Understanding Strategy in Innovation and technology oriented business Team members - MUPPANI PRUDHVI 2011C6PS665H SAKSHI KHANDELWAL 2012A1PS428H VALLEM VEENASRI 2012A1PS840H SURE SAI ABHISHEK 2012A3PS242h DURGA RAO GUNDU 2012A3PS255H
Jul 08, 2015
Understanding Strategy in Innovation and technology oriented business
Team members -
MUPPANI PRUDHVI 2011C6PS665H
SAKSHI KHANDELWAL 2012A1PS428H
VALLEM VEENASRI 2012A1PS840H
SURE SAI ABHISHEK 2012A3PS242h
DURGA RAO GUNDU 2012A3PS255H
What is innovation ???
Innovation is the process through which economic and social value is extracted from knowledge through the generation, development, and
implementation of ideas to produce new or improved strategies, capabilities, products, services, or processes.
Key topics of focus Developing and implementing innovation and technology strategies
Increasing organizations' capacity for innovation
Organizing innovation and research and development (R&D) effectively and efficiently using lean processes
Identifying, evaluating and exploiting new technologies
Setting up and supporting technology and innovation networks
Intellectual property: IP for innovation
IT support for R&D, technology and innovation management
3M is a diversified technology company serving customers and communities with innovative products and services. Each of our five businesses are committed to making our customers lives easier and better.
Mission Statement
“To solve unsolved innovatively”
The mission statement clearly states that the company is not just making and sellinginnovative products, but it is solving the customer needs in the most innovative way.It is this mission statement of 3M which helps in bringing the strategic objectives andspecific target performance
Vision Statement
3M Technology Advancing Every Company
3M Products Enhancing Every Home
3M Innovation Improving Every Life
ValuesAct with uncompromising honesty and integrity in everything we do.
Satisfy our customers with innovative technology and superior quality, value and service.
Provide our investors an attractive return through sustainable, global growth.
Respect our social and physical environment around the world.
Value and develop our employees' diverse talents, initiative and leadership.
Earn the admiration of all those associated with 3M worldwide.
Segmentation
Target Group Customers using industrial packaging
Industrial users of polymer and adhesives
Users of interior designing components
Pharmaceuticals
orthodontic practitioners
users of stationeries and homecare products
computers and TV manufacturers; enterprise, military, aerospace markets
PositioningCreativity and process Innovation in various fields
SWOT ANALYSISStrengths
Strong research and development capability with over 80,000 employees worldwide
Diversified business with over 55000 products in its portfolio
It has operations in over 65 countries and commands a strong brand name
Robust cash position and financially improving performance over the years
Its product reach through retailers and distributors is in nearly 200 countries
CSR activities for environmental benefits is a good way to enhance market position
WeaknessEnvironmental issues and litigations have sometime affected the image
Being a market leader, any mistake hurts the brand image world over
OpportunityAcquisitions to strengthen existing businesses
Automotive industry on road to recovery would mean more business
More global presence through tie-ups and diversification in businesses can lead to more growth
ThreatsUnfriendly environmental regulations and strict government policies can affect position
Intense competition can lead to loss of market share
Risks associated with conducting business outside the US
Sales of 3M
Porter’s Five forces Model
Industry Rivalry
Threat of New
Entrants
Power of buyers
Power of suppliers
Threat of Substitutes
Business DescriptionMAIN INDUSTRY
New Technology Development
6 SUB INDUSTRIES:
Health Care
Industrial and Transportation
Display and Graphics
Consumer and Office
Electro and Communications
Safety, Security, and Protection services
Threat of New EntrantsMain Industry LOW
As the Capital investment is very high most of the new entrants can’t afford such large amounts.
Sub Industries HIGH
As these industries are segmented industries other industries which are focused as well as well equipped firms will have a significant probability of entering the market which makes the intensity at high level for example a retailer may sell the product at relatively low price than 3M
Power of BuyersMain Industry LOW
Sub Industries LOW
As 3M produces innovative products the customers are ready to pay premium prices which makes the power of buyers low in both industrial cases.
