Who are the 3M company's competitors
The turning point of a legend
Friday afternoon in the company store at 3M headquarters outside St. Paul. Most of the employees are already in the weekend; it's warm, and that's rare in Minnesota. The company is based in a stretch of land where most of the jokes are made about snowdrifts and ice fishing. The parking bays in front of the brick-faced office and laboratory bunkers on "Innovation Road" are empty. A few stragglers walk past the rows of shelves in the socialist-sparse office block No. 220 and browse through the in-house products. Plasters, bandages, respirators, adhesive tape, kitchen sponges, brushes, post-it notepads, envelopes with and without padding, car accessories, varnish, sandpaper and even sleeping bags are lined up like in a hardware store.
In the Leadership Development Institute not far from the main building, however, heads will be smoking all weekend. The newly inaugurated seminar center stands in stark contrast to the dreary company shop. It is decorated in earth tones and decorated with Far Eastern paintings. In its library, guests can access the internet wirelessly in hip armchairs. Almost 50 members of senior management will try to solve problems from the real life of the multinational in a two-and-a-half-week marathon. If you have to travel to Europe or Asia to do this, the expenses are approved in advance. At the end of the seminar, there is a presentation in front of the 15-person 3M management team. And the chance that a manager will immediately put into practice what has been worked out together.
The training temple has an ambitious spiritual father who sometimes comes to the desk himself and teaches the ABCs of modern industrial management: James McNerney. The former management consultant and General Electric Manager has been CEO and Chairman of the Board of Directors of the traditional company 3M since January 2001. The training facility, which several hundred managers have passed through so far, is a symbol of the new wind that is blowing through the 102-year-old company.
The change at 3M is not yet obvious to the outside world - many still consider the group to be an old-fashioned junk shop. The oldest mainstay is the consumer and office supplies division with its well-known brands Post-it and Scotch adhesive tape. One-seventh of last year's sales of $ 18.2 billion were made by those little things that make our lives easier. It's a highly competitive market teeming with cheaper competing products.
McNerney only sees him as a sideline. Since taking office he has initiated a radical change of course, he wants to achieve double-digit growth rates and margins. Its trump card: 3M sits on a lively boiling cauldron full of innovations - from inconspicuous everyday objects to complex high-tech applications. The long-established company with 67,000 employees in more than 60 countries manufactures no less than 50,000 products.
McNerney's mission is to constantly do new things, unfortunately the encrusted technocracy in St. Paul prefers to hide the revolution. Visitors and journalists are not allowed into laboratories, even if they only have the latest sticky notes on the walls to test how many hours they take to fall off. Instead, the press lady proudly leads through the 3M Museum on the ground floor, where a dozen innovation awards and faded advertising posters from the 1950s, 1960s and 1970s hang - long before the ScotchGard stain protection product came under fire and was taken off the market in 2000 as being liver-damaging. You can only meet the developers in neutral conference rooms with a PR supervisor at their side. Nobody should look behind the scenes of the innovation machine. Even when "Business Week" printed a cover story about the newcomer McNerney in the spring, the reporters had to stay outside and be content with archive images.
Despite the new boss, 3M clearly has problems conveying the transition from ancestor worship to a spirit of optimism. That is why the old shine is bragged. The ancestral line of innovations from St. Paul goes back to 1921, when waterproof sandpaper saw the light of day there. Today, 6500 employees, almost one in ten, work in research and development. The flow of new technologies and products - often discovered by chance by stubborn engineers single-handedly - has become not only legend, but also the subject of non-fiction books and case studies at business schools. 3M, as the magazine "Fortune" put it benevolently, stands for "Mistake = Magic = Money".
The profit from this revealing tinkering turned out to be less and less spectacular in the nineties, when product cycles became shorter and customers wanted to become more closely integrated partners. "By 2000, our culture, internal discipline, and approach to product development and innovation management had changed little," recalls David Powell. At 64 years of age, the Senior Vice President is one of the company's veterans; he was there when the first yellow Post-it notes were launched in 1980. Powell resides on the top floor of building 220, which is furnished in the style of yesteryear: marble-clad columns, dark woods and fluffy beige carpet, into which the chrome legs of the furniture sink. Powell is friendly and narrative - but not very critical of himself. Everything is "great" or "super". Powell only becomes more thoughtful when asked several times.
