3m Strategies Reviewed2

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TitleReview of the Strategies Behind 3Ms Success

Author (s):Iloka Benneth

Olajide Ifeanyi

Date PublishedJan 11 2012
http://www.ilokabenneth.com/http://www.ilokabenneth.com/http://www.ilokabenneth.com/


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INTRODUCTION

In modern day business, product and service innovation has been highlighted as the key to

organisation differentiation and success. This is because, through product and service

innovations, companies are able to find new solutions to customer problems and companies

that can constantly find solutions to customers problems will have a competitive advantage

over their competitors as they tend to gain high market shares through market pioneering and

leadership, and also increased sales through customer loyalty.

The case study presented a clear example of this claims with 3M an organisation widely

recognized for its contribution towards corporate entrepreneurship. Thus, this case study

analysis is meant to shade more lights and the strategic approaches that has made 3M

successful over the years. This case study analysis is based on secondary research and is

divided into three sections.

The first section is an analysis of 3Ms organisational structure and culture, and the business

strategies that has made them successful over the years. The second section presents a critical

review of problems face by 3M, while the third and final section highlights the limitations to

this case study analysis followed by conclusion and bibliography in the preceding pages.


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CASE STUDY ANALYSIS

3MS ORGANISATIONAL STRUCTURES AND DEVICES USED TO ENCOURAGE

ENTREPRENEURSHIP ACTIVITIES AND WHY THEY WORK

3Ms organisational structure is built around cultures that encourage innovation. Being a

company primary based on production of adhesive, 3M searched for new ways to increase

their profit and market share, and they found that one of the best ways is through

organisational innovation. From this angle, the company was able to develop 6 business

strategies to promote entrepreneurship and increase customer satisfaction

First strategiesget close to customers and understand their needs

3M started life by selling inferior form of sandpaper and the only way they could generate

sales was by getting close to the customers and demonstrating their products for them. This

helped them to understand customers needs better based on the feedbacks they get from

demonstrating their products to this selected group of customers.

In modern day businesses, customer relationship management has been viewed as a strategy

to attract, maintain and enhance customer services which will in return ensure customer

loyalty (Christopher et al., 1991; Gummesson, 1991; Lindgreen et al., 2004). This concept isachieved by mutual symbiosis and meeting set promises (Ndubuisi 2003a, b). From these

theoretical definitions, it can be seen that 3Ms first business strategy is a successful path

towards ensuring that the company improves their sales. Thus will be possibly through

increased customer loyalty and repeat purchase which are hugely influenced by both the

products and services received.

Second strategyseek out niche markets no matter how small

From the success of the first strategy, 3M found that if they offered customers what they

wanted, these customers will be loyal to their company. Thus they developed the second

strategy to seek niche markets no matter how small, as this will allow them for charge

premium prices for their products. The company realized that numerous small niche markets

will be more profitable that few large ones and this lead to the development of Three-M-Ite

- an abrasive clothe using aluminium oxide in place of the original abrasive, thus offering

more durability.


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Niche marketing has been used synonymously with market segmentation, micromarketing,

regional marketing, target marketing, focused marketing and concentrated marketing (Dalgic

and Leeuw, 1994; Linneman and Stanton, 1992). Nevertheless, all of these tend to point to a

general agreement of identifying customers according to their respective needs and finding

solutions to all their needs respectively. Therefore, it can be argued that niche marketing is

none of the synonymous concepts and also the entire synonymous concept.

Dalgic and Leeuw (1994) suggested that strong long-tern relationship through niche

marketing can build a barrier to deter potential competitors and sustain long-term profitability

and customer retention. Based on this suggestion, it can be argued that 3Ms second strategy

just like the first is a strategic approach that is destined to bring back nothing less than

success to the organisation because through niche marketing, they can identify all needs of

their customers and tailor their products and services to meet these needs.

