MTI 3M Optical Systems: Managing Corporate Entrepreneurship

Anto Abraham 073 Arpit Rastogi 077 Ritesh Jain 112 Sandeep Tripathy 114 Shalina Bhatia 119 Arun Ravindran 138

Suman Saha 245 Shikha Gupta 300 Suja Barua 306 Suseendran 308 Vishal Gagrai 316

Founded in year 1902 Business was highly diversified Sales of $14 billion 3900 profit centers, 47 divisions and

operations across 57 countries Andy Wong – manager of Optical

Systems Target:- 25% sales from

last 5 years product

30% sales from last 5 years

product

Wong faced the problem of getting the

expenditure sanctioned from the senior management

Various layers in the approval

process

Optical Systems has been losing

money since 1979 as a business unit

Started as a mining company and then shifted to sandpapers

Two basic products –

Large R&D infrastructure was developed and 6-7% of sales were incurred on R&D

Implementation of the “15% Rule” Company had the objective of a 10% sales

growth and each business unit was expected to contribute to that

Waterproof Sandpaper

Adhesive Tape

Operations became more globalized

As a result the management was more centralized and disciplined

After 1986 Alan Jacobson took over as the CEO

The traditional approach changed into a more technology driven approach and more of financial commitments were made

In 1991 DeSimone took over as the CEO

Focus was on the new innovations which was 3M’s legacy

Optical system business unit developed in 1979

Main objective was to exploit the light control film

The optical microlouver technology was expected not to meet the targets

Hence this was collated with other optical technologies

In spite of that the unit was losing money at a rate of $3-$5 million every year

Downsizing in terms of financial commitments were made

Focus shifted more towards developing a core technology and unique competencies

Presently more focus was on new inventions rather on operation realities

Hence a three year manufacturing strategy was developed

Manufacturing costs b/w 1987-90 were expected to come down by 50%

The OS unit was merged with SSSD

Process Streamlining

Process Streamlining

Extrusion Process

Main challenge was to address the declining sales volume

No new applications were developed to replace the od ones

Three Initiatives taken by Wong –

From Ammunition to Aiming Device

Tightening the Standards

Testing the Business

Need to capture more external opportunities by using the internal assets

As a result Wong needed a marketing manager

Rob Noirjean joined as marketing manager in 1990

Major potential markets were identified – for e.g. Museum lighting, ATM, Government computing etc

Each segment had some problems – as a result Rob identified a new segment as the “corporate computing”

Corporate computing opportunity

Computer privacy filter for general office applications

An entirely new market segment

Sell through computer supply distributers

Pricing strategy

Retail price to be $140

100% mark up for distributers

Sales reached $10,000 in the first month

Growth stalled due to two basic problems:

- Requirement of different sizes of screens

- Perceived value of the screen costing

over $100

Screen created an uncomfortable glare

The new multiprotection filter : -Reposition to Antiglare filter -Total market potential of $32.7 million -CAGR of 20.3%

Hurdles Way forward

Development of the product concept

Feasibility Assessment

Development of Business Plan

Implementation of the plan

Antiglare filter market estimated to become $70 million by 1991, growing at 20 % annually

Four major players in antiglare filter market Acco

▪ Strong supplier to office supply market, have good channel access

▪ Market share of 14%

Polaroid ▪ Sell low cost plastic filters to both computer and office supply distributers

▪ Market share of 10%

Fellowes ▪ Strong supplier to office supply channel, don’t have privacy feature

▪ Market share of 13%

Optical Coating Laboratories ▪ Market leader with 37% market share

▪ Doesn’t have a privacy filter and distribution position

3M’s Advantage over its competitors

Unique privacy filter feature

Distribution channel to office supplies through COSD & DSMD

Additional features

Electrically conductive coating which would prevent dust buildup on the screen

Block E field electromagnetic radiation

Two development subteams were formed

One to explore the feasibility of glass specification

Other to explore the feasibility of screen frame

Developed a proprietary process for laminating coated glass with microlouver film

Designed an inexpensive frame with all the competitor’s features

Derive the cost estimates and sales forecasts to the product concepts and design parameters

Development of risk assessments – categorizing the various elements into various risk zones and building mitigation plans

Forecasted a sale of $1 million in first six months – faced a good deal of skepticism

1. Postpone or reject the proposal 2. Try to fund it within the unit

Outsource a standard frame

Cut inventory

Take incremental approach

3. Try to get divisional funding 4. Take the proposal to one of the mentors

Arguments (For)

Comment Argument Strength

2 previous market failures

Counter-argument •Product has been transformed, after analyzing the market and identifying an unmet need •Exploratory nature of R&D – high risk, high return – 3M has been allowing several years of research (e.g. post-it notes)

Financial viability questionable , over-optimistic forecasts

Support-argument Price Distributor prices of similar products •Anti-glare screen: $40.77; Anti-glare + anti radiation + glass: $54 ( Average over all such products available in the market) •Distributor price for multi-purpose filter = $79

Sales (quantity) – There is no basis given in the case for such optimistic sales (apart from the project team’s belief) More realistic estimates of price and sales need to be figured out.