Power of Suppliers
Main Industry LOW
As 3M provides a huge investment on R&D and also has a large possibility of buying raw materials from various suppliers the power of the suppliers here is low
Sub Industries LOW
As these industries are segmented industries it has various inlets from the suppliers which makes the power of suppliers here low
Threat of SubstitutesMain Industry LOW
Competition based on new product development
As 3M has the best innovation and provides expenses in R&D and there are few who do that at large scale the threat is low
Sub Industries HIGH
Competition based on Commercialization
As sub industries are segmented industries the local level retailers have a edge over the 3M as they can provide more focused products that satisfy customer needs so the threat of substitutes is high at the low level.
Intensity of RivalryMain Industry LOW
Sub Industries MODERATE
Competitors
Honeywell
General Electric
DuPont
Johnson & Johnson
Open Innovation at 3MIdea Generation Selection Execution Commercialization
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
IP
Lic
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sin
g
IN
IP
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Product
brought
to market
Te
ch
no
log
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Sp
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Develop
New ideasTe
ch
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Internal Analysis – Resource Based View
3M’s core competency and capabilities are due to its valuable tangible and intangible resources
3M has an excellent intangible resources which lead the company to scale greater height today
3M has a wonderful organizational culture which develops the innovative skills of an employee as well as entrepreneurship capabilities
The effective functional strategies help the firm to create best and innovative products
As there is a saying” innovation is distinguished from invention by the fact that innovation is usually applied successfully in practice.”
Intangible Resources of 3M
HUMAN CAPITAL
Professional Development
New skills and Knowledge
Commitment
Collaborativeness
ORGANIZATIONAL CAPITAL
Business Philosophy - ” Never kill a new idea, even if it looks like a foolish one”
Decision making and working style
Institutionalized knowledge
Intangible Resources of 3M
RELATIONAL CAPITAL
Company – Stakeholders Relationship & Trust
SYMBOLIC CAPITAL
Reliability
Trustworthiness
Image and reputation
Capabilities and Products
Core-Competency
We can consider that 3M’s entrepreneurial culture is its core competency, since 3M has been consistently heralded within both the scholarly and practitioner
communities as a model for entrepreneurial development.
Firms with entrepreneurial cultures out-perform their competitors which has five dimensions:
Autonomy – Employees are encouraged to make a business case to their proposal and compete for their share of organizational resources. 3M’s is often viewed in the academic literature as a good example of how autonomous employees can add value to a company.
Innovativeness – Management embraces the development of new products.
Proactiveness – Research and Development is a driving value within the organization
Competitive aggressiveness – The company is willing and sometimes eager to engage the competition.
Risk taking – There is a systematic internal process in place to delineate ideas from opportunities
3M’s ApproachENTREPRENEURIAL APPROACH
15 Percent Option
30 Percent Rule
Seed Capital
Tolerance for Failure
Rewards for Success
R&D Spending
DESCRIPTION
Certain employee encouraged to spend up to 15% of their work week initiating and developing projects of their choice.
30% of business unit revenue should come from products introduced within the last four years
Revenue provided for promising ideas
Failed projects will not negatively affect an employee’s job
Employees and departments receive financial rewards if their products reach sales goals.
3M spends 6-7% of sales on R&D investments
Value chain analysis Of 3M
Value chain analysis
Strategic decisions in the value chain
Resources Vertical integration
Economics of scale
Economics of scope
Location Linkages
Product design and development
↑(R&D)
_ _ ↑(R&D
management)
_ Marketingafter sales
Supply ↑(employees and
patents)
outsourced _ ↑(ideas)
_ Product design development
Operation _ outsourced _ _ ↑(as it is
outsourced)
Product designafter sales
Marketing and sales ↑ (promotional
activities)
both _ ↑(same website)
_ product design
development
After sales service ↔ _ _ _ _ product design
development
Human resources _ _ _ _ _ Operation
Infrastructure ↑(R&D enhances
IT)
_ _ _ _ Strong with all
Open Innovation at 3MIdea Generation Selection Execution Commercialization
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
IP
Lic
en
sin
g
IN
IP
Lic
en
sin
g
OU
T
Product
brought
to market
Te
ch
no
log
y
Sp
in-o
ffs
Develop
New ideasTe
ch
no
log
y
Lic
en
sin
g
IN
PRODUCTS & SERVICESOur inspiration comes from listening to customers and creating new products and solutions for the challenges and opportunities you face.
