Innovation remains the mantra of success for many global companies in the contemporary business world, and 3M Company is not exceptional. The company’s unique products, active market leadership, as well as an unmatched global network of international resources form distinctive factors that have steered the firm towards success. The 3M Company is a technology firm based in Minnesota, US and operates in more than 65 countries across the globe. Since its incorporation in 1929, 3M has undergone enormous transformation to become one of the most admired and reputable technology companies in the world. This report explores the strategic reasons behind its success through a detailed and analytical process. It emphasizes on the leadership initiatives adopted by the company to achieve success in the global business market. Lastly, the author recommends measures for sustainable success.
The Success of 3M Company
Stakeholders from different sectors often present different meanings to the concept of success. For instance, Brooksbank, Kirby, Tompson and Taylor (2003) attribute business success to high performance while Perren (2000) cites profitability and growth as the key factors that determine the success of a business enterprise. Hers (2017) of HBS Tax Company defines a successful business as a company that ensures the happiness of current customers and endeavor to get new customers while it is earning a profit in the process. Companies may evaluate success based on tangible assets and non-financial indicators, as well benchmarking criterion (Frigo, 2002; Safko, 2010). For instance, the economic indicators may include such aspects like profit per employee, total income per employee, or the period to return investment (Brooksbank, Kirby, Tompson & Taylor, 2003). An online company or a Webstore would consider analyzing their traffic network to ascertain their success. Notably, increased network traffic is likely to imply that the firm is attracting many people to its site, an issue that is attributable to its success. Many enterprises in the global marketplace have often measured their success using revenue generation, profitability, and growth. However, such criteria usually vary depending on each and every business or industry.
This article delves deep into both the financial and non-financial indicators, as well as the benchmarking criterion to determine the success of 3M Company in the volatile market. According to the company financials, 3M is a highly profitable global business venture (Roepke, Agarwal & Ferratt, 2000). The management of the company attributes its success to a variety of measures driven by innovation and customer satisfaction among other features. Regarding sales, for instance, 3M Company has demonstrated excellent growth and subsequent success in the technology market. The company reported steady growth in net sales from $29,611million in 2011 to $30,274million in 2015 (3M Annual Report, 2015). The company’s net income also grew from 14.5%in 2011 to 16.0% in 2015. 3M reported more sales of about $18.23billion outside the US, constituting approximately 60% of the company’s total sales.
Table 1: 3M Annual Net Sales between 2011 and 2015
Also, 3M Company reported steady growth in the earnings per share between 2012 and 2016, an issue that reflects the excellent performance by the corporation. 3M Company had an increase of earnings per share-diluted from $6.32 in 2012 to $8.16 in 2016 as shown in the diagram below. According to Machuga, Pfeiffer, and Verma, (2002), earnings per share is a valuable figure that helps the managers and investors in making wise business decisions. Machuga, Pfeiffer, and Verma, (2002) define earnings per share as a figure derived from dividing the net income by the outstanding shares of stock of a company.
Figure 2: 3M Earnings per Share
The 2016 3M Company annual report also stipulates an increase in dividends paid per share from $2.36 in 2012 to $4.44 in 2016. According to Nichols and Wahlen (2004), dividend per share depicts the figure given to the shareholders as a return on their investment at the company. Higher dividend per share shows that the corporation is reporting excellent performance and that the returns on investment are high. Nichols and Wahlen (2004) assert that the increase in the figure mentioned above is attributable to an increase in the net profit posted by 3M Company in the recent times.
Figure 3: Cash dividend per share
According to the firm’s 2016 annual report, the company had a dividend payout of approximately 50%, an issue that portrays the positive and excellent performance by the corporation. An important factor to note is the fact that 3M Company is planning to repurchase shares worth $3-$5billion in 2016.
3M Company has also made commendable strides in the global business market by demonstrating success as shown in its non-financial measures. According to Johanson and Hansson (2006) and Kaplan and Norton (2001), the contemporary enterprises have shifted from using financial performance indicators to non-financial indicators due to the difficulty involved in imitating the business models. Typical examples of non-financial performance indicators include market share, customer or employee satisfaction, as well as innovation among other indicators (Roepke, Agarwal & Ferratt, 2000; HBSP, 2003).