Third strategyproduct diversification

By being close to the customers, 3M identified problems that they can solve for their

customers through technical expertise. This is exceptionally great as it ensure that they

continued to diversify their product offerings by developing new products to solve new or

unattended customer needs. Once 3M found a new product to offer in their niche market theywill move on to develop related products and thus occupy leadership positions in these

markets.

This strategy exceptionally works as it can be seen from the statement above that through

product diversification 3M where able to gain market leaderships in the markets where these

products are sold. This argument is also supported by numerous studies that argue that the

synergies of related product diversification creates superior value, indicating that firm-

specific a major driving force for diversification activities (Bettis, 1981; Christensen and

Montgomery, 1981; Hill and Hoskisson, 1987; Palepu, 1985; Rumelt, 1974, 1982; Teece,

1982; Wernerfelt and Montgomery, 1988). This is because, when companies diversify they

have a great opportunity of finding solutions to existing unattended customers needs and

thus making their pioneers of these products and giving them high competitive advantage in

case of new market entries.


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Fourth strategyproduct development and innovation through research

The fourth business strategy as developed by 3M is to encourage product development and

innovation in all sectors of the organisation through research. This strategy was developed in

line with the third strategy which encourages diversification. If 3M where to constantly

diversify their product and service offering, the company understood that it will need to

support its system with improved innovation and new product development to ensure that

they continue in line with their business model.

This strategy is destined to work as product development is the bloodline for organisational

growth. Product development and innovation offer company competitive advantage, new

customer and market penetration, customer retention, and strengthened ties with distribution

network (Kotler and Keller, 2006; Cooper and Kleinschmidt, 1990). When companies

successfully introduce new products through a well-developed process, they tend to satisfy

specific customer needs and thus ensuring customer loyalty. This system worked because 3M

was able to gain customer loyalty through new product development and innovations to offer

their customer more value for their money.

Fifth strategyknowledge sharing

In other to perfect their fourth strategy of encouraging innovation and development in all

sectors of the organisation, 3M developed their fifth organisational strategy which is to

encourage knowledge sharing in the organisation. This became official with the establishment

of the technical forum in 1950s, with the aim of sharing knowledge within the company. This

forum comprised of technical council and directors that held annual shows to encourage

knowledge sharing in 3M.

Knowledge sharing has been thought to be able to enhance effectiveness (Gupta and

Govindarajan, 2000) because, unlike other organisational assets, knowledge tends to increase

when shared: ideas bring new ideas and shared knowledge remains with the giver, while it

reaches the receiver (Davenport and Prusak, 1998, pp. 16, 17). This true as two heirs are

better than one and knowledge sharing offers confidence and reliability on ideas if they are

approved by those whom it is shared. Therefore, it can be argued that through knowledge

sharing, 3M was able to increase their knowledge stream and find new years to tackle their

business problems effectively and efficiently.


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Sixth strategyencourage achievement through reward

The last strategy is an employee appraisal scheme that encourages achievement by rewarding

employees who generated successful business ideas. Employees that successful innovate new

products are made managers of that product division, this ensured that other staff members

are motivated to work harder and discover new product innovation as they seek to one day

become managers of their developed product lines.

Accurate employee performance appraisal is regarded as key to organisation success (Judge

and Ferris, 1993). Due to the variance in organisational members contribution, individual

performance appraisal is essential for recognizing and motivating individuals, and reducing

social malingering and free-riding that obstruct group moral (Murphy and Cleveland, 1995;

Scott and Einstein, 2001). Looking from the researchers point of view, it can easily be

concluded that this business strategy works because it has numerous potentials of motivating

bot the individual and other members of the organisation. As agued above, employee

appraisal is essential for motivating individuals in 3M as they tend to work hard, increase

their innovative abilities and seek new ways to make the company better because they know

that if they develop new products they would be made manager of that product line.

HOW 3M DISTINGUISHES BETWEEN INCREMENTAL AND FUNDAMENTALINNOVATIONS

In other to distinguish between fundamental and incremental innovation, 3M established a

new product development central research laboratory in 1940. This was used to explore the

feasibility of new products or technologies that where not related to existing ones.

