Innovation all around us

While I hated to post the entire article, I felt as if it was very interesting regarding 3M's drive towards innovation.

3M's innovation revival
By Marc Gunther, contributing editorSeptember 24, 2010: 4:40 AM ET

FORTUNE -- 3M is everywhere. That's the point George Buckley, the chairman and CEO of 3M, is trying to make as he talks about his favorite subject, inventing things. Last year, he says, "even in the worst economic times in memory, we released over 1,000 new products."

As if on cue, Buckley's new iPhone rings, showing a photo of his daughter. "Daddy's in a meeting," he says, and hangs up.

"I'm told there's some 3M inside that phone," I say. Buckley replies, "There's lots of 3M inside." He can't say exactly what 3M (MMM, Fortune 500) gadget is in the iPhone; Apple's (AAPL, Fortune 500) skittish about such things. But point well made: 3M is everywhere.

Apple and many others couldn't do what they do without 3M. The St. Paul company produces a mind-bending 55,000 products. Some of them you know -- Post-it notes, Scotch tape, Dobie scouring pads, Ace bandages, Thinsulate insulation. But most you don't, because they're embedded in other products and places: autos, factories, hospitals, homes, and offices. Scientific Anglers fly-fishing rods and Nutri-Dog chews? Yup. They also come from 3M.

Somehow they all add up to a business with $23.1 billion in revenue and $3.2 billion in net income in 2009, placing 3M at No. 106 on the Fortune 500. It has also recovered nicely from the recession. Sales grew 21% and net income 43% in the first half of 2010. The stock? Up about 20% in the past 12 months. The company's shares have consistently outperformed the S&P 500 and other conglomerates, including GE (GE, Fortune 500). Says Buckley: "The magic is back. It is an absolute joy to behold."

3M has long been synonymous with innovation. Founded in 1902 as the Minnesota Mining & Manufacturing Co., it has deployed a range of practices to promote out-of-the-box thinking.
Long before Google (GOOG, Fortune 500) gave its engineers one day a week to pursue their own ideas, 3M let its researchers do the same with up to 15% of their time. Several years ago folks in the company's infection-prevention division decided on their own to see whether 3M's Littmann electronic stethoscopes could be wirelessly connected. Last year 3M introduced the first electronic stethoscope with Bluetooth technology. It allows doctors and med students to listen to patients' heart and lung sounds as they go on rounds and then transfer those sounds to software programs for deeper analysis.

In another unusual practice, 3M awards annual Genesis Grants, worth as much as $100,000, to company scientists for research. The money is allocated by their peers and is spent on projects for which "no sensible, conventional person in the company would give money," says Chris Holmes, vice president of 3M's abrasives division.

Management efficiency came at a cost to creativity

Despite such practices, many inside and outside 3M, including Buckley, think 3M lost some of its creative juice under James McNerney, the acclaimed GE alum who led the company from 2001 to 2005 and is now CEO of Boeing (BA, Fortune 500). It's not that McNerney, the first outsider to run 3M, did a poor job. The company had become sluggish, and McNerney whipped it into shape. He streamlined operations, laid off 8,000 people, and imported Six Sigma management techniques, popularized by GE, to analyze processes, curb waste, and reduce defects. "He brought the discipline and the focus on execution we needed," says Mark Colin, who oversees a 3M business that makes products for mobile devices. Earnings grew, margins improved, and shareholders cheered.

But the efficiency gains came at a price. Scientists and engineers griped that McNerney, an MBA, didn't understand the creative process. Six Sigma rules choked those working in the labs. "It's really tough to schedule invention," says Craig Oster, a mechanical engineer who has been with 3M for 30 years. (Boeing said McNerney would not be available for comment.)

Why is that important? Because as 3M's older products grow outmoded or become commodities, it must replace them. "Our business model is literally new-product innovation," says Larry Wendling, who oversees 3M's corporate research. The company, as a result, had in place a goal to generate 30% of revenue from new products introduced in the past five years. By 2005, when McNerney left to run Boeing, the percentage was down to 21%, and much of the new-product revenue had come from a single category, optical films. (3M also has a history of acquisitions and has announced deals recently.)