About non-financial performance indicators, 3M Company has demonstrated commendable excellence in the global business arena. First, the technology company has had a strong innovation culture since its incorporation way back in 1929. Although 3M Company managers appreciate the fact that technology is the backbone of innovation, they believe in delivering the rights products to the marketplace at the right time (Handrigan, 2013). The company has prioritized research and development by investing between 5% and 6% of its sales in the sector. According to the company CEO, Inge Thulin, between 30% and 32% of the company’s annual income emanate from products introduced in the market within the last five years (3M Performance, 2017).The innovation at the enterprise through the use of technology has not only addressed the needs of the customers but also enabled the provision of differentiated products in the global market, thereby enhancing 3M Company’s competitiveness (3M Performance, 2017).
Reasons for 3M’s Success
3M Company attributes its success in the world market to a variety of issues. Outstanding and excellent innovative strategies adopted by the company remains as the remarkable success of the firm. Since its inception in 1902 as Minnesota Mining and Manufacturing Company, 3M Company has prioritized innovation as a key pillar in driving its businesses (Handrigan, 2013). As noted earlier in this article, 3M Company put much emphasis in R&D through annual investment in the sector to steer the production and delivery of differentiated products in the marketplace. More importantly, 3M Company prioritized the incremental approach of product development and innovation by investing heavily on the department, more so after Buckley assumed office in 2005 as the company CEO (Hindo, 2007). The company also accords its employees sufficient time to explore new ideas, an initiative that has often contributed towards steering innovation at the firm. 3M Company takes pride in the introduction of such items like waterproof sandpaper, post-it picture paper, and mask tape as some of the products of innovation at the company (Keller & Richey, 2006). In 1995, the US government recognized the spirited innovation initiatives put forward by 3M Company and awarded it the National Medal of Technology. The above-stated award is the highest offered by the government in recognition of companies that display excellence in innovation.
International Expansion and Acquisition
In addition to the outstanding innovation, 3M Company success also hinges on the aggressive international expansion and acquisition strategies adopted by the management. Since the hiring of outsiders, McNerney and Buckley to assume the position the company CEO, 3M Company has put much emphasis on the filling of the strategic openings in various geographic markets across the globe. Through international acquisition and partnerships, the company has managed to expand into the international markets and now operates in about 70 countries across the world (3M Performance, 2017).While the previous company CEOs acquired close to 70 businesses at the cost of $69million, Inge has so far spent an average amount of $644 to acquire nine companies since assuming office as the company CEO in 2012. Irrespective of the differences in the acquisition and expansion strategies mentioned above, the initiative has steered growth and revenue generation at 3M Company. International expansion not only increases revenue generation but also creates an international business partnership, an important factor in the creation of more business overseas (Stackebrandt, 2010). 3M Company reported net sales of close to $18.0billion from its international businesses, constituting about 60% of the company’s total net sales in the 2015-16 financial year (3M Performance, 2017).
Effective Human Resource Management
While 3M Company strives to accelerate growth through various strategies, including diversification, it acknowledges the significance of human capital as the backbone of its business operations both in the US and oversees. Employees at the company have an opportunity to contribute effectively towards the success of the firm as the management values every worker. The company leadership, starting with McNerney, to Buckley, through to Inge have often given priority to the importance of employees. For instance, McNerney argued that growing people remains the backbone to a company success, hence his strategy and endeavor to prioritize the participation and contribution of the employees.
Strategic Leadership Approach
Since its inception, 3M Company has maneuvered through challenging moments in the business market (Sternberg, Kaufman & Pretz, 2003). For instance, it has encountered enormous difficulties, including tough economic times, coupled with global recessions and political stability. Nonetheless, the practical leadership has enabled the firm to stay productive and profitable in the long-run (Alldredge, Johnson, Stoltzfus & Vicere, 2003; Sternberg, Kaufman & Pretz, 2003). Upon realizing that the internally-based CEOs could not succeed in steering the corporation to its desired success, the board opted to appoint an outsider by the name Jim McNerney.