An apostle of effectiveness rules the former tinkerer's paradise. And dreams of systematic innovation "We have had great success for a long time," he says. "Then the market began to change. The competition got better, our patents expired, we became more vulnerable. This was reflected in slower growth." Development often took place for its own sake. "We measured our success by the number of new products: 30 percent had to be new on the market within four years. That forced people to take questionable abbreviations," he admits. "A note in a new color got a new product number, but that's not an innovation with a billion-dollar sales potential." 3M shareholders, who have been rewarded with a dividend every quarter since 1916, cared little about the number of new products. They wanted to see sales and earnings growth. That did not happen. At the beginning of this decade, the US press found that 3M had become fed up and complacent. The lack of a profitable urge to research has fatal consequences sooner or later, because a company can only afford a research budget of six to seven percent of its annual turnover with the income from real innovations.
A break in tradition was necessary to rethink. With McNerney's appointment to the executive chair, a long line of ancestors of engineers and technocrats came to an end. McNerney is the first CEO in the company's history who was not recruited from within its own ranks. The 55-year-old Yale graduate previously climbed the career ladder at General Electric (GE) for 18 years, was called in by the legendary Jack Welch as one of his three potential successors - and then passed over. The 3M restructuring case came at just the right time for him: There he was able to apply the tough rules of the game and management tools from GE. 3M lacked the strict hand of the bookkeeper, who brings order into the laboratory and arouses a hunger for economic success among creative people. Since taking office, McNerney has turned the helm of the supertanker around to turn the playground of innovation into a battlefield for lucrative ideas.
He dropped the old company name Minnesota Mining & Manufacturing Company, which sounded like dust and machine noise, and made the abbreviation 3M the new figurehead. Around 6,700 employees were laid off, research and development turned inside out and the entire group sworn to the management cult Six Sigma, which had already brought the even larger and even older super tanker GE back into motion. Under McNerney, profit and share price have risen by a good third since 2001 - Wall Street and economists applaud.
"It was fascinating to see Jim join 3M. He brought a fantastic track record from his time at GE," said Noel Tichy, professor of human resource management at the University of Michigan. He has known McNerney since the early 1980s, having worked under Welch at GE and occasionally traveling to St. Paul as a consultant for 3M. "The man has a clear plan in mind how to turn an old company of this size inside out. What Welch has done at GE must also be possible at 3M," says Tichy. "If he couldn't deal with people so well, the people in St. Paul would treat him like an alien who suddenly fell from the sky. So the resistance is low." McNerney, gray and parted, could easily take over his brother's job as a pastor in Illinois: correct, friendly, neat and slim, visibly averse to the sins of the good life. The apostle of effectiveness found his second wife - where else? - in his old company GE: They set up a company fitness studio there. Inwardly, McNerney likes to communicate his Six Sigma beliefs and a lot, outwardly he is shy. He is reluctant to give interviews and does not exceed a minute when he has preached his reform message: "We needed more discipline. We want to achieve double-digit growth again as in the sixties or seventies." McNerney's strategy looks like this: Every new idea is rigorously evaluated and promoted according to its market potential right from the start, in close and constant contact with the customers. The process of innovation - from the prototype to the finished product - has been standardized worldwide. And the company is no longer afraid to buy up good ideas or even entire companies instead of developing everything itself.
Philip Bromiley, Management Professor at the local University of Minnesota, has praised the new course. "3M had two major problems in the 1990s and both were resolved." In this way, more mature products, which can no longer be used to make large profits, are being rejected. The most prominent example is the business with data carriers such as floppy disks. "Second," says Bromiley, "the company used to be poorly organized and suffered from a lack of information flow. Sometimes several departments competed for the same customers without knowing each other. McNerney has so far found the right balance between tighter reins and a relaxed atmosphere of innovation." says Bromiley.
