence , lack of motivation, or negligence. When the company decided to reduce their workforce , the only concern they face is how to preserve the experience and sense of dedication that will ensure continued innovation in the company.In fact people laid off because of their performance or early retirement are well attracted by others firms to work and share the knowledge they acquire through 3M experience. Finally 3M face not only internal concerns as seen before but external environnement affect as well its innovation management. In fact according to Gundling, E. (2000), when a product has been approved for marketing, 3m still have to wait the review from the regulatory agencies in other countries.This could slow down the innovation process of the company for instance for the launch of the Aldara cream. Section B : Briefly indicate how the National System of Innovation influences the company s ability to manage innovation. According to Tidd, J. et al (2001), the national system of innovation in which a firm is embedded, strongly influences both the direction and the vigour of its own innovation activities. He identifies three national factors that influence the rate and direction of innovation, National market incentives and pressures; competencies in production and research; and institutions for corporate governance. The innovation policy whereby 3M scientists hold regular meetings with customers allows the company to utilise knowledge available on the market, for its innovation management. In relation to health care products, 3M is forced to keep innovating due to intense competition and regulation in the US. Competition does also promote innovation by providing opportunity for formation of alliances to share costs and risks in risky and costly projects. 3M enjoys national competencies in production and research through the availability of universities with which it has research links. US, as a nation also ranks high among nations with good innovation environment indicators. The nation has steadily increased its RD expenditure (as a percentage of GNP) from 0.99% to 1.60% between 1967 and 1998. Tidd, J. et al (2001) estimated that US per capita and per researcher RD expenditure was US $ 650 and US $ 169,650 respectively. RD Personnel ratio was estimated at 3,700 per million population. Tidd, J. et al (2001) posit that increased share of RD expenditure as a percentage of GDP for USA (as well as Germany and Japan) has been responsible for the growth of major firms in pharmaceuticals and telecommunication. USA has also good institutions that promote RD. These include, the National Institute of Health, which is a government funded body active in biotechnology RD . Section C: Select three analytical frameworks from the course as a means of evaluating the effectiveness of the organization s approach to innovation management. There is 3 theoritical framework that could applied to 3M innovation management concept . The first model that could be applied to 3M innovation management is the Knowledge creation Model . According to Professor Nonaka and Takeuchi, (1995), there is two types of knowledge :Tacit knowledge and explicit knowledge .Through this dynamic interaction between the two types of knowledge, personal knowledge becomes organizational knowledge. And the organizational knowledge or intellectual infrastructure of an organization encourages its individual members to develop new knowledge through new experiences. This dynamic process is the key to organizational knowledge creation. This interaction between the two types of knowledge brings about what we call four modes of knowledge conversion that is, socialization (from individual tacit knowledge to group tacit knowledge), externalization (from tacit knowledge to explicit knowledge), combination (from separate explicit knowledge to systemic explicit knowledge), and internalization (from explicit knowledge to tacit knowledge). Socialization is a process of creating common tacit knowledge through shared experiences. For socialization, we need to build a field of interaction, where individuals share experiences and space at the same time, thereby creating common unarticulated beliefs or embodied skills. In the case of 3M , personal tacit knowledge which 3M requires through their recruitment process to only take knowledgeable employees and that tacit knowledge will be transferred through team working , for instance the division managers nust know each staffers first name(Mitchell,1991). Externalization is a process among individuals within a group. During such face-to-face communication people share beliefs and learn how to better articulate their thinking, though instantaneous feedback and the simultaneous exchange of ideas. This mode is triggered by a dialog. In fact when an employee come up with a product idea, he or she recruits an action team to develop it(Mitchell,1991). Combination is a process of assembling new and existing explicit knowledge into a systemic knowledge, such as a set of specifications for a prototype of a new product. Often, a newly created concept should be combined with existing knowledge to materialize it into something tangible. For instance according to Gundling, E. (2000), 3Ms Technical Forum is a means for all technical people share technologies, practices, policies, and procedures. Exchange of technical personnel knowledge to different divisions, or other countries where 3M has operations, is common. Internalization is a process of embodying explicit knowledge into tacit, operational knowledge such as know-how. This mode is triggered by learning by doing or using. Explicit knowledge documented into text, sound, or