Incremental innovation means innovation made based on existing products and technologies

while fundamental innovations are those that are not related to existing products or

technologies. In the 1980s, two separate laboratories where developed to over-see short-term

and long-term researches. Short-term researches are more of incremental innovation that are

designed to respond to industrial and consumer needs, life science, electronics and

information technologies and graphic technologies with a life span of 1-5 years, while the

corporate lab was designed for fundamental innovations with researches of over 10 years.

3Ms ORGANISATION CULTURE AND WHAT IT DEPENDS ON

For decades, 3M has been known as an entrepreneurial organisation that pursues growththrough innovation. Innovation was encouraged originally in an informal way by the


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founders, but was later formalized over a century into an organisational culture. The

organisational culture is one which encourages innovation, and it has helped them to realize

success over the years as it perpetuates itself. This culture evolved from 3M s place of origin

which is called Minnesota Nice. It is described as a non-political, low ego, egalitarian and

non-hierarchical, hardworking and self-critical.

WHY 3M HAS BEEN A SUCCESSFUL INNOVATOR FOR SO LONG

3Ms success in innovation can be traced back to their employee appraisal. This is because;

the organisation has found the missing link which numerous organisations tend to overlook

when it comes to showing appreciation towards employees efforts. 3M is achievement

oriented and achievement particularly through research was rewarded through promotion. For

instance, successful new product teams were spun off to form a new division in the

organisation. The leader of the team is often the general manager of the new division and this

w as seen as a great motivator. Lesser achievements were also rewarded and failure is not

punishable. This increase in 3M employees motivation level has been the key to their long -

tern success as their staffs continually give out their best for the organisational success.

CAN OTHER COMPANIES BE SUCCESSFUL INNOVATORS IF THEY JUST

COPY 3MS CULTURE AND STRUCTURE?

Copying ideas and practices of other organisation is a mechanism widely used by firms

across the globe to improve their performance. Indeed, imitation had been seen as a key

means or organisational learning (Argote 1999) and has found in academic and practitioner-

oriented literature. For manager, imitation is a crucial fact of organisational life a colourful

illustration of this was given by president of Rexhall, a manufacturer of premium

motorhomes, who openly revealead, in this industry we call it R&C: research and copy

(Schnaars 1994, p. 3).

If properly copied, organisations that copy 3Ms strategies and culture can be successful

innovators. This is because, 3Ms culture general revolves around employee appraisal and in

business psychology; appraisal has been rated high as increasing employees motivation level

and enhancing organisational success. There it can be argued that organisations can become

successful innovators if they directly copy 3Ms business model and culture. Nevertheless, it

must be understood that since external environment affect the success of any organisation;


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fully copying their model and culture could be disastrous as it could lead to negative effects

such as legal prosecution from 3M in-cases where they copy patented rights etc.

PROBLEM IDENTIFICATION

Although 3M has been associated with numerous success stories over the years, they

organisation is prove that all businesses no matter how successful is filled with ups and

downs. Today 3M faces numerous challenges as it seeks to maintain their reputation for

innovation. As 3M becomes larger and more complex, involving with different markets and

product life cycles, the organisation has been face with numerous problems and issues that it

will need to handle if they are to continue their market leadership. These problems are:

1. Proper management issues.2. High expense on research with the adoption of Maverick high risk approach.3. Increasing competition and new entries.

CRITICAL REVIEW OF HIGHLIGHTED PROBLEMS

Management issue

3M initiative of making product innovating teams the management of the product division is

a strategic way of ensuring that staffs continue to purse innovation and new product

development but also questionable. It is questionable because being a great innovator does

not necessary means being able to manage and coordinate the markets where these products

are sold. Thus, this decision can deter their success potentials when compared with employee

qualified managers to manage these product lines.

Schoemaker (1997) described scenario planning as a logical process of imagining possible

futures. It tries to executive thinking away from what has been in the past and what is

happening in the present to consider alternative for what will happen in the future. In

doing so, scenario planning engages with confusion, uncertainty and complexity (Wilson,

2002). From this point of view, it can easily be seen that 3M faces critical management issues

is they continue to adapt their old format of making product innovators the management team

of these product line.

