mti 3m optical systems: managing corporate entrepreneurship
TRANSCRIPT
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