Order from us for quality, customized work in due time of your choice.
Introduction
Historically, the socio-economic development of any state is determined by the level of its scientific and technological development as a fundamental factor in the formation and development of the state’s economic potential. At the same time, scientific and technological development is defined as creating new knowledge and technologies based on scientific research with the subsequent transfer of the results obtained to the real economy for the development of innovative and high-tech production (Nambisan et al., 2017). Investors are now paying more and more attention to innovations that increase company profits and accelerate growth, which is the basis for creating competitive advantages.
An innovative business or an innovative project is always a risky but exciting endeavor. According to Michael Porter, leadership in innovation is one of the successful development strategies renowned strategic management guru (Saputra, Haryono, and Untoro, 2019). However, it is of particular importance to systematically and carefully calculate the risks of innovative projects. This paper deals with 3M – an American corporation is working in chemistry, industry, safety, and everyday goods (Meng, 2019). This company is associated with innovation since it has been steadily discovering new technologies since 1902 that allow the production of fundamentally new products (3M – About us, 2021). For example, the company pioneered photocopying and magnetic recording (3M – Timeline, 2021). It is believed that 3M’s merit lies not only in creativity but also in good management. This paper critically examines the role of innovation management and its supporting tools and techniques that underpin new product development. In addition, areas, systems, and processes are assessed that use project and program management to support the goals of a given company.
Critical Analysis
3M is committed to developing innovation. It should be noted that inspiration for new ideas does not lend itself to schedules and plans, but several techniques can increase the likelihood of a breakthrough idea. At a minimum, this fact can be facilitated by professional intuition, which, the higher, the deeper the specialist’s level of knowledge (Hong and Han, 2021). In addition, industrial innovation is invariably linked to scientific discovery. When mining substances, 3M has often synthesized breakthrough products that mark technological progress milestones (3M – About us, 2021). This fact is facilitated by several methods and approaches at once, reflecting the company’s orientation in the management of innovative projects.
First, it is the legacy and history of the company, which includes many similar discoveries. 3M tries to use its best sides, and many years of experience and longevity in the market have always been allies of large companies. However, according to the company, the experience category lies a little deeper. The core value of 3M is its employees and management’s approach to them (3M – Careers, 2021). People in the framework of work processes gain experience, synthesize new ideas from it, and gain exceptional skills, which are then shared with new employees. On the part of the management, all personnel receives certain freedom in matters of innovation and an appropriate attitude that meets the requirements of the corporate culture. All these factors together contribute to employees’ involvement in the company’s global affairs since any discovery can drastically change the world and satisfaction, as each employee is essential and appreciated by management.
On the part of the management in the project management, rather ambitious plans are set for each new product. These events cannot be called naive since most of them bring results. First of all, this tends to have 30% of sales of the company’s total turnover due to goods released in the last four years (Von Hippel, Thomke and Sonnack, 1999). Goals like these provide incentives for developers and senior managers to stimulate theoretical and ideological activity. Again, this approach’s strength is its many years of experience in application. This organizational process also keeps 3M out of their comfort zone, where they could come up with a hugely popular product and freeze R&D spending. However, such a scenario completely contradicts the company’s philosophy, which is not without reason, called one of the most innovative in the world.
In addition, the development of potential in a separate part of the work process rendered 15% of the total working time. During this period, employees work individually to share their new thoughts at the general meeting (Hiranto, 2018). Post-it notes were invented during this period (Karapapa, 2019). However, it is not enough to develop a new idea; implementing it is much more challenging. While many companies have the resources to try new products, not all want to expand their line or portfolio. 3M on this issue takes a much more democratic position of tolerance for failure (Smith, Treem, and Love, 2020). Indeed, the best way to try out a new product is to launch it directly into the market so that the critical decision about its relevance is made by consumers and not by management.
Organizational processes and management decisions also allow employees to form groups and separate companies when sales reach certain levels. The R&D management company offers close collaboration with researchers around the world. Approximately 6% of 3M’s revenues are invested in science, resulting in over three thousand patents every year (Morioka et al., 2017). There is practically not a single branch in science where 3M would not put its hand. At first glance, it may seem that quality may be lost before the quest for quantity. However, growing sales, even during a pandemic, continue to grow and refute this fact (Macrotrends, 2021). New product development (NPD) in this regard remains at the height of 3M.
This approach includes several key features. First, the methodology is designed for the long term, which, together with the company’s long history, gives more actual results for the long term. Secondly, this uses unusual combinations at the intersection of various sciences, which are not tested or ordered by other industrial companies. Finally, 3M raffles off many grants every year, thus encouraging scientific endeavors (Howell, 2017). The combination of these factors, with clearly defined goals and company philosophy, can confirm the success of NPD activities and serve as an example for other companies.