It can be argued that proper training and development will offer them the needed skills, but it

must be understood that training does not necessary guarantee transfer of acquired skills anddevelopment takes time to perfect. Some of these innovators might be staffs from the


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technical team who have no business background and it can scupper the success of the

company if they compete with organisations that have a better management team.

High expenditure on research and development

Over the years, academic and managerial literatures have drawn their attention to problems of

measuring the performance of organisational investment on research and development

activities (Lebas, 1995; Merchant, 1998; Amadio, 2005), because research and development

has been recognized as a critical issue for motivating personnel, supporting decision making,

and enhancing organisation learning and continuous improvement (Simons, 1990; Eccles,

1991; Sink, 1991; Lebas, 1995).

Although they are many positive attributes to research and development in an organisation, it

must be argued that 3M high risk approach towards research and development is an issue the

organisation must seek to resolve. In 3M all staffs are encouraged to pursue innovation and

the company constantly spend million in research and development on these new products;

many of which fail. Thus, this leads to loss of both organisational and human resource

capitals. This is a critical issue the company must address if they are to continue their market

leadership as continued loss could lead to loss of company market shares and low returns on

investments.

Increased competition and new entries

The drift in recent years towards globalization and internationalization of companies has

affected the competitive landscape of business across the globe (Harvey and Novicevic,

2001) and created a state of change as businesses struggle to adopt innovative leadership

approaches to meet the challenges of new market environment (Robinson and Harvey, 2008).

As 3M continue to expand their market research in search of new ways to generate profit, the

company faces stiff competition from all their product lines.

Global competition is a tough encounter for any organisation both in global and national

market as the unpredictability of external environment, coupled with new market entries and

product imitations can put companies on the blink of collapse if they dont adapt strategic

management system that offer organisations competitive advantage. Therefore, it can be seen

that competition and new market entries is a serious issue that 3M must find ways to combat

if they are to continue to be market leaders in their product lines.


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LIMITATIONS

This case study analysis has been perfect in examining the contents of the case study; there is

no doubt to the quality and credibility of the contents contained in this analysis due to its

ability to apply supportive ideas from secondary researches on relevant topics. But, there are

still limitations to the contents of this research paper as:

The case study was not analytical enough in areas related to the problems faced by 3M. The

problems highlighted above are as linked with the case study in the concluding paragraphs

and secondary research. Thus, this is a limitation as the inability of the case study to pinpoint

the problems faced by 3M in a detailed format could result in assumption that are rather

irrelevant or unconnected to the current situation face my 3M in their markets at present.

Another limitation is the fact that all contents of this case study analysis are based on

secondary research. This is a limitation as primary research would have offered a much

detailed understanding of the actual happening in the organisation in real-time approach.

Thus, although it can be argued that this research paper has gone a long way in ensuring that

all aspects of the company as highlighted in the case study were taken into consideration, it

should be noted that these limitation could offer certain level of unreliability to this research

paper.


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CONCLUSION

In essence, 3M must be appreciated for their contribution in pioneering corporate

entrepreneurship through numerous investments of both monetary and human resource

capitals. The case study pointed out 6 strategic approaches which 3M adapted to make

themselves successful entrepreneurs. These strategies where built under the canopy of 3Ms

organisational structure which is encouraging innovation at all level of the organisation in

other to gain competitive advantage.

This research analysis was able to analyse all these six business strategies and what made

them work for 3M. It also answered all other questioned contained in the case study and

pointed out that other companies have a high chance of being as successful as 3M if they are

to adapt these organisational structure and culture. Nevertheless, companies that wish to

adapt this culture and structure of 3Ms organisational system must as well understand the

consequences of such activities. The case study analysis concluded by present critical review

of all problems faced by 3M and limitation to the overall rating of this research paper.


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3m Strategies Reviewed2