Incremental approach + operational measures

Arguments Comment (Support-argument) Argument Strength

(Against) Slow process -> fear of losing market share to competitors

Sumitomo Chemical may launch a similar product (though not as good as the one from 3M)

(Against) More costly to acquire resource on its own

- -

Arguments (For) Comment (Counter-argument)

Argument Strength

Less costly to access existing resources rather than trying to acquiring them on its own

Hard to convince and get support from top management as well as managers of other divisions, given the history

Arguments Comment (Counter-argument)

Argument Strength

(For) Personal contacts can be leveraged to get top management support

•It is essential to get support from other divisions like COSD and DSMD, so top management support will not suffice •Mentor will be conscious in approving the project due to profitability concerns

Better forecasts

Conduct market research to find out the appropriate price premium and expected sales

Build a stronger business case, backed by realistic data

Stronger case will help the unit to get support from other divisional managers and top-management

OS had low credibility

Situation in OS contrasted sharply with other divisions nominated to the Pacing Program

Wong championing two risky proposals Privacy screen

Brightness enhancement product

Wong’s personal evaluations

Paul Guehler

Empower to identify

opportunities

Encourage and nurture

innovativeness

Set standards for performance

Balance between performance and

support

Approve More disciplined approach (3-phase review passed)

Highly Committed team

Funding relatively low ($750K)

Future of OS Unit at stake (promising project in pipeline)

Reject Two previously unsuccessful launches

Ideal time for a harvest strategy

Other managers in div. highly skeptical

2 of 4 BU’s in SSSD nominated for the Pacing Program

OS losing $3 mn on sales of $10 mn

How does Wong's effort fit within the 3M culture in 1992?

• Andy Wong joined the OS division in 1984

• The unit was losing $3 to $5 million per year & morale was low due to downsizing

Scenario

• Identified micro replication as the core technology of the unit

• Used formal & informal channels to recruit specialists

• Streamlined processes and emphasized operating realities

• Developed a manufacturing strategy that reduced costs by 50% and increased quality

Actions

• Wong took over as the business manager in 1989

• Current products were deemphasized since they were not profitable

Scenario

• Recognized that they had “the ammunition” but not “an aiming device”

• Sought a professional marketing manager to address the situation and was asked to give up a technical position in exchange

• Hired Rob Noirjean through internal recruitment to focus the technology on the right products

Wong’s Actions

• Paul Guehler replaced Rob Mitsch as divisional vice president

• Threatening & disciplined environment

• ‘Give and Take strategy’

• Reduced resource allocation

• Focus on 3 opportunities

• Computer filters

• Electronic display enhancement

• Automotive optics

• Wong’s personal evaluations had been low for the past 3 years

Scenario

• Four main responsibilities

• Attract & retain good people

• Build motivation & commitment

• Ensure progress towards objective

• Earn support of top management

• Adopted a 4 phased development approach

• Drew in experts from various divisions and did more with less

• Continued to support the privacy screen proposal & another risky project for electronic display enhancement

Wong’s Actions

Changing management style – more efficiency and profit driven (short-term) against traditional growth-driven style

Difficult targets for all business units, irrespective of their state in maturity cycle

Paradox of exploitative and explorative efforts (efficiency vs. innovation)

Solution – ambidextrous organization

Different set of rules for difference business units depending upon their position in maturity cycle

Technology Drivers

High Focus on Innovation

Portfolio of large number of products

25% of sales from last 5 years’ products

R&D 6-7% of sales

“Pacing Program”

Organizational Culture

Employees devote 15% time on non-program activities

Products belong to divisions but technology to the company

Extensive informal networks

Cross-divisional transfers

The 3M growth process

Extensive Management Support Commitment not to damage careers of project

champions

Balance between discipline and flexibility

Committed to create an entrepreneurial environment

Creative Developments

Project Teams Departments Divisions

Feature Comment Transferable

High Focus on Innovation

-A strong Innovation focus can be developed - Increased R&D spending

Yes

Organizational Culture

-Difficult to replicate the strong informal, cross-divisional network - Huge amount of time needed to develop a strong organizational culture

No

3M Growth

Process

- Unique process Difficult

Extensive Management Support

-Leaders with an uncanny ability to identify creative projects that can add value

Yes