3M: Profile of a Pioneer1

Introduction

More than a century ago, 3M started as a small-scale mining venture in Northern Minnesota,
then named Minnesota Mining and Manufacturing Company. Now a global powerhouse, its
products improve the daily lives of people around the world. But its success and longevity were
not apparent from the start. They tried. They failed. They tried something new. Repeat
cycle. Innovation and perseverance drove their founders, and it continues to drive 3Mers
today.

3M is a diversified global manufacturer, technology innovator and marketer of a wide variety

of products and services. 3M manufactures over 55,000 products that are sold in more than 200
countries. 3M’s thousands of products target end markets ranging from automobiles to
operating rooms to semiconductor plants to construction sites. The company operates in four
segments:

 Safety & industrial (34% of sales, 38% of profits in 2020) makes abrasives, adhesives,
electrical products, and personal protective gear.
 Transportation & electronics (26%, 24%) makes ceramics, vehicle components, and
packaging.
 Health care (24%, 23%) produces consumables, equipment, and software for medical end
markets.
 The consumer unit (16%, 16%) sells cleaning supplies, home goods, office supplies, and
consumer-focused medical supplies.

All four business units grew sales in the December quarter of 2020, with safety & industrial
(11% growth) and consumer (10%) setting the pace. The company expects all four units to
deliver higher revenue in 2021. Growth targets for this year reflect higher demand for
semiconductor, data-center, and consumer-electronics products and components, a pickup in
automaking, and continued positive trends in home improvement.

Given below is the selected financial data for the last five years2.

Table 1. Selected financial data

Summary of Profitability: 3M
Sl. No. Year ROIC % WACC % ERR%
1 2016 18.24 7.88 10.36
2 2017 16.17 7.56 8.61
3 2018 17.26 8.64 8.62
4 2019 14.42 8.38 6.04
5 2020 14.32 5.81 8.51

1
The case study is prepared by Professor Ashok K. Sar using information from secondary sources. It is meant for
discussion in the class, rather than to illustrate effective or ineffective handling of an administrative situation.
2
https://www.gurufocus.com/financials/MMM
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Industries, brands and categories of products

Industries Brands Categories

 Automotive (3730)  ACE (66)  Abrasives (1353)
 Commercial Solutions  Aqua-Pure (46)  Adhesives, Sealants &
(2513) Fillers (558)
 Communications (211)  Attest (45)  Advanced Materials
(419)
 Consumer (2934)  Avagard (14)  Automotive Parts &
Hardware (49)
 Design & Construction  Bair Hugger (50)  Building Materials (91)
(3171)
 Electronics (2402)  Bondo (38)  Cleaning Supplies (443)
 Energy (3537)  Clarity (6)  Coatings (239)
 Health Care (2604)
 Manufacturing (4172)
 Safety (6887)
 Transportation (4816)

3M is investing $1 billion over the next 20 years to become carbon neutral by 2050, reduce
water use, and improve water quality. 3M is helping shape the future of work by expanding
access to science, manufacturing and skilled-trades careers inside and outside 3M for
underrepresented groups. 3M believes that good corporate governance practices serve the long-
term interests of all stakeholders, strengthen the Board and management, and further enhance
the public trust 3M has earned. 3M is one of the World’s Most Ethical Companies as rated by
Ethisphere.3

Science and 3M

Science operates within a set of rules. It follows specific methods. It delivers proof and proves
cause and effect. But science also breaks boundaries, challenges the status quo, and improves
lives. As a company rooted in scientific exploration, and the belief that every problem has a
solution, 3M is applying technological expertise to help solve some of the world’s biggest
challenges on raw materials, water, energy and climate, health and safety, and education and
development. The challenges they must tackle for a sustainable future don’t always follow clear
rules or methods — but they see them clearly. They are broad. They are interrelated. They are
solvable. They know science can help tackle them. They are looking at ways to build purpose
into leadership and talent development across the company, to recognize business opportunities
that help the company grow while addressing societal issues. They cut across industries and
siloes to collaborate with suppliers, customers, and communities by working together toward
building a more resilient world. They have a unique opportunity to apply their passion and
collaboration to help the world prosper.