McNerney introduced commendable management initiatives, including diversification into the global markets through acquisitions among other excellent management strategies. The CEO named above encouraged autonomy among employees and helped them to master whatever they opted to pursue. His successor, George Buckley also assumed the CEO role and continued with McNerney’s legacy albeit with certain corrections and improvements (Roepke, Agarwal, Ferratt, 2000). They both appreciated a participatory and democratic form of leadership where the contribution of employees remained critical to the company’s success. The effective leadership also manifests in Inge Thulin, the current company CEO. Under his reign, 3M Company has reported commendable and excellent business results, regarding revenue generation, international diversification, and overall profitability. In a nutshell, 3M Company leaders have a strong belief in transformational leadership by growing people to achieve company growth.
Strong Organizational Culture
Since the incorporation of the company as Minnesota Mining and Manufacturing company way back in the mid-1920s, the firm has operated under the facets of integrity and honesty. The changes in leadership and management at the helm of the company has done much in reinforcing the strong culture that has existed for several years (Székely & Knirsch, 2005).
The corporate reputation that 3M Company currently enjoy is rooted in the firm’s business conduct practices and conduct introduced in 1988. The current practices and policies exhibit the same aspects of integrity that has been at the core of the firm’s operations ever since. The policies mentioned above define the ethical and legal conduct at the company. The multinational conglomerate also placed emphasis on the individual initiative, teamwork, as well as tolerance of each other’s mistakes as the central corporate cultural traits (Urde, Greyser & Balmer, 2007). The cultural features mentioned above not only created a haven for original thought but also provided an environment of entrepreneurialism, an issue that fostered growth and subsequent success of 3M Company.
Effective Management Strategies
Following the failure of several management strategies adopted by the previous internally-based CEOs, the new managers changed the management strategies to enact the six sigma approach to steer the company to success. McNerney first introduced the Six Sigma approach, a workplace management methodology that has reported success in several corporations, including 3M Company. According to Canato, Ravasi, and Phillips, (2013), Six Sigma is an approach aimed at enhancing efficiency through the enforcement of regulation and standardization. In doing so, the management approach minimizes chances for errors by identifying and subsequently eliminating them (Schroeder, Linderman, Liedtke & Choo, 2008). It is notable that Six Sigma approach improved the performance of 3M Company through increased productivity, and subsequent success (Chakravorty, 2009). Although the introduction of Six Sigma created tension by clashing with the existing corporate culture, the subsequent managers effectively integrated the strategy with the firm’s corporate culture.
3M Company, just like other successful global firms, puts much emphasis on customer satisfaction as a means of achieving their business goals. The company invests in extensive research to ascertain the needs of the customers before developing a new product. Keller and Richey (2006) cited a case where 3M Company carried out a customer satisfaction research to ascertain the degree of their satisfaction with the company products and services as well as provide a comparable data with the firm’s competitors on the customer satisfaction. The study for the Traffic Control Materials Division involved interviewing 561 participants via telephone calls (Keller and Richey, 2006). Although the study findings highlighted areas of improvements, it revealed that customers had a favorable perception towards the company products and services. Besides, employees of 3M Company also spend a lot of time with the customers to gather vital information from the clients, including their feedback on the products and service at the corporation (Keller and Richey, 2006). While companies may engage in the production of new products like 3M Company was doing, getting the connection between the products and the customer needs remains central to a company’s success in the marketplace.
3M Company has prioritized corporate responsibility as one of the major initiatives in its national and international agendas. The reputation and subsequent success of a company hinge not solely on the favorable financial performance but also on the non-financial indicators (3M Annual Report, 2015). While putting much emphasis on commercial success, 3M Company also acknowledges the importance of achieving such goals in an atmosphere that values the social, economic, as well as environmental sustainability. For instance, environment stewardship at the company entails the provision of efficient and practical solutions and products that take into account the environmental challenges for both the company and her customers.
3M Company’s Strategic Capabilities
3M Company remains a reputable company in the global market due to its international presence and strong revenue base. The skillful management of technological process by 3M Company has elevated it above competitors in the global business. Since its incorporation, the company has mainstreamed innovation among other strategies, thereby ensuring the delivery of a broad range of products to the marketplace.