Considering that the segment of 3M’s activities is extensive and includes industry and transport, consumerism, security, electricity, communication technologies, and healthcare, there is also a broad segment of their consumers and competitors. The target group is represented by other industries and industries ordering specific packaging, polymer materials, and ordinary users of office supplies and home care products (Chang and Huang, 2017). Naturally, this also includes doctors of various disciplines if they use many technologies and developments of the company.
It is always difficult to assess the market of an international company due to the vast number of factors that affect the organization globally and locally. 3M has competitors in the form of General Electric, Honeywell, and Emerson. Intense struggles, coupled with political restrictions due to the pandemic or foreign actors, for example, in India, can become obstacles to development and a loss of market share (Masharu and Nasir, 2018). Environmental regulations, which are taking the environmental trend more and more seriously every day, can also unexpectedly interfere with producing good products. Moreover, the company already had image threats due to environmental litigation (Guenster and Koegst, 2018). However, the diversity of 3M’s activities is a weak side and a strong one: pointwise, each company’s product has a lower risk of impact in case of failure.
Opportunities for any sizeable international company always include diversification. Considering the philosophy of 3M, this approach is one of the most promising and is consonant with the company’s goals. However, it is almost impossible to plan for such an activity, given the creative nature of any discoveries and patents. In addition, the automotive industry is one of the most interdependent industries for 3M, where forecasted growth could be good news for the company (Bran, Bodislav, and Mitriţă, 2020). Finally, since 3M allows its subsidiaries to spin off, takeovers should also be considered in line with 3M’s philosophy.
The economic and financial performance of the company has been demonstrating stable growth for many years, even despite the crises of previous years. This fact means that the commercial stability of the company is ensured, taking into account the approaches in business that are pretty risky for the traditional presentation. In turn, the technological viability of 3M is at an even higher level. First, the company’s scientific achievements have been recorded for over a hundred years. Perhaps not all of them survived to the present day, mainly due to the company’s approach, and not all of them were breakthroughs at the level of Microsoft’s discoveries. However, having practically worked with such a massive amount of material, 3M has undoubtedly amassed a knowledge base that gives it an edge over the many companies in the market. Secondly, the company did not limit itself to materials science: the study of physical processes, information technology also gives its fruits in the form of various patents that are used for the benefit of society or within the framework of any production.
A company’s strategy more explicitly reflects its goals. First, the three main vectors of the company’s activities include society, circular, and climate: any scientific activity or achievement must benefit one of the three directions (3M – Strategy, 2021). The 2025 plan also includes a transition to fully renewable energy and an ecological approach to developing any new product (3M – Strategy, 2021). Thus, the recycling of materials will become the engine of technological progress around the world. Activities for the good of society meet the requirements of the company’s social responsibility, which, together with a humane approach to its employees, only confirms this type of responsibility. Finally, previous bad experiences of environmental collisions must be addressed through new approaches focused on climate, renewable energy, and sustainable new product development methods. Environmental responsibility is now as much a necessary part of a company’s reputation as social responsibility, which is why its requirements must be observed. Considering that the company’s activities are always aimed at the future, the importance of this type of responsibility increases several times.
The collision of business model innovation and technical competence is almost certainly closely intertwined with its components. First, a company that has worked primarily with technology for such a long time has an extremely high level of competence that many employees develop professional intuition that allows for radical changes in the business model. Second, by dividing the activities of a company down to the production of each product, it can be seen that the scale of business model innovation matters. The company’s philosophy is focused on constant change, and therefore the innovation of business models at the lower levels is at the heart of the organization. However, the underlying business model, which dictates a change in each sector, does not change for some reason. First, it has proven itself well over more than a century of history. Secondly, this model allows the company to stay afloat today and stimulates new actions.
When evaluating 3M according to the risk-reward system, one can notice the dual nature of this assessment. On the one hand, the company tries to update its product line every year, exclusively expanding the portfolio. In addition, 3M relies on new products, increasing their sales rates, and focusing on their novelty. Such frequent product updates do not guarantee successful sales in the coming period, so the risk of investing is always there. Nevertheless, investments in the company are growing exceptionally, given a reasonably stable situation in terms of other financial indicators, such as net profit and turnover (Macrotrends, 2021). 3M lacks stars from the sky, but its stability, unshakable by the pandemic and crisis in the late 2000s, really justifies the risks of investing in the company.