Displays & GraphicsWe’re a world leader in films that brighten the displays on electronic products, such as flat-panel computer monitors, cellular phones, PDAs, and LCD televisions.
Manufacturing & IndustryOur innovative products and services help manufacturers improve their businesses. With a global network, we meet needs of both multinational and local customers.
Electronics, Electrical & Communications3M is a leading supplier of innovative solutions to the electrical, electronics, and telecommunications industries.
OfficeWe continue to rejuvenate products for the office. An example of this is the Post-it® brand -- notes, flags, easel pads … today more than 1,000 Post-it® products are sold in more than 100 countries.
Safety, Security, and ProtectionWe produce products that increase the safety, security, and productivity of workers, facilities, and systems around the world.
Health Care3M Health Care is committed to providing the health care community with innovative solutions, based on 3M's diversified technologies, that help improve the quality of life.
Transportation IndustryWe provide high-quality abrasives, tapes, films, adhesives, and specialty materials for the manufacture, repair, and maintenance of autos, aircraft, boats, and other vehicles.
Home & LeisureSome of the world’s best-known consumer brands, Scotch®, Post-it®, Scotch-Brite®, and Scotchgard™, are household names. 3M people find ways to make life better and easier.
Operation From that factory, the work-in-process was shipped 600 more miles to Minneapolis, where a contractor applied the 3M logo and the WIP was sliced into the right sizes. From there, another 200 mile trip to a contractor that added the hooks and did the final packaging. 1300 miles of supply chain travel in total for a product that just sells for a few bucks
Linkages Also in developing products, researchers collaborate with Sales and Marketing to identify customer needs and then often to work with customers in the development process
Shop3M.com
usefulness of the features provided
convenience of the features on this site
number of clicks to get where you want on this site
how quickly pages load on this site
If you heard about this website from a social network, please specify the site (i.e. Facebook, Twitter)
Which best describes your role in visiting this site today?
Business level strategies
Market Segmentation
Market Segments
TransportationDisplay and Graphics
Health Care
Office Govt. Safety and security
Electrical Manufacturing and industry
Work and leisure
Cost leadership strategyAnother common business level strategy that the 3M Company is using is relative cost leadership not an absolute one.
It could be asked as a controversial question why 3M has no absolute cost leadership with this big size and global presence.
The answer is because the Company has a diversified business in at least six different areas and to be a cost leader in all of those markets is a big deal therefore, 3M has relatively low cost in any of the businesses .
Differentiation StrategyBeing the top most innovators in the world.. They follow some of the innovative strategies :
Rule of 15% : “At 3M we live by our wits”. Rule in R&D , to
spend 15% of lab time in research of your
choice. Increases innovation speed.
25/5 rule : financial strategic decision. 25% of the company
profits should come from products that are 5 years
old.
30/4 rule : 25/5 rule revised. Now 30% of the profits should
come from products 4 years old. Done to increase
innovation at faster speed.
7 percent rule : from every 1 dollar sales, 7% will be spent on
R&D . Which gives 28% more sales due to
large spending on R&D.
Awards and RecognitionsThe work of outstanding technical employees is recognised by the 3M Carlton Society, this is voted on by peers.
Employees that create products which sell $4 million or more are awarded the prestigious Golden Step Award
Employees have a choice to work on a management or laboratory career ladder, no employee is forced to take a management role if they don’t wish it
Focused DifferentiationAmerica Europe Middle East
& AfricaAsia & pacific
Strategic Groups3M being the leader in almost every industry, has some of the major competitors :
Mature Industry•3M is definitely in the Mature phase of industry life cycle. It launches products in various areas every year and also simultaneously remove the unwanted products in the market.
•Innovative Products : able to persuade consumers to pay for benefits. The ability to do so usually depends on the products they sell.•Brand loyalty : they have been working and giving innovative products back to back . Which has imbibed them as brand in minds of costumers.•Using IT and Internet : shop3M. com
Fragmented Industry turned to consolidated
Deter entry to rivalsProduct proliferation : being in almost every sector of the world like automation, electronics, healthcare, finance etc. It has filled all the niches available to it by launching diverse products in every area.