Hart and Milstein (2003) define value chain as the internal activities that a company engages in while pursuing its operations, mainly changing the input to finished products. Businesses in the contemporary society utilize value chain as an integral part of their planning strategies (Roper, Du & Love, 2006). The primary goal of value chain analysis is to ascertain the most valuable activities in a company, whether they form the source of differentiation or cost advantage. Besides, it seeks to identify which of the activities require improvements. In the case of 3M Company, R$D remains one of the primary activities that the company has prioritized not to foster growth and development but also gain a strategic competitive advantage against peers in the global market. Through massive investments in R&D, 3M Company has managed to produce a variety of products to the marketplace, thereby improving its competitiveness (Starr, 2012). The company has several R&D in almost all its divisions across the globe. The technology-based innovation has remained central to the business activities of the Minnesota-based company, an issue that has enabled it to produce high-quality products that outcompete its rivals in the marketplace (Starr, 2012). The company engages in open innovation where both the internal and external source of innovations are welcome in the generation of new ideas at the firm.
Product design and development
3M Company comprises of several individual business units and produces a broad range of products of up to 50, 000 in number. While the company adopts the use of innovative technology in developing its products, it manages the individual business units independently, and also produces and markets the products after their manufacture. The company encourages researchers to utilize the resources at their disposal to develop new products. However, the researchers can also acquire external resources through the firm’s leading Edge Academic Program to achieve the same issue. The program mentioned above ensures availability of funding for the facilitation of a collaboration between the researchers and government labs as well as with other scientists (Evans & Mendenhall, 2004).
Product Differentiation and Risk Taking
The broad range of products at 3M as well as the risk-taking culture accords the firm a unique advantage over its rivals in the market. Besides, 3M Company also takes advantage of the several business units across the globe to assert its presence in the global market (Verma, 2006). The international expansion initiative and acquisitions also increase its global market presence, thereby increasing its competitive advantage. According to Early (2004), the value of diversification efforts can only be meaningful under certain conditions. The 3M Company has efficiently managed its different markets simultaneously, thereby spreading risks as well as gaining a competitive advantage against its competitors (3M Performance, 2017).
Marketing and Sales
In addition to the aggressive innovation at 3M Company, the firm also engages in the customer segmentation and needs, and innovative methods of promotion and advertising. As noted earlier in this article, 3M Company often involves in funding customer-based market research to ascertain the changing needs of its clients. The feedback provided by the clients is key not only in addressing the customer needs but also ensuring their retention.
Managing the impacts of sustainability of the value chain at 3M Company is one of the support activities that the company has a solid background in pursuing. In 2011, for instance, 3M Company sought to improve the environmental sustainability characteristics of the new products (3M Performance, 2017). In this respect, the company put much emphasis on the products that exhibited environmental sustainability traits within its value chain. The value chain, in this perspective comprised of stages in the life cycle of the products, including the sourcing of raw materials, manufacturing, consumption, and design, as well as function and disposal. The Pollution Prevention Pays program initiated by the company celebrated its 40th anniversary in 2016, having contributed to the prevention of over 2.1 million tons of pollutants (3M Performance, 2017).
3M Company takes advantage of innovativeness in product development and production as well as delivery of services. According to Verma (2006), the core competency of diversity and innovation in 3M Company’s R&D departments accords the firm a unique characteristic to outcompete its rivals in the marketplace. Besides, the success in the company’s acquisition in the global arena also gives 3M innovative competencies in a variety of areas. It is wise to note that the capabilities mentioned above give 3M an advantage that is not imitable by its competitors, especially when harvested in large scale. Previous studies show that intangible assets often present massive advantages to a company due to the challenges involved in imitating them as compared to tangible assets (Peng, 2009). The R&D, diversification as well as risk-taking the model of 3M Company are valuable, rare and costly to imitate, thereby giving the company a sustainable advantage over its peers in the global marketplace. 3M Company has put emphasis in innovative R&D through incremental funding to the department on an annual basis.
The company currently invests between 5% and 6% of its sales in research and development (Verma, 2006). By investing massively in innovative R&D, 3M Company can produce a broad range of differentiated products, thereby enhancing its competitive advantage in the market. Besides, it has also put aggressive diversification and risk-taking initiatives in the recent times as demonstrated by the incremental number of businesses it is acquiring in the international markets. Both value chain and VRIN frameworks provide reliable and relevant data that can be useful in making sound decisions on the company’s strategic capabilities (Horvath, 2001; Talaja, 2012).
|Capability, Competence or Resource||V?||R?||I?||N?||SCA conclusion|
|Diversification and Risk taking||Yes||Yes||No||Yes||Yes|
Contribution of 3M Company Leadership
The leadership of 3M Company has made an excellent contribution towards the improved performance and subsequent success of the firm. Since its incorporation in the early 1920s, 3M Company has undergone remarkable transformation to become a reputable company in the global arena. 3M Company had previous CEOs from internal management before resorting to hiring external mangers due to its failure to achieve the desired goals (Alldredge & Nilan, 2000).
