CASE ANALYSIS

Product Management

INNOVATION AT 3M CORPORATION

Submitted to:

Submitted by: Group No. A2

Divyanshu Saurav (13020)
Mayank Vyas

(13033)

Nupoor Jain

(13039)

Kunal Bhagat

(13089)

Sushobhan Saha

(13117)

Virender Pal Bhasin(13121)

Dr. Suresh M.R.

Marketing Research,
Associate Professor - Marketing,
SDMIMD, Mysore

Innovation at 3M Corporation

Table of Contents
About the company ................................................................................................................................. 2
Case Facts ................................................................................................................................................ 2
Industry Scenario ..................................................................................................................................... 2
The Medical Surgical Markets Division ............................................................................................. 3
Issues in the Case .................................................................................................................................... 4
PIC Product Innovation Charter ........................................................................................................... 5
Background ......................................................................................................................................... 5
Focus ................................................................................................................................................... 5
Goals and objectives ............................................................................................................................ 5
Guidelines............................................................................................................................................ 6
Traditional innovation process at 3M ...................................................................................................... 6
Disadvantages ...................................................................................................................................... 6
Lead User Research Methodology Adopted At 3m ................................................................................ 6
Project planning................................................................................................................................... 7
Trends and needs identification........................................................................................................... 7
Preliminary concept generation ........................................................................................................... 7
Final concept generation ..................................................................................................................... 7
Recommendations: .................................................................................................................................. 8

Innovation at 3M Corporation

About the company

Originally known as the Minnesota Mining and Manufacturing Company, with its headquarters in St
Paul, Minnesota, 3M was established in 1902 to mine abrasive minerals for the production of a single
product, sandpaper. From these inauspicious beginnings, the company has grown organically,
concentrating on the internal development of new products in a variety of different industries. The
latest review of the companys position reveals that it manufactures over 60,000 products, has
operations in 61 countries, employs 75,000 people and has achieved an average year-on-year growth
in sales of 10 percent. Its products include Scotch adhesive tapes, fibre-optic connectors, abrasives,
adhesives, floppy disks, aerosol inhalers, medical diagnostic products and Post-it Notes.

Case Facts
3Ms origins date back to 1902 when five investors came together in a failed attempt at mining
exploration and development. From that date, the company has developed a number of innovative
products, some of which came about serendipitously. For example, in the 1920s a young lab assistant
made the link between a common paint problem encountered in auto-body shops and a new and
crinkly backing material for sandpaper. The result was masking tape. These innovations helped rocket
3M forward into a multi-billion dollar company.
Over the decades, 3M enjoyed national and global growth as well as a reputation for remaining a
Hothouse of innovation. 3M encouraged innovation through a variety of means including awards for
innovation as well as in-house grants for innovating projects. The company also allowed all staff to
spend 15% of their time to explore new ideas outside of assigned responsibilities.
To achieve high rates of innovation 3M placed heavy emphasis on R&D. In 1997, it employed 4500
scientists, engineers and technicians in the United States and another 2000 overseas.
In 1990s, 3M operated with four objectives:

Producing 30% sales from products that did not exist four years earlier

Greater than 10% annual growth in earnings per share

Greater than 27% return on capital employed

20 25% return on equity

Industry Scenario
The surgical equipment industry is growing due to aging populations, advances in anesthetics,
emerging economies, and technological innovation. GBI Research predicts the global surgical
equipment market to surpass $7 billion by 2016, with a 6% compound annual growth rate.
Industry products are primarily made up of powered devices (such as lasers, electrosurgery products
and heavier cutting tools), handheld non-powered instruments (such as scalpels, blades, clamps and
scissors) and wound closure products (such as staples and sutures).

Innovation at 3M Corporation
Challenges to surgical market entry and success include high start-up costs, the need for highlyspecialized technical knowledge and strict product regulations, such as those set by the FDA, which
risk suspensions and heavy penalties for non-compliance.
Innovation at 3M

The company was known for its innovation Full of growth potential Heavy emphasis on

R&D

Worlds first waterproof sand paper

First in Masking tape
Scotch brand cellophane tape
Post it Notes Art Fry who first used a weak adhesive
30 key technologies by late 1990
No fear of idea failure
Marketing input traditionally came from current customers and sales rep
Followed incrementalist approach to innovation

The Medical Surgical Markets Division

The Health Care Unit is a core component of 3Ms business model. Although, the unit was recording
significant and increasing sales, it had failed to introduce a successful product in almost a decade. This
did not jibe well with one of the companys key objectives, which aimed to see at least thirty per cent
of sales originate from products that did not exist four years earlier.
To identify the market needs and trends, 3M product developers in the Health Care unit utilized
several tools:

Data from sales representatives with daily contact with physicians or registered nurses

Focus groups

Customer evaluations of currently marked products

Site visits by scientists and technologists to observe physicians and nurses at work, with the intent
to identify unforeseen needs

Data on risk factors for diseases

The success, to date, of the Medical-Surgical Markets Division was built on the sale of surgical
drapes. In 1995, the company was enjoying over $100 million in sales from surgical drapes alone.
Although the company was enjoying reasonable success from the sale of surgical drapes, it found that
growth in the United States was limited, and penetration into markets overseas was hampered by the
high cost of 3M products when converted into foreign currencies.
In identifying the lack-lustre efforts and success of the Medical-Surgical Markets Division, it became
evident that a change was needed. Recent involvement of Mary Sonnack, a division scientist with 3M,
in a new approach to product development known as lead user research" presented a new opportunity

Innovation at 3M Corporation
for the division. The general concept for the new method required that the product development team
tap into lead users," or those individuals that face market needs well before others.
Shor, in cohorts with Sonnack, convinced senior management of giving them a chance to pursue the
new approach. After receiving an initial green light, Shor assembled the lead user research team. The
team consisted of individuals with a wide breadth of expertise and backgrounds, including
antimicrobial pharmacology, chemistry, dermatology, biology, veterinary science, and even Broadway
make-up artistry.

Issues in the Case

Traditional Market research followed earlier at 3M had not resulted into fruitful results and there
was a need to generate a method of Marketing Research that is more capable of filling the gap
between the needs of the consumers and the capabilities of the company

The mangers of the interdisciplinary team members did not allow them to work freely on the new
Research Methodology as they were still expected to do their traditional duties.

Acceptance of Lead User Research Methodology at 3M and by Mr. Dunlop

Preliminary Concept Generation stage saw the product developers visit hospitals in South America
and Asia. The company realized that their understanding of developing nations and their
healthcare needs was inept.

The Lead user Research yielded four ideas. Three of them where direct extensions of existing
product lines and materials to be used were already available at 3M. The team was confident of
presenting these ideas to the top management.

Rita Shor, senior product specialist at 3M is worried about the implications of the fourth
recommendation of the Lead User Research and how to go about implementing the same in the
Medical Surgical Markets Division

By mid 1990s, 3M had highly penetrated into the niche surgical drapes market and yearly sales were
over $100 million. But the downside was the sales in US had limited growth and the overseas market
is also limited by the high cost of 3M products, when convert into local currencies.
The main problems faced by the Medical Surgical Market Division were:

Stagnating Sales
Saturating Current Markets
Need of new product concepts
Lack of knowledge about the market outside the developed world
Inappropriate pricing for developing markets
Surgical Drapes product had now come to a maturity stage and needed re-vitalisation to ensure
that it would not go in to a decline stage.

Innovation at 3M Corporation

Figure 1: Product life cycle-Surgical drapes

3M had two options to innovate and revitalize the surgical drapes product.

Traditional Method
Lead User Research Approach

PIC Product Innovation Charter

Background

3M Company known for its innovation.

Surgical drapes, Penetrated in to niche market and achieved $100 Million sales
The growth of the product is now stagnating, no new innovation happening for the last decade
The strategy adopted to resolve this problem is Lead User Research Methodology

Focus

Use our core competencies of innovation and R&D for developing new products.

Goals and objectives

To come up with a breakthrough product in medical surgical market division.

To increase the sales volume and profitability of the company

Innovation at 3M Corporation

Guidelines

To understand the customer needs and develop innovative products with respect to it
Use the existing product of the mature market in the developing countries with required
amendments to provide quality at an affordable price
To keep up to the international quality standards and companys image
To provide the products in the market within one year to reach the customer on time, satisfying the
timely need.

Traditional innovation process at 3M

Product team comprised of technical individuals who ensured that the particular product under
development could be efficiently made and provided feedback about 3Ms manufacturing
capabilities
Allowed for technical employees to take matters in their own hands.
Marketing input traditionally came from current customers and sales representatives.
Product developer focuses on finding new angles or twists on the early trends.
Tools to identify market needs and trend by product developers of 3M
Data were collected from sales representative with daily contact with physicians or registered
nurses.
Gathered some 30 nurses biannually from across the nation in a room to obtain reactions to
proposed products.
Customer evaluation of currently marketed products.
Site visits to observe physicians and nurse at work, with the intent to identify unforeseen needs.