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https://s24.q4cdn.com/834031268/files/doc_financials/2020/ar/2020_3M_Annual_Report.pdf
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In 2018, 3M launched the State of Science Index Survey. 3M’s State of Science Index presents
original, independent and nationally representative research conducted in 14 (expanded to 17
in 2021) countries among the general population. It is one of the largest, most global studies to
explore attitudes to science in recent years, and enables 3M to track and benchmark shifts in
attitudes about science over time, using this first year as a baseline. Data from this research can
be viewed as a 14-country, global average, or individually by country. At the 95 percent
confidence level, the margin of error is +/- 0.83 percentage points at the global level and +/-
3.1 percentage points for each individual country. About 1,000 respondents in each of the 14
countries participated in this survey in 2018.

Key business processes

The bottom line statement of 3M- “Research is the transformation of money to knowledge.
Innovation is the transformation of knowledge to money”.

In 1948, 3M introduced a unique program that quickly became one of the signature elements
of the company’s reputation for innovation. The 15% program, which continues today, allows
employees to dedicate up to six hours a week to their own projects, to range beyond the
responsibilities of their job, hatch their own ideas and see what can become of them. The
program is a perk that delivers benefits both to the individual and the company. Among other
innovations, the company attributes the invention of Post-it® Brand notes to 15% time.

3M business is centered on technologies developed by Corporate Research Laboratory (CRL).

CRL develops differentiated technologies that are aligned with the demand in high growth
markets to drive/ support 3M’s future businesses. These technologies with the help of business
leadership are turned into unique products. This marriage of technology with business has been
very successful for 3M. 33% of the company’s sales come from products which had been
launched in the prior five years. This is tracked rigorously, and employee bonuses are based on
successful achievement of this goal. 3M also uses “and thinking” in their three-tiered research
structure. Each research area has a unique focus: Business Unit Laboratories focus on specific
markets, with near-term products; Sector Laboratories, on applications with 3-to-10-year time
horizons; and Corporate Laboratories, on basic research with a time horizon of as long as 20
years. 3M was awarded the US government’s highest award for innovation, the National Medal
of Technology.

Technology and innovation are at the heart of 3M – the company has been granted more than
118,000 patents, and each year, more than 4,000 new patents are issued to 3M worldwide.

3M has a rich set of structures and systems to encourage resourcefulness:

 Seed Capital: Inventors can request seed capital from their business unit managers; if their
request is denied, they can seek funding from other business units. Inventors can also apply
for corporate funding in the form of a Genesis Grant. (The Post-it was funded by a Genesis
Grant.)
 New Venture Formation: Product inventors must recruit their own teams, reaping the
benefit of 3M’s many networking forums as they seek the right people for the job at hand.
The recruits have a chance to evaluate the inventor’s track record before signing up.
However, if the product fails, everyone is guaranteed their previous jobs.

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 Dual-career ladder: Scientists can continue to move up the ladder without becoming
managers. They have the same prestige, compensation, and perks as corporate
management. As a result, 3M doesn’t lose good scientists and engineers only to gain poor
managers, a common problem in the manufacturing sector.

Technology platforms

3M has identified 46 technology platforms that are broadly classified into following 5
categories.

1. Applications
2. Processing
3. Software, Analysis and Control
4. Materials
5. Biotech

This technology and business alignment helps 3M achieve- Core business growth, creation of
new business and international growth and makes it unique amongst the leading technology
and industrial manufacturing companies.

2X/ 3X Program. 2X is an objective for two times the number of new products that were
introduced in the past. 3X is a business objective for 3 times as many winning products as there
were in the past. 2X focuses on generating more major product initiatives and 3X on improving
the commercialization of those initiatives.

