ICMR Case Collection

ICFAI Center for Management Research

This case was written by K. Subhadra, under the direction of Sanjib Dutta, ICFAI Center for Management
Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class
discussion rather than to illustrate either effective or ineffective handling of a management situation.










3M's Organizational Culture
HR0B 022
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This case was written by Subhadra. K under the direction of Sanjib Dutta, ICFAI Center for Management Research
(ICMR).
! 2003, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any formor by any means electronic or mechanical, without
permission.

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HROB/022


3Ms ORGANIZATIONAL CULTURE
3M! No doubt about it. You never know what theyre going to come up with next. The beauty of it
is that they probably dont know what theyre going to come up with next, either. But even though
you never predict what exactly the company will do, you know that it will continue to be
successful.
- Bill Hewlett, Founder of HP, commenting on the company he admired most.
1

My job is to add scale in a fast-moving, entrepreneurial environment. If I end up killing that
entrepreneurial spirit. I will have failed.
- James McNerney, CEO, 3M in January 2002.
2

There is a change in culture, and it is cause for concern.
- Arthur Fry, inventor Post-it Notes, in June 2002 commenting on culture overhaul at 3M.
3

In a company that's really driven by creative thinkers - how do you do Six Sigma and creativity?
You can't. And if you force that model on an organization, you're just bound to make it moribund.
- Ryan Mathews, business consultant and critic of Six Sigma management, in June 2002.
4

ONE HUNDRED YEARS OF SUCCESSFUL INNOVATION
It was celebration time at 3M! The company completed 100 years in business in 2002. For many,
3M represented the house of innovation (Refer Exhibit I). For 100 years, 3M formula for growth
recruit the right people, provide them with the right environment to work and let them do their
things resulted in around 55,000 products and over thousands of patents for the company
Analysts attributed 3Ms success to its commitment to innovation. They pointed out that 3M gave
its employees the freedom to conduct research in areas of their choice even if that research was not
related to their official projects. By thus nurturing the talents of its employees and fostering a
climate of innovation, 3M became one of the most innovative companies in the world.

1
James C. Collins and Jerry I. Porras, Built to Last, (Harper Business, 1997, First edition)

2
3M: A Lab For Growth?, BusinessWeek, January 21, 2002.

3
3M at 100 - On the Right Path for Growth? www.news.mpr.org, June 10, 2002.

4
3M at 100 - On the Right Path for Growth? www.news.mpr.org, June 10, 2002






3Ms Organizational Culture


3
In 2001, James McNerney Jr. (McNerney) took over as Chairman and CEO of 3M and announced
several initiatives to revive the stagnating growth rate of the company. He initiated cost cutting
measures, rationalized purchases, and implemented process improvement programs in the
company. He gave a centralized direction to the company from its earlier laissez-faire working
style.

Analysts cautioned that the changes brought about by McNerney might harm the 100-year old
culture at 3M that fostered innovation and sustained its growth over the years. However,
McNerney pointed out that the changes brought about in 3M would provide the company a
strategic direction in a volatile business environment without harming its organizational culture.

INVENTING 3M

In 1902, five businessmen founded Minnesota Mining and Manufacturing (popularly referred to as
3M) in Two Harbors, US. The new company was in the business of mining corundum, a mineral
best suited for making sandpaper and grinding wheels. In 1904, when an artificial abrasive
replaced corundum, 3M decided to manufacture sandpaper.

Edgar Ober (Ober), one of the founding members of 3M, approached his friend Lucius Ordway
(Ordway), a successful businessman for funds for the new venture. Ordway agreed to invest
$25,000 in the company, on condition that he wont be involved in the day-to-day affairs of the
company. However, by 1906, Ordway had invested around $200,000 in 3M and had become
involved in the day-to-day affairs of the company. In the same year he became the President of the
company.

When 3M realized that the corundum owned by it was a low-grade anorthosite, it decided to shut
down the mine and shift to Duluth in 1905. In the same year, 3M decided to import garnet
5
from
Spain. 3M received its first shipment of garnet in 1907 and started producing sandpaper. By 1911,
3M reported sales of $212, 898 and in the same year Ober appointed William L. McKnight
(McKnight), who joined the company in 1907 as assistant bookkeeper as sales manager.