video formats facilitates the internalization process. Therefore, manuals, a quintessential example of explicit knowledge, are widely used for internalization. That has been done in 2002 when 3M published the book which is a compilation of 3M voices, memories, facts and experiences from the companys first years : The innovation century , the 3M story. The second model that could be applied to 3m innovation management is the culture-innovation model The innovative culture of 3M has been the driving force for the companys continuous innovation and growth into a major world-wide, large-scale manufacturer. Applying the theory developed by Teece, we assessed that 3M has developed complementary assets, in terms of research ability residing in individual knowledge and technical expertise held by 3M scientists. Furthermore, this culture has helped the company develop dynamic capabilities by analysing and anticipating future customer needs (opportunities) and translating these opportunities into product novelty, by combining various complementary assets in a competitive, hardly inimitable way. 3M is a company whose culture has led to thousands of new products every year for decades, probably the premiere company in bringing new products to market. 3Ms development process is dramatically different from most, yet it is highly successful at new product development. Innovative new products from 3M because of a well-thought-out set of mechanisms which support emergent activity. 3Ms corporate strategies explicitly promote an innovative spirit. These strategies include: 30% if sales must result from products less than 4 years old; technical people can spend 15% of their time on projects of their own choosing; every division has access to technologies developed anywhere in the company and has the responsibility to share the technological needs of its customers throughout the company. 3Ms corporate culture is very supportive of risk taking, teamwork, innovation, and entrepreneurship. Failure is viewed as a learning experience; employee relations are informal and on a first-name basis; the technological base is diversified and technological exchange is encouraged throughout the company; and 3M maintains a strong commitment to develop customer-driven products. These principles have all been followed at 3M for decades. The specific human resource (HR) strategy helps 3M foster innovation, retain research talent and reduce the employee turnover by giving scientists personal research time, rewarding innovation and adopting a constructive approach towards product failures. As shown in the case, the specific HR policy along with the innovative culture has been the milestones in the development and the success of the company over several decades of operation. By providing the framework for innovation, 3M allows the innovation process to be controlled almost entirely by the individual scientists, who are encouraged to think outside the square and develop new products within the specifications required by the market. The third framework that will apply 3M innovation management will be the organic structure. The organic structure is more flexible, more adaptable to a participative form of management, and less concerned with a clearly defined structure. The organic organization is open to the environment in order to capitalize upon new opportunities. Organic organizations have a flat structure with only one or two levels of management. Flat organizations emphasize a decentralized approach to management that encourage high employee involvement in decisions. In 3M, this translates into a structure where most employees network into at least five levels: department, division, group, sector and company. For purposes of innovation, the key level is the division. Each of the companys 40-some divisions develops, manufactures and sells its own products, and each has a structure appropriate to its market. Most divisions include functional departments division labs, manufacturing, marketing, sales, logistics and so forth as well as cross-functional teams. 3Ms resulting formal structure may look like a bureaucracys analytical hierarchy on an organization chart. But, in fact, the structure acts less like a bureaucratic prison than a platform, from which employees are expected to learn and serve customers. For instance, like the units in a living thing, the departments in any division have semi-permeable boundaries. Sales people arent trained only in sales. They learn about their divisions technology so they can describe products to customers. Moreover, theyre expected to work with people in the marketing and research departments of their divisions and to network across the company. Similarly, technical and manufacturing people regularly visit customers manufacturing facilities to learn about their operations. As a result, they sometimes see possible uses of 3M products those customers havent thought of. As an example, about 15 years ago, technical people were visiting an auto manufacturers factory and learned that the rivets they used to hold side molding to doors were rusting. So the technical people went back to the lab and developed an acrylic foam tape that replaced the rivets and solved the problem. Additionally, 3M has a flexible organisational structure, with a dual ladder approach, allowing employees with technical background to advance in their career without having to switch to management. Furthermore, we assessed that the dual ladder reveals a matrix internal corporate organisational structure allowing the firm to react promptly to market opportunities and assemble quickly multi-disciplinary teams of employees. This