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Figure 1. 3M's core technologies to see how ideas live on, in connection with others, to help
solve problems around the world

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Figure 2. New product development process

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Figure 3. Role of R&D in organic growth

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Figure 4. Corporate level strategy

3M has expanded its products markets based on leveraging its resources and capabilities. It
closely works with users, identify needs and develops technologies to develop products that
would meet the needs. It keeps the business units small and autonomous to maintain the
entrepreneurial spirit.

Discussion questions

1. In a scale of 1-10, where will you place 3M in terms of performance?

2. What are the likely causes of its superior/ poor/ average performance?
3. From the performance and causes thereof of 3M, what can we generalize about firm level
performance?

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 Annexure-I

Timeline of 3M History: evolving from mining for rocks to rocking science4

1900s

1902 – Humble Beginnings

Minnesota Mining and Manufacturing Company was founded by Dr. J. Danley Budd, Henry.
S. Bryan, William A. McGonagle, John Dwan and Hermon W. Cable in Two Harbors,
MN. Initial mining efforts failed to produce corundum, a mineral ideal for making sandpaper.
Instead, the mineral anorthosite was used and sales were weak.

1905 – Duluth Sandpaper Plant

The company moved to Duluth, MN, to make sandpaper with abrasive minerals purchased
from another source, thanks to an investment from St. Paul businessman, Lucius P. Ordway.
3M constructed its first manufacturing building, a two-story sandpaper plant. Poor planning
caused the floor to collapse from the weight of the company’s newly purchased raw materials.

1907 – Leadership in the Making

Future 3M President and Chairman of the Board, William L. McKnight, joined Minnesota
Mining and Manufacturing Co. as an assistant bookkeeper, and would become to be best known
for shaping the company’s culture of innovation and collaboration.

1910s

1910 – 3M Moves to St. Paul, MN

Major investor Lucius Ordway established the first plant in St. Paul, MN, leading to faster
expansion of the company due to its more central location.

1914 – First 3M Exclusive: Three-M-ite

The 3M™ Three-M-ite™ Abrasive Cloth became 3M’s first exclusive product.

1916 – Substantial Profits

Thanks to the Three-M-ite cloth and a boost in business from World War I, 3M posted
substantial profits and declared its first dividend. A new headquarters office is established in
St. Paul, MN. The first laboratory is established to test product quality.

4
https://www.3m.com/3M/en_US/company-us/about-3m/history/timeline/

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1920s

1921 – Revolutionizing Sandpaper

The company patented and introduced 3M™ Wetordry™ Waterproof Sandpaper — the
world’s first water-resistant coated abrasive. Automobile manufacturers could use the product
with water to reduce dust and decrease the friction that marred auto finishes. Also, this
technology created healthier working conditions for employees.

1925 – Masking Tape Invented

While testing abrasive samples at a body shop, Richard Drew, a 3M lab assistant, noted that
painters were having trouble masking car parts. He got an idea that led to the invention of
masking tape. The tape was a hit and the Scotch® brand tape product line was born, as was
3M's growing emphasis on product diversity.

1930s

1930 – Scotch Cellophane Tape Launched

Richard Drew saw another customer need. Cellophane was popular, but there was no attractive
way to seal the clear material. He coated samples of cellophane with 3M adhesive. Scotch®
Cellophane Tape was born and soon hundreds of practical uses were discovered, such as during
the Great Depression, people found the product to be useful for mending torn book pages and
documents.

1937 – An Investment in Innovation

3M Vice President, Richard P. Carlton, established a Central Research Laboratory to pursue

research in technologies with long-term potential leading to 3M breakthroughs, such as
reflective materials used to improve highway signs and markings.

1938 – Reflective Traffic Signs Born

After 3M™ Scotchlite™ Reflective Sheeting was introduced commercially in 1938, the first
traffic sign featuring this new product was erected in Minneapolis one year later.