In 1911, 3M brought out its first breakthrough product, Three-M-ite cloth. Three-M-ite became the
companys first profitable product. The Carborundum Company, which had developed artificial
abrasive coated emery cloth before 3M, filed a patent infringement suit against the company. 3M
hired Paul Carpenter, a Chicago based lawyer and expert in patent law, and won the case against
Carborundum. Due to Three-M-ites success, 3M became debt free and announced its first
dividend of 6 cents per share in 1916. In the same year, McKnight became vice-president.

In the 1920s, 3M recruited people with diverse backgrounds and expanded its product portfolio. It
also introduced two breakthrough products, waterproof sandpaper and Scotch masking tape,
invented by Francis Okie (Okie) and Dick Drew (Drew) respectively. In 1922, 3M entered the
English market and reported sales of $68,000 in the first year of its operations. In order to
consolidate its presence in global markets, 3M established research laboratories, and a sales and
marketing network across Europe.

In the 1930s, the global economy was in a state of recession. In spite of the recession, 3M
continued to expand its operations, and by 1936, its sales reached $10 million. The decade also
saw the launch of some more breakthrough products. 3M launched Scotch Cellophane tape in
1930, reflective tape coated with glass beads in 1937, and Scotchlite reflective sheeting in 1938.

5
Abrasive mineral used for making sand paper.

3Ms Organizational Culture


4
In 1937, 3M established a central research laboratory with the twin objectives of working on
product refinements and exploring new product ideas. In 1940, McKnight established the Product
Department to speed up product launches. In the same year, 3M decided to invest 5% of its sales in
R&D every year to encourage the development of new products.

In 1946, 3M got listed on the New York Stock Exchange. And in 1947, it launched Scotch
magnetic audiotape. In the same year, it opened new plants in Hutchinson, Los Angeles, and Little
Rock. In 1951, 3M established its international division to oversee its international operations. In
the same year, international sales touched $20 million. In the 1960s, 3M established manufacturing
plants in Austria, Columbia, Denmark, Hong Kong and Norway. Its international sales reached
$136 million in 1961. In 1965, 3Ms total sales exceeded $1 billion.

In the 1970s and 1980s, 3M diversified into various areas such as medical products,
pharmaceuticals, radiology, energy control, the office market etc. In 1980, 3M introduced one of
its most successful products, Post it Notes. Throughout the 1990s 3M focused on exploring new
technologies and maintaining its pace of growth. In 1994 3M implemented the Pacing Plus
program to speed up product development. Under this program, the companys top executives
selected some products in the research stage that had the potential to become commercially
successful. The selected products were given additional financial and technical support to speed up
their commercialization. In 1995, 3M introduced the first metered dose asthma inhaler. In 1999,
3M was organized into six business segments Industrial, Transportation, Graphics and Safety,
Health Care, Consumer and Office, Electro and Communications, and Specialty Material to
increase the pace of growth.

By 2002, 3M had a presence in 60 countries and its products were sold in around 200 countries
(Refer Table I). Its total sales amounted to $16.332 billion (Refer Exhibit II), of which
international sales represented around 55% ($8.906 billion). It had more than 55,000 products in
its product portfolio and, according to reports, it applied for over 500 patents every year.

TABLE I
3Ms INTERNATIONAL PRESENCE*
CONTINENT COUNTRIES
ASIA China, Hong Kong, India, Indonesia, Israel, Japan, Korea,
Malaysia, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan,
Thailand, Vietnam, United Arab Emirates, Turkey
AFRICA Egypt, Kenya, Morocco, South Africa, Zimbabwe
EUROPE Austria, Belgium, Denmark, Finland, France, Greece, Germany,
Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal,
Romania, Russia, Spain, Sweden, Switzerland, United Kingdom
NORTH AMERICA Canada, Mexico
SOUTH AMERICA Chile, Colombia, Argentina, Brazil, Ecuador, El Salvador,
Panama, Peru, Puerto Rico, Uruguay, Venezuela
* This list is not exhaustive
Source: www.3m.com
3Ms Organizational Culture


5
FOSTERING INNOVATION
From its early days, 3M fostered a culture of innovation in its organization. McKnight tried to
create an organization that would encourage its employees to take the initiative and come up with
new ideas. He even laid down principles for fostering such a culture at 3M (Refer Table II).