The hopes at 3M are know-how and components that flow into products from other manufacturers or are used by specialists. Display and Graphics (sales increase in 2003: 33 percent) and Healthcare (plus 12.2 percent) are the two branches of business that now contribute more than half of the profit. Cell phone and laptop manufacturers use 3M optical film to brighten their monitors. Automakers from BMW to Toyota incorporate 3M's catalytic converter components into their cars. Genetic researchers pipette 3M plates with hundreds of microscopic wells to investigate the function of genes and proteins.
Fencing people in turns them into sheep. However, letting it run aimlessly is not a good idea. Gregg Vandesteeg, chief technologist of the booming health division, describes how to walk the tightrope between creativity and control in everyday life: "It's an exciting time to work at 3M," says the 54-year-old chemist . He is one of those gray-haired men at 3M who have come up to put McNerney's mantra 2x / 3x into practice. Twice as many ideas as before are to be promoted to the feasibility study, and three times as many as before are to hit the market. Technology should help with this: Researchers enter new ideas into a database that is accessible to selected authorized users worldwide. Vandesteeg found it difficult to translate this modern bean counting into lively prose. He sits stiffly at the conference table, his hands folded in front of him, his gaze fixed straight ahead. He doesn't even want to answer questions about the size of the various market segments in which 3M operates. And how many researchers 3M now has, he doesn't know either.
There would be a lot to report. McNerney streamlined the research organization from three to two levels: basic research is carried out by 600 scientists in a central laboratory, the remaining 5900 experts are assigned directly to the respective business laboratories."Up until the 1990s we were a technology company that developed solutions and then looked for a market," explains Vandesteeg. "Today we are oriented towards promising markets and new, adjacent segments in which we are not yet present." In his database for the health sector, new ideas come in every day, which he regularly sifts out together with technicians and marketing colleagues. "My database is a tool to manage the product portfolio. The use of information technology is the most important change here." The tighter control of the tinkering work is having a positive effect, says Kevin Kuck, who was born in the Midwest, has been with 3M for 23 years and has been General Director of 3M Germany since last year. "In the past, technicians sometimes sealed off their inventions like secrets. Today there is a lot more exchange. Laboratories and marketing department review projects together before they come onto the market." Ideas that have few market opportunities would not be pursued and resources would be concentrated elsewhere. This new process did not reduce the number of ideas, emphasizes Kuck, "but only the number of ideas that we are working on at the same time".
The German holding company, based in Neuss, has more than 580 researchers working on global or regional projects. Three years ago 3M opened its largest research center in Europe there, where projects are developed together with customers. "Our Customer Technical Center will be one of the touching research groups for diesel filters, wind turbines and fuel cells," says Kuck. Automobile manufacturers, for example, are currently testing new 3M soot filters for diesel engines in France and Germany that comply with the new Euro 5 emissions standard and will not come onto the market until 2006/2007.
Scientists at 3M have always been used to spending at least 15 percent of their time on their own projects. William McKnight, the company's forefather, had already come to the conclusion: "The best and hardest work is done in the face of adventure and challenge." Therefore "experimental fiddling must be encouraged. If you fence people in, they become sheep". In practice, however, this meant that people were busy working on projects that sometimes sat in the laboratory for years until they were discovered or buried.
This innovation strategy no longer works today, says Kuck: "The market dynamics have changed. If you look at automotive engineering or dental technology, a project that takes half a place to work for seven years would miss the product cycle by the time it hit the The market is coming. If we identify a project today that is worthwhile, we will assign more people to it for a shorter period of time. That will benefit us and the customers. " In 3M jargon, this promotion of talented people is referred to as "acceleration".
The health chief technologist Vandesteeg estimates that today only ten out of a hundred ideas clear the hurdles to market launch. "But as soon as we are in the development phase, a project receives one hundred percent support right up to the start, so that it becomes a success. The company's customers are increasingly helping with sifting out." Almost every day a marketing and technology expert from 3M conducts interviews with customers to inquire about "pain points" and to find new solutions. While in the past ideas often came from so-called lead users - specialists or universities who rode right at the top of the wave of innovation - nowadays the main focus is on the broad "voice of the market".