Moreover, scientific discoveries openly focused on environmental trends attract investors regardless of their success and further application. In this case, investments are not made for profit but the future of the environment. Given the company’s creative nature and its environmental responsibility statements, the investment target is attractive in this situation.
New product development in various fields, as a rule, goes through traditional procedures of verification and implementation. In medicine, this is additional research in laboratory and clinical conditions; in the case of industry or manufacturing, it is economic research for changes in technological processes. In many ways, these processes depend on consumers; 3M only focuses on these procedures to facilitate entry into the required market. Freedom of inspiration and the creation of new ideas after their processing take a convenient form for the end-user. Taking on this activity, 3M has earned an appropriate attitude towards itself for high-quality service and a guarantee of the uniqueness of this or that product or service.
Goal Support Systems and Processes
If the products under development by 3M had only scientific interest, the company would not have lasted so long and now would no longer exist. Naturally, the achievements entering the market should have practical applications that the end consumer will be willing to pay. 3M faced a similar crisis in the early 2000s; however, a series of actions to reorient and create cross-functional teams helped get out of the crisis (Lee and Ahn, 2018). First, a more effective and productive contact was established between scientists in 3M laboratories and marketers, describing the main interests of the market and the possibilities of scientific activity. Secondly, the cross-functional teams created in the company meant the need to keep duplicate records of people from different departments of 3M (Lee and Ahn, 2018). Technological production of products focuses on ideal quality, allowing for a defect of no more than a fraction of a percent. It is noteworthy that this approach uses a strong focus on data, not on intuition. Consequently, intuitive techniques are applied when creating a product, while when manufacturing it, they are entirely excluded from the workflow.
Leadership plays a vital role at 3M. The Six Sigma approach, which has been used with great success in many companies, reflects the basic principles of leadership in the organization: “chart the course; energize and inspire others; demonstrate ethics, integrity, and compliance; deliver results; raise the bar; and innovate resourcefully” (Alosani, Yusoff and Alansi, 2018). These aspects demonstrate at once several qualities of a leader in a given company. First, the leadership is focused on bringing any business to an end, implying the transition to innovation. This fact is confirmed by the company’s democratic policy towards failure. Second, leadership within the company supports the dual nature of the entire innovation development process. Leadership first energizes and inspires to create a new idea using intuitive methods, then requires decency and adherence to processes that exclude any emotional interference. Against the background of ethics, demonstration of results, the constant raising of the bar, and a culture of constant changes in various business models, the company maintains its reputation and leading position in the market.
Supporting a company’s three-pronged strategy also occurs in three different ways. Products manufactured for the good of society increase the company’s social reputation and bring it closer to the end-user in the form of an ordinary buyer and not an entire military organization or industry. Closer contact always implies better feedback and a better understanding of the needs of the community. As a result, the financial performance in this segment is improving. Concerning development for the benefit of the climate, the financial proceeds are not always an indicator of the project’s success. Recognition by the scientific community or the authorities and activists of a given company as an active environmentalist creates the most critical advertisement for 3M in the modern world. Compliance with environmental responsibility requirements is an unspoken prerequisite for a large company’s success and high reputation. Finally, inventions for the benefit of processing are best at improving the economy, both within the enterprise and at the national level.
The company itself openly dictates corporate venturing at 3M. First, the company collaborates with entrepreneurs and start-ups in the most promising areas: smart infrastructure, healthcare, digitalization, and modern materials science (3M – Ventures, 2021). Secondly, a distinctive feature of the company is that 3M is looking for a strong connection between its future partners and customers. In other words, for collaboration and enterprise creation, the partner must provide a firm idea of their intellectual property, a scalable business model, and a track record of the management team (3M – Ventures, 2021). As a result, 3M acts as a platform for bringing innovative ideas to life, thanks to its many years of experience.
As a business example, we will take the 3M ™ 360 Encompass system, which is used for computer coding of information, mainly in hospitals (3M™ 360 Encompass™ System for computer-assisted coding, 2021). On the one hand, this software provides a complex; on the other – an easy-to-learn solution for patient data analytics and various necessary functionality. Stakeholders are various hospitals that have successfully implemented this system. Its advantage turned out to be that there was an acute shortage of programmers in medical institutions capable of understanding new technologies encompassing medicine at the time of its graduation. The ease of use of this software and the flexible functionality that provides various monitoring and reporting systems relieved the burden of medical personnel, allowing them not to be distracted by such work processes.