3Ms culture of innovation got a new direction when three young men Carlton, Okie and Drew
joined the company in the early 1920s. The trio changed the working environment at 3M. Many
analysts agree that these three set the tone of innovation at 3M. In the early 1920s, Drew took
Okies waterproof sandpaper to garages for product testing. During his visits to garages, he noticed
that painters faced a problem when painting cars: either the paint came off when the tape
protecting a portion of the car was removed or the tapes adhesive remained on the cars surface.
Drew started experimenting to produce an adhesive that would not stick on the cars and would not
peel off the paint. However, even after months of experimentation, his efforts were not successful
and McKnight asked Drew to abandon his research and resume his official duties.

In spite of McKnights orders, Drew continued his research and eventually developed Scotch
masking tape in 1925. This incident resulted in the famous 15% rule at 3M. According to the 15%
rule, 3M employees were allowed to spend 15% of their working hours on independent projects.
Most analysts agree that the key factors that fostered innovation at 3M were its ability to recruit
and retain talent, create a challenging environment, encourage knowledge sharing and develop
suitable reward systems. (Refer Exhibit III for mechanisms stimulating innovation at 3M).

TABLE II
PRINCIPLES OF McKNIGHT
Listen to anyone with an original idea, no matter how absurd it might sound
at first.
Encourage; dont nitpick. Let people run with an idea.
Hire good people, and leave them alone.
If you put fences around people, you get sheep. Give people the room they
need.
Encourage experimental doodling.
Give it a try and quick.
Source: James C. Collins and Jerry I. Porras, Built to Last, (Harper Business, 1997, First edition)

RECRUITING AND RETAINING TALENT

3M recruited people who were creative and had a broad range of interests. According to company
sources people who had a broad range of interests were willing to learn and explore new ideas. In
addition, they brought a multi-disciplinary approach to their work. To make it easy for recruiters,
3M codified the six traits of innovative people in its recruiting brochure:

" Creativity
" Broad interests
" Self motivated
" Resourceful
" Hard working
" Problem solvers
3Ms Organizational Culture


6
The company felt that people with the above traits would be able to take the initiative and lead and
encourage others to accomplish their goals. 3M not only recruited people with the above traits, it
also tried to retain them. The company realized that to retain innovative people, it must provide
them a challenging work environment.

CREATING A CHALLENGING ENVIRONMENT

Initially 3M was organized into various product divisions. As these divisions increased in size,
McKnight noticed that there was a slowdown in innovation; not much time was devoted to new
product development. To increase the pace of new product launches, McKnight introduced the
philosophy of divide and grow. In line with this philosophy, new businesses were spun off and
new management teams were devoted to the spun off units. As a result, these new units were able
to grow quickly. When these new businesses were spun off, the established divisions had to
develop new products and find new markets to achieve their growth objectives to make up for
contributions from the businesses that had become independent. This mechanism, which analysts
called Renewal, resulted in increased diversification at 3M.

The divide and grow policy pressured product divisions to come up with new products to sustain
themselves. 3M also encouraged employees to work on problems that challenged their intellect.
For instance, in the late 1950s, when McKnight saw one of his horses get injured on a defective
running track, he asked 3M employees to develop a better, safer track surface. When Drew asked
for volunteers to work on the project, Ted Buchholtz (Buchholtz) volunteered himself. Buchholtz
was given the responsibility of inventing soft, elastic, stable and shock absorbent material, which
could be used for racetracks and athletic fields.

After a series of experiments, a new track surface (Tartan Track) was tested in New Yorks
Belmont Park in 1961. The track surface was tested successfully in all climatic conditions. The
Tartan track performed successfully in the market. However, in the 1970s, the Tartan Track market
got saturated and there was little or no replacement business for the product. But according to
Buchholtz, such challenges motivated 3M employees: It was big let down, but then you grab
yourself by your bootstraps and start a new project. And you get excited all over again. I was
excited a lot in my career at 3M.
6


In the late 1970s, Lewis Lehr (Lehr) then chairman of the Board, realized that with increasing
competition in the global business environment, 3M had to accelerate its rate of innovation to
sustain its competitive advantage. In 1977, 3M launched Challenge 81 a program that aimed at
achieving 25% of the companys annual sales from products that had been in the market for less
than 5 years. This 25% was stretched to 30% in the 1990s and the total years in the market were
reduced from five to four.