As an example, Vandesteeg cites a product line called "Empore Affinity AZ". The plates for the production of chemically pure proteins were first considered ten years ago at 3M, but they did not come onto the market until March 2004. "Unfortunately, we were too far ahead of the market because we were oriented towards universities at the time. The demand only arose when the genome project was completed and technology for researching genes and proteins became interesting for a wide range of users." Thanks to McNerney, research budgets for the individual business areas are also redefined every year according to their individual needs and development potential, instead of being distributed evenly as in the past. Biotechnology, for example, is one of the market segments that is not only far more capital-intensive than the production of office products, but also enjoys special support as the company's growth engine.
In the health business in particular, 3M sees great growth opportunities. A prime example of the new thinking in the company is an ointment called Aldara for the treatment of genital warts, which has been on the market since 1997. The drug - a so-called immune response modifier that activates the body's own antibodies against viruses - was developed by a 3M scientist. At your own expense, tolerated but not encouraged by your superiors. The process dragged on from the late seventies to the nineties - only then was the ointment's potential finally recognized.
It all started with sandpaper. Today an anti-cancer drug is 3M's box office hit. Since March 2004, Aldara has also been approved in the US for the treatment of actinic keratosis, a precursor to skin cancer. Approval for the treatment of the widespread skin cancer basal cell carcinoma followed in mid-July, while Aldara has already become a blockbuster for 3M. According to analysts' estimates, the ointment achieved sales of around $ 180 million last year and could generate sales of around $ 1.3 billion by 2008. "While 3M as an industrial company has enviable margins of around 20 percent, the range for drugs is typically 50 percent," said Mark Gulley of Banc of America Securities in New York. He expects immune defense drugs to add a whopping 15 percent to 3M's annual growth. Vandesteeg raves about the huge number of potential customers; "First of all, these are all aging baby boomers who have not applied enough sunscreen in their lives." In addition, the ointment could serve as a "platform" for the treatment of other cancer and viral diseases. And make Aldara a blockbuster - with more than a billion dollars in annual sales.
Infection prevention and wound care are further promising fields of activity for Vandesteeg. "This market runs into the billions because pathogens are constantly changing." In connection with home care and telemedicine for the elderly, the 3M manager sees great potential for new products. The same applies to life sciences and dentistry - from composite materials for bridges and crowns, which are confusingly similar to real teeth, to new types of braces that do not have to be glued onto the teeth, to integrated laboratory kits for gene and protein research.
What cannot be developed in-house is bought in. Since January 2001 3M has taken over a total of 15 companies in whole or in part. This includes the German dental technology company Espe AG. "Your product range matched exactly 3M's offer, and the research and development work in Germany is of worldwide importance for the dental sector," says Germany boss Kuck. For David Powell in St. Paul, further acquisitions are a core part of the growth strategy. "We calculate with eight to nine percent internal growth per year, plus four to five percent through acquisitions. Here we are pursuing a much more aggressive program than before. Our biggest problem, however, is to find suitable takeover candidates," says Powell. In the past year alone, more than a hundred companies were assessed and rejected.
"We tend to buy smaller companies because they are easier to integrate. But analysts' concern that we would get excited about a really big, multi-billion dollar takeover is unfounded," said Powell. "We'd like to make a deal like this, but we don't have any companies on our radar screen." When asked what industry you're in, Powell doesn't have to think twice. "Healthcare. This market will ensure solid growth over many, many years. We would like to find someone who suits us well. Not in the pharmaceutical sector, where we prefer to continue to play in a niche, but in areas such as infection prevention, surgical requirements and." domestic care." The exchange between marketing and research is also very important when it comes to acquisitions, says Kevin Kuck: "When it comes to business, the old 15 percent freedom rule means that we take a closer look at acquisitions and mergers. Colleagues use their free time on understanding competitors and partners better so that we can come up with unusual ideas when looking for takeover candidates. " In the case of display and graphics, 3M simply absorbed the two main competitors to complete its product range. A quarter of operating profit comes from this division, which manufactures a variety of products from reflective traffic signs to precision optics for large screen televisions.