Using project scheduling techniques such as PERT is only possible at certain stages of product creation in a given organization. The process of creating and developing ideas does not lend itself to timetables, as inspiration, even based on professional intuition, cannot be made to work by the clock. Moreover, in individual and collective work on ideas, and utterly uneven trend of effectiveness prevails. In an hour, one can come up with an ingenious approach that allows the development of hundreds of ideas with the same probability as falling into a crisis and not coming up with anything in a year. Of course, the company sets quantitative targets to drive new product development, but the new product category for such crises is four years old, giving room and timeout for discoveries. Accordingly, PERT can be applied at stages devoid of unpredictable processes: after product approval, production and market entry, logistics and marketing, and much more. The uniqueness of each new product requires uniqueness in the PERT methodology, accumulating statistics and making it possible to classify new developments further and predict the time for their implementation or entry into a particular market.
PEST for strategic planning is significant for any company’s development. Political factors can negatively affect frequent changes in the authorities’ activities, which in turn can cause environmental instability. 3M are strongly tied to natural materials and their extraction, and therefore, they require comfortable working conditions in a particular area. Taxation is also a somewhat important factor in 3M’s location in any country. In addition, bureaucratic processes for an innovative company are a significant obstacle that slows down various essential procedures.
One can single out high requirements for personnel and low dependence on inflation and unemployment among economic factors. 3M is an international company, which gives it an advantage over local companies in the talent search. If local companies, due to the difficult economic situation, cannot afford an expensive specialist, 3M does not depend so much on the specific situation in the country.
Social factors can include demographics, power distance, and different properties of market segments. The company is focused not only on each person but also on other organizations in general, which is why it is necessary to build behavioral models in analyzing market segmentation at a discount on the groups and interests of individual companies. Considering the company’s innovative policy and value policy, 3M’s social responsibility is at a high level, which gives a high reputation in the eyes of consumers.
Finally, technology is the cornerstone of modern 3M developments. Innovation must be timely and relevant, and therefore the company must master and continue to develop rapid marketing. The most promising platforms for this event: are social networks, and contextual advertising. Staying ahead of competitors is the essence of the company’s philosophy, supported by incentives to save 30% of total sales through new products alone. Strategic decisions within a company must be based on PEST analysis, regardless of the new product industry.
The theory of constraints, like the PERT method, can be applied within 3M only at certain stages of the production of goods. First, it is not in the company’s interest to limit the extraction of materials according to sales figures since the extracted materials can be used to develop an innovation, a new product currently in development. Secondly, on the other hand, the theory of constraints presupposes the use of a sufficiently large number of thought processes that involve the search for and removal of constraints. Consequently, the management of the constraints of a single project is ultimately left to the shoulders of the management, although the reasons for this or that activity lie in the plane of general discussions of all those involved in the development of the project. While the company has been using its current approach for many years, not all business processes have likely been perfected. Given the rapid development of technology and current trends, 3M needs to occasionally apply the theory of constraints to prevent the used business models.
An indicator such as the total cost of ownership shows the total value of the target costs over all periods of the ownership life cycle. Concerning patent activities, on average, 3M spends about 15 thousand dollars per patent (Murthy, 2017). However, in the future, this practice only brings income, which is why the financial indicators of assets in the company grow annually, although not by more indicators (Macrotrends, 2021). It is explained that revenue and net income retain their positions every year and do not proliferate. This fact is explained by the company’s policy, which requires updating the product lines annually.
3M is considered a well-established business with a long market success history. This type of company is not distinguished by the high CAPEX and OPEX rates typical of growing companies like Amazon (Sadq, Sabir & Saeed, 2018). As a result, growing companies maintain a relatively low level of dividends for investors. 3M belongs to the category of organizations with low CAPEX and OPEX indicators and relatively high dividends indicators. These companies are suitable for investors who want to make their profits now and are focused on stability since, in the case of growing companies, they postpone their profits for the long term.
Sharing knowledge is an essential component in this kind of company. As a result, the absence or deficiency of this category leads to a lack of innovation, inconsistent work of departments, slowing down the decision-making process, and repetition of mistakes. 3M uses innovation in everything except its core fundamental approach, which is inherently focused on innovation. By creating new technologies at the intersection of various fields of activity, the company ensures well-established communication between departments. With the high pace of work and the need to register and patent new products that should break into the market and generate income, there is no place for delays in the decision-making process. Therefore, pooling risks as a result of teamwork between departments is an appropriate process for ensuring the financial sustainability of projects.
Cost-benefit analysis in project management is a robust risk assessment tool before starting a project. However, in 3M, this type of analysis is more straightforward, allowing dubious products to be produced at first glance. The company encourages new ideas and uses many resources to launch a wide variety of projects. Learning from mistakes, the company gains valuable experience and identifies the problems of a specific project through the prism of which it better understands the needs of end-users.