Turning over a new leaf

The board turned to Buckley, now 63, who had demonstrated his business chops as CEO of Brunswick, an Illinois company known for bowling gear and boats. But the most important thing to know about Buckley, a Brit with a Ph.D. in electrical engineering, is that he's a scientist at heart who has several patents to his name. In other words, he's a good fit for 3M. "This is to me an engineer's and scientist's Toys 'R' Us," Buckley says.

Buckley has laid out some clear business goals for the company. He wants his managers to protect and strengthen 3M's core businesses, like abrasives, industrial tapes, and optical film. He wants 3M to develop lower-cost products to compete in emerging regions. He wants 3M to be part of future growth markets like renewable energy, water infrastructure, and mobile digital media. Above all, Buckley has been an outspoken champion of the labs. Last year, despite the recession, he kept R&D spending at more than $1 billion. Says management guru Ram Charan, who advises 3M: "George has accelerated the innovation machine by devoting his personal time, his energy, his focus, to empowering the researchers, opening up their minds and urging them to restore the luster of 3M." The results speak for themselves: The percentage of 3M's revenue from products introduced in the past five years is back to 30% and may reach the mid-30s by 2012.

Six Sigma remains in force in 3M's factories, but it's gone from the labs. Each of 3M's six major business units has its own research lab, which is product-focused, while the corporate research staff works on core technologies that are shared by all the businesses. Altogether, 3M employs 6,500 people (out of about 75,000) in R&D.

It's the core technologies -- things like abrasives, adhesives, imaging, and films -- that drive growth at 3M, often in unexpected ways. Consider microreplication, a process 3M uses to create tiny, precisely shaped structures that can be arranged on a variety of surfaces; the technology dates to the 1960s, when it was used to make low-cost overhead projectors for schools and offices. The projectors are mostly gone, but microreplication is alive and well, embedded in 3M products that enable traffic signs to be brighter and golf gloves to deliver a tighter grip with less effort. Currently 3M is seeking regulatory approval for a drug-delivery device -- a skin patch made of pain-free microneedles that barely pierce the skin and could replace hypodermics.

It's safe to say that no 3M product will generate the buzz of, say, the next iPhone. But 3M has never been about inventing the Next Big Thing. It's about inventing hundreds and hundreds of Next Small Things, year after year. Things like Cubitron II. Buckley explains that Cubitron II is an industrial abrasive that cuts faster, lasts longer, sharpens itself, and requires less elbow grease than any other abrasive on the market. Introduced last year, it's selling like crazy, to the CEO's delight. "How the heck do [you] innovate in abrasives?" he asks. "A 106-year-old business for us! For goodness' sake -- it's sandpaper!" Catching himself a moment later, he jokes, "I probably need to get out more." Maybe so, but you can understand what he's excited about: little things like grains of sand that add up to the big business that is 3M.

Reporting by Marilyn Adamo and Betsy Feldman contributed to this article.

http://money.cnn.com/2010/09/23/news/companies/3m_innovation_revival.fortune/index.htm

Stock Price Update

As of 4:00 p.m. on Friday, October 22, 2010 3M's stock price was $90.44, a $0.11 drop for the previous value.

http://phx.corporate-ir.net/phoenix.zhtml?c=80574&p=irol-fundIncomeA

Acquisitions

Over the years, 3M has grown tremendously. Since 1982 3M has made 107 acquisitions, some of which allowed them to expand in their current markets while others opened doors for new markets. Either way 3M has become very successful in their targeted industries. This year alone, 3M has successfully acquired five companies; however, in 2007 this number was 17 which is the most the company has acquired in one year. Other busy years were 2006 with 13 and 2008 with 14. The acquired companies fall into ranges of personal goods, industrial, and even medical - what will be next...

http://www.alacrastore.com/mergers-acquisitions/3M_Company-1011244

Driving Innovation

3M is the proud sponsor of the NASCAR Sprint Cup series car number 16 driven by Greg Biffle, who is currently 10th in the point’s standings. In addition to racing in the biggest spectator sport in the US, Greg Biffle and his wife Nicole founded the Greg Biffle Foundation which is dedicated to the advocacy of animal welfare. The foundation is partnered with other companies, including 3M. In 2009, 3M and the Greg Biffle Foundation donated small pet sized oxygen respirators that were used in rescuing nine puppies from a house fire. The foundation also gives grants on an annual basis to various shelters and non-profit groups used for the well being and protection of animals.