In the early 1980s, 3M formed a 16-member innovation task force to examine the innovative spirit
in the organization. Gary Pint, head of the task force, said, We wanted people in 3M to
understand that management, starting with Lehr, was sure that the environment for innovation at
3M hasnt deteriorated. Or if it had, that the commitment and means were available to get it back
to where it was. Weve been successful because of innovators in the past and we wanted to
continue to make sure that innovators, the people who have that flair for making things happen,
feel like theyre working in a supportive environment.

The main objective of the task force was to encourage a spirit of innovation in technical as well as
non-technical employees at all levels. To better understand the innovative environment at 3M, the
task force hired Gifford Pinchot III (Pinchot), a management consultant. Pinchot conducted an

6
A Century of Innovation The 3M Story, www.3m.com, 2002
3Ms Organizational Culture


7
innovation audit at 3M to understand the nature of the organizational environment. The task
forces study reaffirmed 3M belief that Freedom, Support and Encouragement were the factors
that motivated innovative people.

In 1984, 3M launched a new program to support innovation at 3M The Genesis Program. The
Program was initiated by Joe Abere (Abere), 3Ms corporate scientist. Commenting on the
objective of the program, Abere said, Genesis is all about optimizing the innovative spirit at 3M.
Under the Genesis Program, 3M provided financial support to employees to encourage
entrepreneurship for projects in the research stage. According to reports, around 60 people
submitted proposals for Genesis support when it was launched. Genesis grants were only for
technical people; in 1986 3M came up with Alpha grants for non-technical employees who wanted
to bring in some innovative processes in administrative, marketing and other non-technical areas.

KNOWLEDGE SHARING

In addition to providing an environment that stimulated innovation, 3M also took steps to
encourage knowledge sharing among its employees. According to analysts, innovation could
flourish in 3M because the management encouraged its employees to talk. 3M employees never
experienced any communication barriers. Employees were free to communicate across
departments and share ideas. In 3M, the tradition of story telling was encouraged. It was believed
that success stories would fire the imagination of employees and result in the generation of
innovative ideas. 3M also encouraged openness and cooperation among various divisions to foster
innovation. In addition, 3M established forums to encourage employees to share ideas and
knowledge.

In 1951, the Technical Forum was set up to encourage 3Ms technical staff to share ideas. 3M
wanted employees to develop the habit of discussing and inquiring about new ideas and
technologies. In order to introduce its employees to new technologies, 3M invited Nobel Prize
winners to forum meetings to discuss their research findings. The Technical Forum also conducted
problem solving sessions, at which business divisions brought their unsolved technical problems in
search of solutions. In addition, the Technical Forum held annual exhibitions at which all 3M
divisions could set up their stalls to showcase their latest technologies. It also brought together
scientists from different disciplines and formed them into groups so that they could share their
knowledge.

REWARDING INNOVATION

In addition to recruiting innovative people, creating a challenging environment for employees, and
encouraging a culture of knowledge sharing, 3M also focused on rewarding employees. To
encourage the spirit of innovation among employees 3M realized it was necessary to reward them
appropriately. The dual ladder career path adopted by 3M, created two career ladders technical
and management. This approach allowed even a technical person to get promoted to the vice-
president level without taking on managerial and administrative responsibilities.

In the early 1930s, 3M set up a pension plan for its employees and in 1949 it offered its employees
stock options (it was one of the first companies to do so). In addition to monetary rewards, 3M
instituted awards to recognize and encourage employee contributions. In 1963, 3M formed the
Carlton Society to honor technical employees for their achievements. In addition to the Carlton
Society it also formed The Technical Circle of Excellence and Innovation to honour employees
whose innovations had considerable influence on the companys products, processes or programs.
3M also constituted awards for recognizing the achievements of non-technical personnel. Its
Pathfinder Program honored sales, marketing, logistics, finance and production teams for
developing innovative methods for launching new products in the market (Refer Exhibit IV for
rewards and recognition at 3M).
3Ms Organizational Culture


8
CULTURE OVERHAUL

By the late 1990s, 3Ms growth rate started slowing down. According to reports, the stock price of
3M dropped from $83.00 in 1996 to $71.13 in 1998 and the price-earning ratio (P/E ratio)
7
of the
company also declined considerably (Refer Table III). It was reported that during 1995-2000,
earnings per share grew at an average of only 8.8% and shareholder returns fell far behind Dow
and the S&P 500. Analysts felt that 3M was unable to respond to market conditions. Commenting
on 3Ms performance during the decade, Bob Burgstahler (Burgstahler), chief of Business
development, said, We have not produced elite results that correspond to the view that this is an
elite organization.