internal organisational structure is not visible from the outside and it is not easy to be copied by competitors, due to the high complexity of the relationships that establish within this matrix (span of command and delegation of authority). Section D: Based on your analysis in section C explain how the organization could improve the management of innovation: Based on the findings in the third question 3M has managed to innovate continuously and create a large pool of products (over 30,000 products), achieving continuous profitable growth over time. So suggesting new recommendations for the improvement of 3M innovation management is a difficult approach but any company even 3M has some limitation so few suggestions will be recommendable : As explained in the third question, the lack of a system to guide product developers who are seeking to create breakthroughs is a problem even for a company like 3M, long known for its success with innovation. The innovation culture the company has nurtured and the continuous investments in research and development (RD) over several decades has helped 3M get deep roots in several competencies for instance in applied technology for health care. But willing to create although very new products and services may be essential to future growth and profit, companies must first survive to get to the future. That necessity tends to focus companies strongly on making incremental improvements in order to keep sales up and current customers and Wall Street analysts happy. Second, developers simply dont know how to achieve breakthroughs, because there is usually no effective system in place to guide and support their efforts. Employees knows only that 30% of sales must come from products that had not existed four years earlier. So even if the product could have a life cycle more than four years , 3M reduce it in order to comply to the rule. For the Medical-Surgical Markets Division to secure future growth it would be advisable that the division maintain a balance between incremental and revolutionary innovation. As well as promoting more the activities like marketing or branding for the product created in the health care division because the cost of investment put in place for the creation of thoses products will be only recovered if the product stays in the market longer than 3M would. By shortering the product life cycle , it increases the RD expenditure. Even the most effective innovating firms such as 3M may create organizational bureaucracy that slows down innovation. The most successful innovators know that just spending more on RD is not enough; neither is anticipating customer needs. 3M employs a strategy of high decentralization and autonomy for its divisions, or units. In reality 3M also does not follow the traditional approach to organizational design. 3M consistently achieves its goal of having 15 percent of its revenue come from new products by providing managers with the latitude to move from one business unit or laboratory to another without bureaucratic obstruction. It is during the knowledge creation process that Project groups, operating with few constraints from the formal organization, come together to accomplish a task and disband when their work is completed. One of my recommendation regarding the 3M structure is to merge RD with Sales and Marketing, subsequently creating a number of small cross-departmental innovation teams. Realignment of goals and business planning would be crucial during this phase and reappointment according to respective areas of expertise must be communicated positively, offering alternative thoughtfully designed posts, linking salary to performance. Linkage between these teams must be fabricated carefully. By creating this as an independant workforce they will be delegating responsibility , flexibility.They will be able to access fast, good communication will be involve to share the available information. This approach will enable the company to retain all the insight and move on quickly to the next step on a real time basis. . By allowing RD , Sales and Marketing to mix and to participate in decision-making, their suggestions could have changed the outcome by allowing them to respond in a timely manner and adjust their strategies to fit their consumers. It is also recommended to start with small grouping of activities because it is reducing risk and remain tight control and maintain that organic structure put in place within 3M. Finally creating independent small units that can rapidly respond to customers needs or changes in the business environment. The supervisor tends to have a more personal relationship with his or her employees in order to motivate them to succed in their object ives. Summary : 3M, which obtains 30% of sales from new products within four years, offers an example of how a culture of innovation can take root and become integral to the continuing success of a company after nearly a century. Even if 3M is the model of innovation management for other companies, it has some limitations in its proper culture, structure and HRM policy which lead 3M to make some improvements that enable them to excell in their competitive advantage.The national system of innovation is the foundation of their actual direction. After analysing the three theoritical frameworks , there is no doubt that 3M innovation management provide the effectiveness at all level. Total Word Count: 3108 Section A: 569 Section B: 283 Section C: 1321 Section D: 935 Reference: 3M Company, 2002, A Century Of Innovation, 3M Company, USA 3M Company Annual Report, 2003 3M Company, USA Achtmeyer, W.F. 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