The first 13 men the company engaged as leaders in its first 100 years of operation had similar characteristics, including being hard workers, middle-class individuals, as well as primarily Midwestern. Most of the managers mentioned above had technical training when they joined 3M Company and did a lot to build their careers at the firm. However, the management approaches at the company changed after the McNerney assumed the chairman position in 2001 as the first outsider to lead the company. The leader mentioned above prioritizes investing in the people as the most important factor in achieving success. While McNerney transformed various aspects of the company operations, including bringing new techniques, processes, and growth, he believed that investing in people was critical in achieving his business targets. The transformational leadership adopted by McNerney at 3M Company often prioritizes the contribution and participation of all people in the management process (Judge & Piccolo, 2004). It entails building the vision of a company in a collective belief and values as well as empowering the people to achieve the stated vision (Alldredge & Nilan, 2000). McNerney noted that 3M Company would only grow if its people grew. The manger brought a new leadership model that was contrary to the laissez-faire approach of experimentation adopted by the firm previously.
George Buckley continued with the leadership of the company in 2015, assuming the role of company CEO after the exit of Jim McNerney. Buckley continued with McNerney’s legacy albeit with minimal improvements (Roepke, Agarwal, Ferratt, 2000). Just like McNerney, Buckley not only downsized the company employees but also appreciated the participatory and democratic form of leadership where the contribution of employees remained critical to the company’s success. However, Buckley raised issues with the way leaders moved from one job to the other. According to the leader, managers needed at least 4years to demonstrate their effectiveness and report commendable results (Verma, 2006).
The effective leadership also manifests in Inge Thulin, the current company CEO who took over the leadership from Buckley in 2012. Under his reign, 3M Company has reported commendable and excellent business results, regarding revenue generation, international diversification, and overall profitability. In short, 3M Company leaders have a strong belief in transformational leadership by investing in people and accommodating their contribution and participation to achieve business growth and success. Unlike his predecessors who made diversification through the acquisition of several small businesses, Inge’s tenure has acquired a meager nine big businesses at a higher cost.
3M Company draws global recognition for its outstanding technological innovation. Throughout its operations, the company management has prioritized product innovation, an issue that has since enabled it to have a wide range of differentiated products in the global business market. According to Garud, Gehman, and Kumaraswamy (2011), 3M Company currently has about 50,000 products in the market, including waterproof sandpaper, post-it picture paper, and mask tape among other innovative products. Its excellent, innovative products and services elevate the firm above its competitors as well as enabling the firm to generate significant revenues in the market. 3M Company has had an incremental budget set aside for innovative R&D to provide products and services not only of high quality but also meet the customer needs. As noted earlier in this article, 3M Company invested between 5% and 6% of its sales in the innovative R&D in 2016. According to the company CEO, Inge Thulin, between 30% and 32% of the business’s annual revenues come from products introduced in the market within the last five years (3M Performance, 2017).
The aggressive international diversification program currently pursued by 3M Company may present risks and challenges alike. For instance, maintaining innovation in the development of new products and services to conform to the prevailing local culture is one such factor that may pose a challenge to the firm. In this respect, there is a need for 3M Company to contemplate adopting geographically diverse R&D initiatives to enable the firm adapt to the local business conditions. Notably, the R&D departments in all the business units should be separate, and can benefit all the other departments. The department will provide a basis from which the employees and salespeople from the business units will ascertain the customer needs as well as contribute positively towards providing knowledge on product development and efficient service delivery. The company must take into account the prevailing local cultural aspect while designing the aforementioned initiative to achieve the desired outcomes. The above-stated recommendation is key to the company given the fact that 60% of 3M Company’s sales revenues come from business units outside the US. The shareholders are likely to embrace the idea because it would contribute to enhanced production and service delivery, and subsequent profitability in the long-run. The return on investments is likely to increase, an issue that would raise earnings per share.