In December 2000, 3M announced the appointment of James McNerney Jr. (McNerney) of
General Electric as its CEO. For the first time, an outsider was appointed as CEO of 3M. The stock
markets responded positively to the appointment of McNerney and 3Ms stock price closed at
$120.50, the highest in the decade.

TABLE III
3MS STOCK PRICE & P/E RATIO
STOCK PRICE (in $) YEAR
HIGH LOW CLOSE
P/E RATIO
1992 53.50 42.75 50.31 18
1993 58.50 48.63 54.38 19
1994 57.13 46.38 53.38 17
1995 69.88 50.75 66.38 29
1996 85.88 61.25 83.00 23
1997 105.50 80.00 82.06 21
1998 97.88 65.63 71.13 19
1999 103.38 69.31 97.88 23
2000 122.94 78.19 120.50 26
Source: Comparative Financial Data, 3M Investor Relations.

McNerney introduced cost cutting measures at 3M. Under the 3M Acceleration program, he cut
down research projects from 1500 to 700 (Refer Exhibit V for initiatives launched by McNerney).
In addition, McNerney also announced that he would lay off around 6500 employees, thus sending
negative signals to employees. However, his assurance that he would continue to invest 7% of
annual sales in R&D, and his emphasis on preserving the culture of innovation at 3M generated
confidence among employees. Althea Rupert, the outgoing chair of Technical Forum, said, Hes
delivered a very consistent message. Theres a sense of speed and a sense of urgency.

McNerney also set up the leadership development institute, to foster leadership qualities among
employees. The institute offered a three-week development program, which provided participants
real-life experience. Participants had to work on 3M business issues and make their
recommendations to senior managers. 3M management identified six leadership traits (Refer Table
IV) that the companys employees should possess. The leadership attributes were also incorporated
in the performance appraisal process to assess the performance of employees on these attributes.


7
P/E ratio equals common stock closing market price divided by the last 12 months diluted net income
per share.
3Ms Organizational Culture


9
TABLE IV
LEADERSHIP ATTRIBUTES RECOGNISED BY 3M MANAGEMENT
" Charting the course of business
" Raising the targets
" Energizing subordinates and colleagues
" Innovating resourcefully
" Following 3M values
" Delivering results
Source: www.3m.com

McNerney also made changes in 3Ms pay structure. Earlier 3M had a seniority-based pay
structure, under which employees who had put in more years of service were paid better.
McNerney introduced a performance-based pay structure. Under the new system, employees were
graded on their performance and good performers were promoted irrespective of seniority. In
addition, all employees had to come up with individual development plans, stating steps they
would take to improve their performance.

Analysts were apprehensive about the outcome of such changes. They felt that McNerneys 3M
Acceleration program and Six Sigma initiative
8
might dampen the spirit of innovation at 3M. Some
of 3Ms employees also had misgivings about the impact of such changes on the companys
culture. According to Art Fry, a former employee, while earlier 3M gave its employees the
freedom to determine which ideas could be commercialized, post McNerney, management took
control and decided which ideas had the potential for commercialization. According to Art Fry,
The main change is from an egalitarian type of culture - where anyone can assume leadership if
they have an idea - to one where it's more of an elite culture, where only the people at the top
control what gets done.
9


Expressing similar concerns, Lewis Lehr (CEO from 1979 1986) said, If you build a
bureaucracy, you will ultimately stymie the program. That is one point that must be taken into
serious consideration. Because bureaucracy can ruin anything. However, McNerney argued that
though innovation was and would remain the core competency of the company, certain aspects of
3M had to change to enable the company to deal with increasing competition and business
volatility.