1939 – Easy Dispensing

Scotch® Brand welcomes the "snail," the iconic, handheld tape dispenser. The first version
was made from stamped sheet metal followed by the plastic model one year later.

1940s

1940 – 3M Products Go to War

In the early 1940s, our efforts were diverted into applying 3M products to defense materials
for World War II.

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1946 – 3M Debuts on the NYSE

3M stock listed for the first time on the New York Stock Exchange.

1947 – Bing Crosby Croons on 3M Tape

3M™ Sound Recording Tape revolutionized the entertainment industry, allowing consumers
to record and play back music and voice recordings at a later time.

1948 – From Birthday Parties to Operating Rooms

Solid color gift ribbons and surgical drapes made their debut, further diversifying 3M’s product
portfolio.

1950s

1950 – Beautiful Productivity

3M™ Thermo-Fax™ Copier was introduced, changing office productivity for making
duplicate copies. The colorful and shiny 3M™ Sasheen Decorative Ribbon for making bows
created a new market for gift wrapping.

1951 – Going Global

3M established its International Division and new international companies were created in
Australia, Brazil, Canada, France, Germany, Mexico and the United Kingdom.

1954 – 3M Goes Hollywood

RCA uses Scotch® Magnetic Tape to record television programs for the first time.

1956 – Protecting Fabrics

3M introduced Scotchgard™ Fabric and Upholstery Protector to the textile industry.

1957 – Double the Sticking Power

The tape product line was diversified with the introduction of Scotch® Double-Coated Tape.
The two billionth commercial-sized roll of tape came off the production line.

1958 – Scotch-Brite™ Scours the Industry

Scotch-Brite™ Cleaning Pads were marketed for industrial use which was a new application
for the non-woven product.

1960s

1960 – Hypoallergenic and Magical Tape

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3M Micropore™ Surgical Tape, the first hypoallergenic tape, was introduced and was a key to
the success of 3M’s health care business.

1961 – Vanishing Act

3M introduces Scotch® Magic™ Tape, the innovative matte-finish tape virtually invisible on
light-colored paper and envelopes. Unlike glossy tapes, users could write on it with pen, pencil
or marker.

1962 – New Beginnings in Maplewood, MN

The first office building was completed at the 3M Center in Maplewood, MN, establishing the
company's new global headquarters, where it remains today.

1963 – Sports Fields Go Futuristic

Tartan™ Turf, the first synthetic grass surface, debuts.

1968 – Duplicating Gets Colorful

3M’s Color-in-Color copying system produced a full-color copy in one minute. It was released
to the consumer markets the following year.

1969 – Venturing into Space

3M products are used by astronauts in the first moon landing, including 3M™ Fluorel™
Elastomer, a synthetic rubber used in the astronaut’s boots worn inside the space capsule.

1970s

1973 – Carpool Commuting

3M creates the first van-pooling program in the United States in Maplewood, MN, eventually
branching to other states. During the first 22 years of the program, it was calculated that more
than 58 million vehicle miles were reduced.

1975 – Eliminating Pollution

3M launched Pollution Prevention Pays, empowering employees to guide the company’s

sustainability efforts. To date, the “3P” program has resulted in the elimination of more than a
billion pounds of pollution and saved 3M billions in costs.

1976 – Stock Market Spotlight

3M joins the Dow Jones Industrial Average.

1978 – Seeing Red

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The blue 3M logo is replaced with a new, rounded logo in a specially formulated color – 3M
Red.

1979 – Helping People Stay Toasty Warm

3M™ Thinsulate™ Thermal Insulation introduced with more than 30 clothing manufacturers
signing up right away to use this product.

1980s

1980 – Something to Post About

3M introduced Post-it® Notes, creating a whole new category in the marketplace and changing
people’s communication and organization behavior forever. 3M™ VHB™ (Very High Bond) Tapes
were introduced, replacing rivets and screws in fastening operations due to its incredible strength.