One of 3M's flagship products are touch screens that are finding their way everywhere - from ATMs to check-in and catering terminals to new cell phones and organizers. "A few years ago we put together a wish list of what we wanted from the technology and what properties would fundamentally change the entire industry over the next ten years," says Dan Savage. The 38-year-old Canadian is head of the Touch Systems segment at 3M and has the charisma of a trained salesperson: many phrases, few numbers, always sticking to the message. Before Savage takes a step back and after he's finished, he fixes the person he is talking to and repeats the "key messages" to be on the safe side: "Our wish list includes three points: The touch screen of the future will have to do without a special stylus, it must be visually clearly legible and it must be permanent. " Most touch-sensitive screens, especially in smaller devices such as the new cell phones or organizers, are made of plastic and are based on so-called resistance technology. That makes them very cheap at around five dollars a piece, but they scratch easily and are quickly put out of action if the surface is damaged. The rest of the market consists of various glass screens. What 3M had in mind, says Savage, was an innovative product for which you can charge a corresponding surcharge: "Because we already cover the lower segments with optical systems, we wanted to be in the top category." The result was not simply bought-in technology with a 3M label, but a new type of solution. In addition, the group swallowed the two market leaders Dynapro and Micro-Touch three years ago. Dynapro employee Savage was brought from Vancouver to the Midwest, where he suddenly had to manage the integration of around 50 engineers and researchers from three different companies at three locations. "They all knew each other, after all, they had been bitter competitors for ten years. But we had somewhat underestimated the challenge of integrating the various corporate cultures," he says honestly. Development work took three years and internal pacification two years, but the common goal ultimately brought the team together.
The trouble was worth it. The result was a new type of solution, for which, according to Savage, seven patents have already been granted: "Dispersive Signal Technology", in which the vibrations of a touch spread like waves on a pond.
And it still works when the screen surface is dirty or scratched. Ten companies are currently testing their first devices in retail stores, and the new - and more expensive - touch screens are due to come onto the market in early 2005. For better readability, increased responsiveness and longer service life, 3M wants to charge a ten percent surcharge compared to conventional glass screens, says Savage. And this in a market that, according to market researcher VDC, is already at $ 700 million and is expected to grow by 20 percent annually. Savage is certain that his former employer Dynapro would not have managed such an innovation: "This new technology would not have been developed by either of the two acquired companies on their own.It was only possible with the optical portfolio and the research apparatus of 3M in the back. "3M against GE - the battle of the growth fanatics How important optical systems are for the future growth of 3M is shown by the fact that six of the 15 acquisitions in this division since McNerneys According to Smith-Barney analyst Jeffrey Sprague, display and graphics contributed 47 percent of profit growth in the first quarter of 2004 alone, and the margin was 34.9 percent PCs and customer service terminals replacing staff will not only fuel demand for touch screens but also after the most lucrative 3M component: optical films with extremely high light transmission (Brightness Enhancement Film, BEF). Analyst Sprague estimates the optical film market at $ 3 billion annually. "3M owns 25 to 30 percent of that, plus an impressive patent portfolio to help defend its market share." In BEF products for laptops, according to the Wall Street analyst, the company also has a quasi-monopoly that generates annual sales of $ 800 to $ 900 million.
The optical film is first produced in large sheets in Alabama and then shipped to China for cutting and coating - one of the fastest growing markets for 3M. Not least because of the electronics boom, McNerney cut further jobs in America, while investments and new hires are being made in Asia. Sales in China are growing by at least 30 percent annually - more strongly than in any other market. The number of employees in the People's Republic is expected to double to 2,800 by 2007, China boss Kenneth Yu recently calculated in front of investors. He sums up the mixture of the Asian way of thinking and 3M's newly discovered love for modern management methods in a catchy formula: "The spirit of unity. One company, one face, one voice." IT makes it possible: In China, the same databases are fed with ideas and combed through for blockbusters that engineers can access in Germany or Minnesota. By the end of 2004, the training fanatic McNerney also wants all permanent employees worldwide through a Six Sigma course. His teacher and former employer General Electric, who showed him how to modernize a gigantic industrial supermarket, is not resting. 3M’s leadership in optical films and display components brought GE to the scene. After a few years of development work, this year the company is ready to bring a competing product onto the market. GE boss Jeffrey Immelt has high hopes of generating a few hundred million in sales in this segment - at the expense of McNerney.
Let the growth fanatics battle begin.
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