McNerneys management style as well as his Six Sigma initiative received wide criticism from
analysts. Analysts expressed doubts about the co-existence of Six Sigma and innovation in an
organization. Ryan Mathews, Business Consultant, pointed out, The whole notion of Six Sigma is
to remove the deviation; clinically and surgically remove any possibility of error in the name of
quality, so you get very, very, good at what you used to do, and generally always at the expense of
what you might possibly be doing.
10
Analysts felt that the spirit of innovation would be
suffocated by an atmosphere, which did not allow a person to make mistakes.

Analysts pointed out that 3M was able to nurture a culture of innovation through its tolerance of
mistakes. During the initial years of 3M, McKnight had said, Mistakes will be made. But if a
person is essentially right, the mistakes he or she makes are not as serious in the long run as the

8
Six Sigma is a sophisticated quality program that is designed to reduce defects to 3.4 per million
opportunities. McNerney introduced Six Sigma at 3M after taking over as the CEO.

9
3M at 100 - On the Right Path for Growth?, www.news.mpr.org, June 10, 2002

10
3M at 100 - On the Right Path for Growth?, www.news.mpr.org, June 10, 2002

3Ms Organizational Culture


10
mistakes management will make if it undertakes to tell those in authority exactly how they must do
their jobs. Management that is destructively critical when mistakes are made kills initiative. And
it's essential that we have many people with initiative if we are to continue to grow.
11


TABLE V
3Ms SEGMENT WISE REVENUES
(in $ millions)
UNIT 2002 2001 2000 PRODUCTS
Health care 3560 3301 3007 Asthma inhalers, surgical masks, Aldara cream for
genital warts
Transportation,
graphics, and safety
3840 3526 3518 Reflective traffic signs, auto components, optical
filters for computer screens
Consumer & office 2792 2817 2951 Post-it Notes, Scotch tape, O-Celo-O sponges
Industrial 3225 3199 3525 Sandpaper, masking tape, other adhesives and
abrasives
Electro &
communications
1914 2171 2467 Fiber-optic cabling, inkjet printer components,
electrical tape
Specialty materials 953 1022 1197 Scotchgard repellents, firefighting fluids,
fluorothermoplastics
Source: 3M + GE =?, Fortune, July 21, 2002, Annual Report, 2002.
However, McNerneys initiatives received the support of top ranking employees of 3M who were
willing to make changes to accelerate the growth of the organization. McNerney announced that
3M would be concentrating on high growth sectors such as healthcare. Analysts felt that his
initiatives brought in results in some units, though a lot more needed to be achieved (Refer
Table V).
However, many analysts pointed out that McNerneys main challenge would be to balance drive
for efficiency and innovation. Said Burgstahler, It will mean getting stronger business and
marketing involvement earlier, without killing off all the harebrained ideas. Many 3M employees
felt that McNerney has found the right balance between efficiency and innovation. It remains to be
seen whether 3M will continue to be regarded as one of the most innovative companies in the
world.
QUESTIONS FOR DISCUSSION:
1. Since its early years, what strategies did 3M adopt to foster a culture of innovation in the
organization? How far do you attribute the success of the company to its culture?

2. The top management of 3M launched many initiatives to foster a culture of innovation in the
company. Which of these initiatives proved to be critical to the companys uninterrupted
success for over a hundred years?

3. Many analysts pointed out that the new initiatives implemented by 3Ms new CEO James
McNerney would have a negative affect on 3Ms culture. Do you think the new initiatives
would negatively affect 3Ms culture? Justify your stand.

11
James C. Collins and Jerry I. Porras, Built to Last, (Harper Business, 1997, First edition),
3Ms Organizational Culture