1984 – International Expansion Opens New Doors

3M became the first wholly-owned, foreign-invested enterprise in China.

1985 – A Note of Many Colors

The Post-it® Note product line expanded from yellow to include four new colors. Six years
later, neon colors make their debut.

1990s

1990 – Privacy Please

3M™ Privacy Computer Filters were introduced, helping protect information displayed on
monitors.

1994 – Working Up a Sweat

Nexcare™ Active™ Strips Flexible Foam Bandages made their debut, providing extra sticking power to
perspiring skin thanks to the water-resistant adhesive.

1995 – Internet Debut

3M launches its first website, giving its customers links to thousands of pages of information
on 3M programs, products and technologies.

1997 – Gift Wrapping Made Easy

Scotch® Pop-Up Tape Strips and Dispensers were introduced, dispensing 2-inch, pre-cut
pieces of tape from a hand band that allowed customers more of a hands-free wrapping
experience.

2000 to Today

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2002 – Celebrating with a Name Change

As 3M employees celebrated 3M’s centennial anniversary, “3M Company” becomes the legal
name for 3M—originally incorporated as Minnesota Mining and Manufacturing Company.

2004 – Milestone Sales

For the first time in 3M’s history, sales topped $20 billion in large part to the innovative new
products, such as Post-it® Super Sticky Notes, Scotch® Transparent Duct Tape, optical films
for LCD televisions and a new family of Scotch-Brite® Cleaning Products that give consumers
the right scrubbing power for a host of cleaning jobs.

2007 – Consumer Products Continue to Innovate

The Scotch-Brite™ brand introduced the first disposable toilet scrubber with built-in bleach.
Other products, such as Scotch-Blue™ Painter’s Tape for Corners and Hinges and the Scotch™
Fur Fighter™ Hair Remover designed to grip and trap pet hair embedded in upholstery,
continued to exemplify innovative products designed to enhance the home environment.

2008 – Illuminating Developments

Scientists developed a break-through, ultra-compact LED-illuminated projection engine for

integration in personal electronic devices, including the 3M Micro Professional Mpro 110
projector, which has since evolved.

In the wake of global concern around potential public health medical emergencies such as an
influenza pandemic, various 3M respirators were the first to be cleared by the U.S. Food and
Drug Administration for use by the general public.

2009 – Analytical Sound Waves

3M’s healthcare business introduced the 3M Littmann® Electronic Stethoscope Model 3200,
a next-generation auscultation device featuring Bluetooth wireless technology that transfers
heart, lung and other body sounds to software for further analysis. These stethoscopes have
successfully allowed doctors to study rural stroke victims and an astronaut on the International
Space Station.

Featuring a patented, ceramic abrasive grain shape, the 3M™ Cubitron™ II Fibre Discs and
Metal Working Belts increased the life expectancy of abrasives in the grinding industry by as
much as four times.

2012 – Channeling Solar Power

Our Renewable Energy Division and Gossamer Space Frames unveiled the world’s largest
aperture trough using 3M™ Solar Mirror Film 1100 for concentrated solar power.

2013 – Billion Dollar Milestone

3M topped $30 billion in sales around the globe.

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2014 – Perfecting the Patent

3M reached an innovation milestone with the issuance of its 100,000th patent. Each year about 3,000 patents
are issued to 3M worldwide, with more than 500 granted in the U.S.

2015 – Sweet 16

3M named to the Dow Jones Sustainability Index for 16 consecutive years.

2016 – Building Out Innovation

3M opened a state-of-the-art, research and development laboratory at the global headquarters

in Maplewood, MN.

2017 – Staying Visibly Active

A new type of 3M™ Scotchlite™ Reflective Material becomes an attractive product for athletic
activewear manufacturers. The washable, stretchable and stain resistant product adheres to a
variety of fabrics and becomes reflective when illuminated at night.

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