Disadvantages

Hiring out for market research created too many interfaces between development teams and
customers
Information obtained was not necessarily proprietary
Understanding customer and market needs would not suffice
Customers were somewhere blind about their own needs, and thus could not provide clues about
developing revolutionary products

Lead User Research Methodology Adopted At 3m

The general approach to lead user research" involved four stages:
1. Project planning
2. Trends/needs identification
3. Preliminary concept generation
4. Final concept generation

Innovation at 3M Corporation

Project planning
In the project planning stage, the team identifies the various types of markets and potential new
products of interest that they would like to explore. In addition, the team needs to decide whether an
incremental or breakthrough innovation will be pursued, identify the boundaries for the procedure,
and get an initial feel for current needs and trends of the market. For Rita and her team, this stage took
roughly six weeks. During that time, the team developed an invaluable database of information. The
database included tit-bits of previously unknown information such as that thirty per cent of infections
originated from a patients own skin.

Trends and needs identification

The next stage includes the identification of trends and needs. In contrast to stage 1 where an initial
look at trends and needs of the market is undertaken, this stage requires the team to narrow in on a
specific need-related trend or trends, which will remain the focus of the rest of the procedure. This
stage often involves a workshop. Over the course of a 5-day workshop, the lead user research team at
3M had to decipher all the information that was gathered in Stage I. As the stage progressed, a variety
of subject matter experts were enlisted. These experts included individuals from a wide breadth of
specialties including veterinary sciences and make-up artistry. This stage lasted approximately six
weeks for the team.

Preliminary concept generation

In the third stage, preliminary concept generation, the team begins matching preliminary concepts
with actual customer needs. Business potential of the new product or service concept is assessed,
while conformity with current business interests is confirmed. In general, this stage takes between five
to six weeks. However, Rita and her team engaged in international fact-finding trips in countries such
as Korea, Indonesia and India, which increased the length of this stage by almost four times.

Final concept generation

In the final stage, final concept generation builds on the initial concept developed in stage three. This
stage focuses on improvement and add-ons to the preliminary concept. A core component of this stage
is a one to two day workshop. The workshop involves an evaluation of the concepts from the
perspective of technical feasibility, market appeal and potential, and conformity to current
management priorities. Rita brought 11 3M personnel and 11 outside experts together for the final
concept generation stage. During this stage, the team faced a multitude of challenges. Four specific
challenges they faced included the lack of structure for corporate meetings; balancing the participation
of introverts and extroverts in a meeting; integrating creative ideas with technical and economic
feasibility; and being able to discern the most important aspects from a sea of facts
Despite the challenges faced in Stage IV, the lead user research team were able to put forward four
recommendations:
1. The Economy" Line
2. The Skin Doctor" Line
3. Antimicrobial Armour" Line

Innovation at 3M Corporation
4. Evolution or Revolution
The first three recommendations included a mix of incremental and breakthrough innovations. They
included new product lines for low cost surgical drapes; hand-held devices for layering antimicrobial
substances; and armour" that protected against blood borne, urinary tract, and respiratory infections.
The product development team had also developed a fourth recommendation, which was quite unlike
the first three. The team noticed that companies had not started to provide early intervention in the
disease process, in what is known as the upstream containment of infections. Therefore, the fourth
recommendation hinged on the decision to be evolutionary or revolutionary. In the case where the
team would put this recommendation forward, it would have the additional and likely unwelcoming
effect of requiring a complete re-write of the Health Care Units scripted business strategy.

Traditional 3M Development Process

Lead User Research Process

Developers in recent decades lack direct

contact with customers

Puts developers in direct contact with

customers

Developers are not directly accountable for

understanding customer needs

Focus on a few individuals(Lead users) with

extremely rich need and solution specific
information

Marketing research is outsorced to third parties Allow developers to learn from users outside
traditional business focus
Traditional method are linear and tend to
support primarily incremental innovation

Pushes developers towards leading edge with

potentially radical new concept

Can be complemented with traditional market research techniques

Recommendations:
1. The Economy Line

Line of surgical drapes using low cost material

Material should allow focus only on the part of the body being operated

2. The Skin Doctor Line

Line of hand held devices resembling hand-held vacuums for antimicrobial protection

3. Antimicrobial armour line

Product line to armour catheters and tube

This is a breakthrough product which provides the company entry into a $2billion

Innovation at 3M Corporation
market.

4. Evolution or Revolution?

Rewriting the business unit strategy statement to keep infections from happening by
precautionary upstream measures.
Proposal to change the entire business strategy-result of using lead user methodology.