© David O’Sullivan and Lawrence Dooley

International Case Study

3M
Company Background

3M is a diversified technology company which operates in seven different business

segments: Consumer and Office, Display and graphics, Electro and Communications, Health
Care, Industrial, Safety, Security and Protection Services and Transportation. Today 3M
boasts sales of over $20 billion (2004 figure). However, the company started out from
much more humble beginnings.
Minnesota Mining and Manufacturing Company (3M) was founded in 1902 in Two
Harbors Minnesota. It was founded by five businessmen to mine mineral deposits in the
area. However, the mineral deposits turned out to be of little worth, so in 1905 3M moved
to Duluth, and later St. Paul, to concentrate on developing and manufacturing sandpaper
products. During 1914-1915, the company experienced high levels of customer complaints
in relation to the garnet (abrasive material) falling off the 3M sandpaper. After
investigation, it turned out that the garnet had been contaminated with olive oil during
transport from Europe and that this prevented the glue from bonding the garnet to the
paper. The difficulty was that 3M had 200 tones of contaminated raw material remaining
in stock and writing it off had the potential to sink the young company. However through
ingenuity and experimentation, 3M discovered that they could roast the garnet to remove
the oil and decontaminate the raw material. The company’s ingenuity and inventiveness
when faced with adversity became normal practice in-house, and as a consequence, this
has facilitated its growth into th eexcellent company it is today.
The current position of 3M as one of the world’s largest companies did not happen
overnight and certainly not by accident. Since 1916 the company has not rested on its
laurels. Diversification and innovation have been integral to the its growth over the years.
From its beginnings as a mineral mining company it quickly began producing sandpaper and
further diversified into a number of unrelated markets such as cleaning product (Scotch –
Brite) and health care (CFC free inhalers) to name but two. It is 3M’s involvement in
several product markets that have allowed it to expand regardless of a slow-down in any
of the markets.

3M has a tolerance for tinkers and a pattern for experimentation that leads to a
broadly based, diversified company today. To borrow a line from “Finian’s
Rainbow,” You might say we learned to “follow the fellow who follows a dream”

Gordan Eangdahl retired vice president, Human Recourses 3M

Diversification has been made possible by the innovative outlook of the firm. 3M has been
responsible for some groundbreaking inventions over the years including, masking tape
(Richard Drew in 1925) and Post-it notes (Arthur Fry in 1974). Chance or luck had no part
in this situation. Indeed, innovation has always been actively encouraged within the 3M
Company. At 3M there has been a long-standing rule that employees should be allowed to
dedicate 15% of their time towards individual projects. By doing so the company actively
encourages innovation as well as providing an added sense of worth to its employees.
William L. McKnight, who served as chairman of the board from 1949 to 1966, introduced

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this concept at 3M. He was a firm believer in the idea that a company is only as good as
the caliber of its employees. He encouraged management to delegate responsibility and
encourage initiative. He believed that management that is destructively critical when
mistakes are made will only succeed in killing initiative, and that organizational growth is
based on having a high number of people generating initiatives which will ensure
continued growth. His management theories are still the guiding principles for 3M today
and in 2005 alone the company filed 487 US patents.

Every business we’re in today is based on having invented something new to the
world and taking that invention to customers around the world. 3M has spent a lot
of time, money and effort to create a culture of invention.