11
EXHIBIT I

BREAKTHROUGH INNOVATIONS AT 3M
YEAR INNOVATION
1921 Wetordry Waterproof sandpaper
1925 Scotch Masking Tape
1930 Scotch Cellophane Tape
1931 Adhesive and Coating products
1932 Colored Roofing Granules
1935 Automotive Underseal Coating products
1939 Scotchlite Reflective Sheeting, which is used in traffic signals
1945 Electrical Tape with Vinyl Plastic Backing
1947 Scotch Magnetic Tape
1948 Nonwoven fabric, Thinsulate Insulating Materials, Surgical Masks, Absorbent Materials for
oil, Scotch Filament Tape
1950 Scotch Surgical Drape
1951 Flurochemicals, Photo-offset printing plates
1952 Scotchlok Electrical Spring Connectors
1954 Scotch Magnetic Video Tape
1956 Scotchgard - Fabric and Upholstery Protector
1958 ScotchBrite Floor Cleaning Pads
1959 ScotchBrite Consumer Cleaning Pads
1960 Steri-Strip - medical wound closure tape
1962 Tartan Track, Scotch Magic Transparent Tape
1964 Dry Silver Technology
1967 Disposable Face Masks for Respiratory Protection
1969 Light Water Fire Fighting Foam
1970 Scotchban Paper Treatment developed, Box Sealing Tapes
1972 Data Cartridge
1973 Trimax Medical X-ray Film
1975 Buf-Puf Skin Care products
1978 Fire Barrier Sealant
1979 Thinsulate Thermal Insulation
1980 Scotchcast Casting Tape, Scotch VHB (Very High Bond) Tapes, Post-it Notes,
Cubitron Ceramic Abrasive Materials
1984 Medical Laser Imager
1985 MS2 Modular Splicing System, Refastenable Diaper Tapes, Optical Disks
1988 Fibrlok Fiber Optic Splices
1989 Maxair Autohaler Asthmatic Inhaler
1990 Hot Melt Fiber Optic Connectors
3Ms Organizational Culture


12
1991 Scotchprint Electronic Graphic System, HELP Patient Care Computer System
1992 APC Adhesive-Coated Orthodontic Brackets
1993 Scotch-Brite Never Rust Wool Soap Pads, 3M SelfCheck Automated Library System.
1994 Nexcare Active Strips Flexible Foam Bandages, DryView Laser Imaging Systems,
O-Cel-O StayFresh Sponges.
1995 Airomir Metered-dose Inhaler, Precise Mousing Surface, Trizact Abrasive Products
1996 3M Scotchprint Printer 2000, Dual Brightness Enhancement film, Novec Engineered
Fluids
1997 Scotch Pop-Up Tape Strips and Dispensers, Volition Fiber Optic Cabling System,
Aldara (imiquimod) cream
1998 Microflex Circuits, Scotch-Brite High Performance Cloth
1999 Light Management Technology, Scotch Photo and Document Tape
2000 SandBlaster Sponge Products
2001 Inflata-Pak Air Cushion Packaging, Halon-Replacement
Source: www.3m.com
EXHIBIT II
INCOME STATEMENTS OF 3M
(All amounts in millions of US Dollars except per share amounts.)
Income Statement Dec 02 Dec 01 Dec 00
Revenue 16,332.00 16,079.00 16,724.00
Cost of Goods Sold 7,542.00 7,660.00 7,762.00
Gross Profit 8,790.00 8,419.00 8,962.00
Gross Profit Margin (%) 53.80 52.40 53.60
SG&A Expense 4,790.00 5,145.00 5,064.00
Depreciation & Amortization 954.00 1,089.00 1,025.00
Operating Income 3,046.00 2,185.00 2,873.00
Operating Margin (%) 18.70 13.60 17.20
Total Net Income 1,974.00 1,430.00 1,782.00
Net Profit Margin (%) 12.10 8.90 10.70
Diluted EPS ($) 4.99 3.58 4.45
Balance Sheet Dec 02 Dec 01 Dec 00
Cash 618.0 616.0 302.0
Net Receivables 2,527.0 2,482.0 2,891.0
Inventories 1,931.0 2,091.0 2,312.0
Total Current Assets 6,059.0 6,296.0 6,379.0
Total Assets 15,329.0 14,606.0 14,522.0
Short-Term Debt 1,237.0 1,373.0 1,866.0
Total Current Liabilities 4,457.0 4,509.0 4,754.0
Long-Term Debt 2,140.0 1,520.0 971.0
Total Liabilities 9,336.0 8,520.0 7,991.0
Total Equity 5,993.0 6,086.0 6,531.0
Shares Outstanding (mil.) 390.2 391.3 396.1
Source: www.hoovers.com