See the following link for more information on the puppy rescue: http://www.cbsnews.com/stories/2009/08/01/earlyshow/main5203810.shtml?tag=latest

Stock Price Update

According to the Investor Relations page of 3M's website, the company's stock price rose another $.07 to $89.14 as of 4:00 p.m. ET on 10/15/10.

http://phx.corporate-ir.net/phoenix.zhtml?c=80574&p=irol-IRHome

Speed-to-Market

Over the years, 3M has developed its business units to include thousands of products, several in which 3M has taken a vertical integration approach to production and manufacturing of the product. One product line in particular is its Inhalation Drug Delivery systems. The use of vertical integration within the product line allows for the final good to be deliver sooner than if this integration did not exist. Vertical integration allows for one company to own or manage several stages or companies along the supply chain of the production of a good. The article below provides a greater insight to the medical division of the company.

http://solutions.3m.com/3MContentRetrievalAPI/BlobServlet?locale=en_WW&lmd=1222963521000&assetId=1180605258922&assetType=MMM_Image&blobAttribute=ImageFile

A little here and a little there goes a long way...

In 1999, 3M needed a way to cut back on its expenses incurred through the manual processing of purchases orders between its buyers and suppliers. The procurement department project lead Kathy Van Keulen stated the following regarding the costs involved with purchase orders, “the average cost of processing a purchase order at $120; those were expensive transactions for low-dollar items.” According to the June 2000 article in Communications News Magazine, purchase orders only contributed 2% of 3M’s purchasing dollar volume, but greater than 70% of their transaction volume; meaning that in the long run saving a little here and a little there can go a long way in increasing revenues.

To combat this problem 3M recognized they did not have the means to effectively build an electronic catalog. It was then that 3M outsourced this project to TPN Register to create a TPN Marketplace database for 3M’s buyers and suppliers to purchase goods all in one link. By doing this not only does it save 3M money spent towards expenses, but it also saves on processing and shipping times so that others receive their orders more quickly and accurately.

Sean Kelly "Outsource catalog services - 3M, TPN Register - Company Business and Marketing". Communications News. FindArticles.com. 16 Oct, 2010. http://findarticles.com/p/articles/mi_m0CMN/is_6_37/ai_62893697/

Stock Pricing over past 10 days

Sorry I have not been timely in providing a stock pricing update. Below is a graph showing the fluctuations over the past ten days. As of 10/1/10 3M's stock price was at $87.62.

Information gathered from 3M's Investor Relations page: http://phx.corporate-ir.net/phoenix.zhtml?c=80574&p=irol-stockquote

Follow 3M on Twitter and Facebook

Now it’s easier than ever to keep up-to-date on all the latest 3M news. Twitter is a rich source of instantly updated information, so it’s easy to stay current on new products, acquisitions, fun new product demonstrations and applications, and more on Twitter. Follow us on Twitter.

Facebook is great a way to keep in touch with friends and acquaintances, and you can also learn about your favorite products. Facebook pages provide easy access to information about a variety of well-known 3M products, including Post-it® Notes and Scotch® Tape. Find us on Facebook.

This blurb was taken from 3M's website at: http://solutions.3m.com/wps/portal/3M/en_US/Vikuiti1/BrandProducts/communication/newsletter/

Squid...Up Close and Personal

Thanks to 3M’s innovative technologies, the Smithsonian’s National Museum of Natural History has been able to safely preserve a 300-pound, 24 foot mysterious creature for all to see up close and personal. The squid is encompassed in approximately 1,000 gallons of Novec 7100 Engineered Fluid which was donated to the museum by 3M. The exhibit opened September 2008.

Read the full press release at: http://solutions.3m.com/3MContentRetrievalAPI/BlobServlet?locale=en_US&lmd=1219678742000&assetId=1180604131947&assetType=MMM_Image&blobAttribute=ImageFile

Also visit the Smithsonian’s website at: http://www.mnh.si.edu/exhibits/ocean_hall/index.html and The Giant Squid section at: http://www.mnh.si.edu/exhibits/ocean_hall/squid.html

The website also provides details regarding the preservation of specimens and the use of 3M’s Novec Engineered Fluids: http://www.mnh.si.edu/exhibits/ocean_hall/marine_life.html