The Post-it Note

Of all the new product launches at 3M, the story behind the Post-it note is one which
embodies 3M’s unrelenting drive towards innovation. This sticky paper has become one of
3M’s most recognizable products across the globe. However, the path from initial
discovery to eventual market domination was neither a straight forward or a simple one. If
3M could have foreseen the eventual results of the Post-it project, they would have had no
qualms about supporting its development. However, the concept of people paying a dollar
for ‘scratch paper’ seemed ludicrous to many within the organization, and even the initial
market research pointed to the product being a ‘flop’. The product became a success in
the market because certain key individuals believed in the product’s potential and ‘put
their necks on the line’ to make it happen. The 3M adage of ‘its better to ask forgiveness
than permission’ and the practice of ‘bootlegging’ specific projects which were progressed
by individuals who were passionate about them, irrespective of management’s views,
created an environment that allowed the project to survive and be nurtured to success.
The ‘Post-it’ actually began with an experiment by Spencer Silver that resulted in the
creation of a low-grade adhesive (1968). However, it wasn’t until 1980, that the discovery,
reinvigorated by Arthur Fry (1974) was launched on the market as the Post-it notes.
In 1968, Silver was working on developing new types of patentable adhesive. He
was essentially looking for an adhesive that was unique in comparison to other adhesives
on the market at that time. It was as a result of one of these experiments that he
discovered a low-grade adhesive. The glue had certain unique characteristics such as a low
bonding power that prevented it from sticking properly and thus allowed one surface be
bonded to another, then removed and reused again. In simpler terms it was glue that
didn’t stick very well. Silver knew he had invented something entirely unique. The
question he asked himself was: what function could be fulfilled by a type of glue that
didn’t stick? He eventually came up with the idea of using the adhesive on a bulletin
board. However, this idea fell flat. Sales of the product were disappointing, and the
product was scrapped by 3M. Spencer tried to think of more practical uses for the adhesive
as well as putting this question to others at 3M. He gave seminars on this low-grade
adhesive so as to keep the idea in people’s minds. Arthur Fry was present at one of these
seminars.

A Moment of Divine Inspiration

Spencer Silver’s low-grade adhesive had, metaphorically speaking, been left on the shelf
for the best part of five years when Arthur Fry’s idea of using the adhesive to produce
Post-it notes came to pass. A mixture of knowledge, ingenuity and necessity inspired this
discovery. Arthur Fry was a devoted Presbyterian and attended a weekly church service.
He was a member of the choir and before each service would mark the relevant pages of
his hymn book with pieces of paper or bookmarks. However, this proved unsatisfactory as
the paper would fall out when he stood up to sing! One day in church, his creative process
reached the ‘eureka’ phase as he realized he could use Silver’s adhesive to stick his
bookmarks to the page, ensuring they would stay in place and yet could be removed
without damaging the book and still be re-affixed elsewhere.
From this moment on Silver Spencer’s unique discovery had been transformed into
a potential product that Fry believed would be latched onto by the public. Despite his
belief in the ‘Post-it’ product, he realized he could not devote all of his time to

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progressing this project as other projects occupied his time. However, 3M’s ‘15%’ rule’
allowed him to dedicate time to the ‘Post-it’ project. Fry acquired some of Silvers
adhesive and began making an initial prototype. He then handed out samples of the sticky
paper to 3M employees and asked for feedback. He returned a couple of weeks later, but
people did not want more samples. While the sticky bookmarks were indeed being used, he
discovered that the same note was being used over and over. By reducing the size of the
paper used in the prototype, Fry thus reduced the amount of times the sheet could be
reused leaving less space to write on, thereby increasing the consumption of sheets.
In another moment of inspiration Fry realized that a Post-it note could be put to
other uses rather than just as sticky bookmarks. On reading a report that had been given
to him by management, he questioned some of the data contained there. He decided to
question an item on the report by placing a Post-it with an arrow pointing at the data in
question. When the report arrived back on Fry’s desk his manager had written his response
to the question on the Post-it. At their next meeting they mentioned the implications of
their correspondence via Post-it notes, realizing that this was a uniquely new way to
communicate. Fry became excited by the innovation: it transformed a simple scrap of
paper into a mobile bulletin board. More importantly, this was a product which would be
used up quickly, therefore generating increasing demand.