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EXHIBIT III

MECHANISMS STIMULATING INNOVATION AT 3M
MECHANISM EFFECT
15% Rule Employees are allowed to allocate around 15% of their official time to
pursue independent research, irrespective of their official project. This
rule resulted in the development of many innovative products at 3M.
Genesis Grants Under Genesis grants employees were provided around $50,000
financial support for their research for developing prototypes and
conducting market tests. This stimulated entrepreneurship at 3M.
Own Business
Opportunities
3M gave employees the opportunity to run their projects depending on
the sales. This stimulated internal entrepreneurship at 3M.
Dual Ladder This approach at 3M enabled technical employees to move up the
career path without compromising their research/professional
interests.
Technical Forums Technical forums were established to give 3M employees the
opportunity to present their technical papers and exchange ideas with
others. This stimulated the cross fertilization of ideas and technology.
New Product Forums These forums were established to enable all divisions to discuss new
ideas, thus encouraging the generation of ideas across all divisions.
Source: James C. Collins and Jerry I. Porras, Built to Last, (Harper Business, 1997, First edition)

EXHIBIT IV

REWARDS & RECOGNITIONS AT 3M
REWARDS & RECOGNITIONS PARAMETERS FOR AWARD
Golden Step Award This award was conferred on employees whose
ideas turned into successful products.
Technology Sharing Awards This award was conferred on employees who
successfully developed new technology and shared
it with other divisions. This award encouraged the
internal dissemination of technology and ideas.
Carlton Society a techno honor
society
Membership in the Carlton Society was considered
the highest honor for technical people at 3M. 3M
employees who made outstanding and original
technological contributions were chosen as
members of the Carlton Society. This membership
stimulated the development of new technologies.
Profit Sharing Along with the above-mentioned awards, 3M
offered employees a share in the companys profits.
In 1916, it was one of the first companies to offer
employee stock options to its employees. Profit
sharing gave employees a sense of belonging.
Source: James C. Collins and Jerry I. Porras, Built to Last, (Harper Business, 1997, First edition)

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EXHIBIT V

INITIATIVES LAUNCHED BY McNERNEY
Global Sourcing: Under this initiative 3M centralized its purchasing system and reduced the
number of suppliers.
Indirect Cost Reduction: Under this initiative prices were monitored and indirect costs (such
as travel, and use of contract workers and outside services) were reduced.
E-productivity: Under this initiative, a suite of applications was launched to provide product
support to the customers and allow them to make online transactions.
3M Acceleration: Under this initiative new product development programs with good market
potential were identified and given support to speed up commercialization.
Six Sigma Initiative: The Six Sigma initiative was introduced to reduce errors and weed out
inefficiencies in the system.
Adapted from: Jim McNerney, Passed Over for GEs Top Job, Sets 3M on a Growth Course, Industry Week,
December 11, 2001.

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ADDITIONAL READINGS & REFERENCES:
1. I'm Not Taking a Cultural Tool Kit To 3M, Fortune, January 18, 2001.
2. Mullin Rick, Analysts Rate 3M's New Culture, Chemical Week, September 26, 2001.
3. Jim McNerney, Passed Over for GEs Top Job, Sets 3M on a Growth Course,
IndustryWeek, December 12, 2001.
4. 3M: A Lab for Growth?, BusinessWeek, January 21, 2002.
5. 3M Celebrates ``A Century of Innovation'' at Annual Meeting of Shareholders, Business
News Wire, May 14, 2002.
6. Innovation Has Been 3M's Passion for 100 Years, DSR Retailing Today, May 20, 2002.
7. 3M Discusses Plans to Drive Growth; Reiterates Q2 and 2002 Earnings Outlook, Business
Wire, May 22, 2002.
8. Haeg Andrew, 3M at 100 - On the Right Path for Growth? www.news.mpr.org, June 10,
2002.
9. 3M: An Incubator for Fresh Ideas, www.corpstory.com, June 2002.
10. Useem Jerry, 3M + GE = ?, Fortune, July 21, 2002.
11. The Biggest M in 3M: McNerney, BusinessWeek, November 13, 2002.
12. A Century of Innovation: 3M Story, www.3m.com, 2002.
13. 3M A Century of Innovation, www.gurusonline.tv, 2002.
14. Lukas Paul, 3M: The Magic of Mistakes, Fortune, March 19, 2003.
15. www.3m.com