Maintain Excess capacity : To survive in industry, they need to produce in bulk. So they produce their products in bulk so as to prevent rivals to get a place in the industry.
Non- Price StrategiesProduct Development: involves creation of new products to existing markets. For eg: taking adhesives in manufacturing industry it started with masking tapes, spray adhesives, sealants and many other products.
Market Development : as an example focusing on adhesives in manufacturing industry, they diversified their products to sticky notes, glues which could be used by students and general public
Corporate Level Strategies
Corporate level strategy concerns how a diversified company intends to establish business position in different industries and the actions and approaches employed to
improve the performance of the group of businesses of the company
Decisions at Corporate level
Cross Business Fit of 3M
3M was Initially only into abrasive and tape business.
Slowly they started to make products from altogether different sector but the only common thing was all products needed innovation.
The common thing innovation acted as the fit for their business. Thus, 3M kept on increasing products into their product portfolio which required innovation.
To do this effectively they converted 3M into a diversified organization with 6 different divisions.
Size of diversification
3M didn’t diversify their business beyond certain limits. When they found that there were products which were not profitable, were not taken for research in their lab
center. Thus they limited their diversification into 6 major business classes.
Unrelated Diversification of 3MThe businesses in which 3M diversified were not related to each other in many ways but were common in certain aspects , i.e. all products made were made based on the needs of customers which were unmet and meeting those needs required innovation.
3M has 6 major businesses which are not related to each other.
They have different departments to take care of each unit.
The 6 businesses are further divided into more than 35 units which take care of different brands and product lines.
Geographic expansion
3M has vast a geographical expansion.
It operates in more than 65 countries having 75,000 employees worldwide and 6,700researchers contributing to the R&D of the company with their innovations.
Strengthen Position in Existing Business By 3M
3M strengthens its existing businesses by continuous innovation under the same product line which either adds some new feature to the product or changing the product to an extent that it meets some other specific need.
This decision is taken care of at the business level but the corporate policy is clear that there has been strengthening of the existing business.
Positioning in New Industry In 3M the decision of acquisition to enter a new industry is taken care at the business level and not at the corporate level.
This is because of the reason that 3M believes that no one can understand their business better than the division itself. And thus they know what acquisition they should go for.
The decision is strictly taken on the basis of whether 3M already owns the technology that the company they are going to acquire has. If the answer is no, they will go for the acquisition or else no
Diversification in weak and unattractive business
This decision, at 3M, is again taken at the division level. If the technology in certain business is out dated and is of no use to 3M they will divest in that business and go for a new one. This strategy helps them to think only about the new things to bring in and not to ponder over a business not looking good in future
Global Level Strategies Of 3M
LocalizationLocalization is The Key Strategy To Penetrate And Grow In International Markets
3M enters new international markets by exporting its products to that market.
it focuses on localization of the supply chain by using locally sourced raw materials, to manufacture products in local plants and selling through local distribution channels.
Identifying and developing products to cater to local requirements has also helped 3M increase its presence in global markets.
Efficiency By 3MConsolidated Supply Chains Help Increase Efficiency And Bring Down Costs
3M has deployed 'Supply Chain Centers of Excellence' globally to help consolidate and manage its supply chain with a regional focus rather than country by country.
promote better management of manufacturing & engineering activities and the distribution channels in a more effective way.
As a result, there are improvements in working capital requirements, overhead costs and tax rates.
Switzerland, Singapore and Panama that cater to EMEA, Asia-Pacific and the Americas respectively.
These centers have integrated and dedicated Enterprise Resource Planning solutions like SAP to maximize productivity and efficiency within the region.
3M in developing and developed Markets3M's Wide Range Enables It To Establish Presence In Developing And Developed Markets
3M has a wide range of products that can cater to every phase of a markets' economic growth.
Developing countries are more focused on infrastructural growth and manufacturing operations, whereas developed countries purchase more consumer and healthcare goods.
In 2012, developing markets contributed 39% to revenues in 3M's Industrial, Safety & Graphics, and Electronics & Energy Businesses, and 20% in the Consumer and Healthcare Businesses.
The bottom line Statement of 3M
“ Research is the transformation
of money into knowledge. “ “Innovation is the transformation
of knowledge into money.“
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