The Set-Backs

Fry continued to send out samples of the Post-it notes to employees at 3M but this time
they were being used up. There was a demand for more and more samples. Fry’s invention
now had a cult following yet he was still unable to devote many working hours to the
project. His superiors allowed him to charge any project-related expenses to a
miscellaneous account, but he still had to be satisfied with treating this as a side project.
Eventually, he was successful in having a small team assigned to help him realize the
invention’s full potential in order to transform it into a commercial venture.
However, some obvious handicaps were evident from the outset. At 3M an
adhesive’s value lay in its superior bonding power. Fry was championing glue that didn’t
stick very well, and which contradicted this philosophy; therefore, there was little faith in
Fry’s project. Another stumbling block emerged when manufacturing and production
people came on board. All stock at 3M was put on a roll. Post-it’s had to be stacked one on
top of the other in order for them to work. This would cause serious problems in
manufacturing the product. Fry had perfected the art of producing the notes on a small
scale, however mass-production would require investment in custom-built machinery. This
would be both costly and complicated. Fry’s optimistic view of the situation was that it
would therefore be difficult to imitate the product. This gave the company a strategic
advantage. Fry tried to impress this idea upon his superiors. However, engineers at 3M
would only see the negative side of the project. Fry had a great idea but selling it was the
problem. He realized he would have to have to use all his innate sales skills and
persistence if this project was to get off the ground.

The Breakthroughs

Eventually, 3M succeeded in developing suitable manufacturing equipment and processes

to allow large scale production of the Post-it. In conjunction, they conducted market
research with focus groups in order to estimate the reaction on launch of the product. This
feedback was generally positive in response but negative regarding anyone spending an
exorbitant price for what was essentially a piece of paper with a bit of poor-quality glue.
For many of the objectors to the new product within the company, this market feedback
endorsed their belief that there simply was not a market for this type of product. Despite
this, 3M decided to test-market the product in four cities: Denver, Richmond, Tampa and
Tulsa. Again, the overall result of this market research was very poor as people simply
could not see themselves purchasing ‘scratch paper’.
However, Geoff Nicholson and Joe Ramey, two 3M executives who were internal
customers of Fry’s prototypes, decided to conduct their own one-day market research in
Boise, Idaho. Their justified this decision by the knowledge of how popular and invaluable

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Post-it notes were in use within the company. They planned an intensive market research
expedition in Boise, where they flooded the town with Post-its. Nicholson and Ramey’s
efforts also involved educating consumers on how to use the product. Despite their
efforts, the response still was mixed. On the positive side, people were warming to the
Post-it idea; but price was still an issue. Based on the complete market research results, a
decision was taken to give away millions of Post-it notes during the initial year of launch
(1980-81) to convince consumers of the value of the product. This marketing plan proved
to be a successful one, and once the free samples were discontinued, the sales of Post-it
notes increased.

Conclusion

By the end of the first year, 3M was realizing profits from their new product and by 1984
sales of ‘Post-its’ were estimated at $45 million. From there on the product went from
strength to strength; numerous product variations of the Post-it were introduced and the
famous ‘yellow pad ’started to infiltrate offices across the globe.

Review Questions

1. How did 3M’s culture and management structures contribute to the development of
the Post-it pad innovation?
2. Why did Art Fry put such great effort into a project that was not core to his job?
3. How did prototype and testing contribute to the development of the Post-it notes?
4. How did 3M approach the issue of market development relative to the technology
development of the product?
5. What does this case tell us about knowledge management relative to the innovation
process?

Sources

• A Century of Innovation (2002); www.3m.com

• New Product Development: A Reader, Susan Hart, 1996 Pages 8 – 9 and 16 – 17
• Operations Management, Nigel Slack 3rd Edition, 2001 Pages 546 – 547
• Bouchey, Lisa M. “Post-it Pandemonium (Technology Information).” Office
Solutions. Vol. 17, (9). Sept. 200: 6.
• Fry, Arthur. “The Post-It Note: an entrepreneurial success.” SAM Advance
Management Journal, vol. 52 (3. Summer 1987: 4.
• Havener, Cliff and Margaret Thorpe. “Customers Can’t Tell You What They Want
(Mythology of product development and marketing strategy).” Management Review.
Vol. 83, n12. Dec 1994: 42.
• Mullin, Rick. “Analysts Rate 3M’s New Culture.” Chemical Week, vol. 163. Sept 26,
2001: 39.
• Prane, Joseph. “Post-It Notes Prove to be a Popular Invention.” Adhesives Age. Vol.
35 (2). Feb 1992: 52.
• www.wikipedia.com
• www.3m.com
• http://web.mit.edu/invent/iow/frysilver.html
• http://patft.uspto.gov/netacgi/nph-Parser?patentnumber=3691140