NPV for money flow is also one of the most vital tools for identifying investment projects. In the necessary context, this approach allows for calculating various scenarios and assessing the risks for the project’s future. As a rule, 3M projects are capital-intensive and labor-intensive, but such projects are preferred by investors since the earliest possible net profit is not a priority in this context (Macrotrends, 2021). With a sufficiently high discount rate, most projects on this assessment in 3M will show negative values since often the project has scientific, environmental, and other experimental goals. A loyal project development policy makes mistakes during the development of projects that do not carry critical risks given the company’s resources.
Conclusion
For many years, 3M has been implementing an approach that is quite unusual for the traditional understanding of doing business, which has bore fruit and kept the company in the leading market positions for more than a hundred years. Employees who are the principal value of the company stand behind this approach. Absolutely all components and departments of the business comply with the philosophy and give a result demonstrated by the company’s financial performance and the number of patents per year. The very nature of the company’s activities is always associated with significant risks, especially given their loyalty to the launch of projects. However, a long history and maintaining a solid position in the global market demonstrate its ability to cope with such risks. The very organizational structure and built systems help the company benefit from cooperation with partners and researchers, projects that are not tailored for a quick profit, and even unsuccessful projects, followed by discussion rather than punishment of delinquent employees.
Reference List
3M – About us (2021).
3M™ 360 Encompass™ System for computer-assisted coding (2021).
Alosani, M. S., Yusoff, R. Z., & Alansi, A. M. (2018) “The effect of Six Sigma on organizational performance: the mediating role of innovation culture”, Journal of Advanced Research Design, 47(1), pp. 17-28.
Bran, F., Bodislav, D. A., & Mitriţă, M. A. (2020) “The Age of Automatization and the Evolution of Globalization” In SHS Web of Conferences (Vol. 74, p. 02002). EDP Sciences.
Chang, C. C., & Huang, L. (2019) “How could business culture motivate enterprise innovation” In Engineering Innovation and Design (pp. 442-446). CRC Press.
Guenster, N., & Koegst, J. (2018) “Environmental responsibility and firm value” In Green Crimes and Dirty Money (pp. 113-128). Routledge.
Hiranto, P. (2018) “The Comparison Between 3M Company and US Steel Corporation”. Available at SSRN 3103898.
Hong, H. K., & Han, G. S. (2021) “The influence of ethical propensity on dental hygiene professional intuition and ethical competency”, Journal of Korean Society of Dental Hygiene, 21(3), pp. 301-310.
Howell, S. T. (2017) “Financing innovation: Evidence from R&D grants”, American Economic Review, 107(4), pp. 1136-64.
Karapapa, S. (2019) “40 Post-it Note”, A History of Intellectual Property in 50 Objects, 329.
Lee, K., & Ahn, J. M. (2018) “The impacts of cross-functional team on innovation performance and openness” In DRUID Academy Conference.
Macrotrends. (2021) 3M Financial Statements 2005-2021.
Masharu, U., & Nasir, M. A. (2018) “Policy of foreign direct investment liberalization in India: implications for retail sector”, International Review of Economics, 65(4), pp. 465-487.
Meng, Z. (2019) “Analysis on 3M Company’s Core Corporate Culture and Its Enlightenment”, Shanxi Science and Technology, 04, pp. 1-13.
Morioka, T., et al. (2017) “R&D of 3M Technologies towards the Realization of Exabit/s Optical Communications”, IEICE Transactions on Communications, 100(9), pp. 1707-1715.
Murthy, J. J. (2017) “Managing Innovation and exploring its impact on a Patent Portfolio”, NMIMS Journal of Economics and Public Policy, 2, pp. 37-43.
Nambisan, S., et al. (2017) “Digital Innovation Management: Reinventing innovation management research in a digital world”, MIS Quarterly, 41(1).
Sadq, Z. M., Sabir, H. N., & Saeed, V. S. H. (2018) “Analyzing the Amazon success strategies”, Journal of Process Management. New Technologies, 6(4).
Saputra, A. R. P., Haryono, T., & Untoro, W. (2019) “Green Products Strategy Impact of Generic Porter Strategy on Company’s Performance”, International Review of Management and Marketing, 9(1), pp. 52-53.
Smith, W. R., Treem, J., & Love, B. (2020) “When Failure is the Only Option: How Communicative Framing Resources Organizational Innovation”, International Journal of Business Communication, pp. 1-20.
Von Hippel, E., Thomke, S., & Sonnack, M. (1999) “Creating breakthroughs at 3M”, Harvard Business Review, 77, pp. 47-57.
Order from us for quality, customized work in due time of your choice.