Critical Reveiw of 3M's Business Strategies - Iloka Benneth Chiemelie

INTRODUCTION

In order to ensure that all elements are critically and wholesomely considered in this review, as a measure of providing final findings that are reliable under any circumstance, this review has been partitioned in a sequential order that aids easy assimilation of ideas presented. This order of presentation is divided into four sections.

The first section is a summary of the article. This section summarizes the article to be reviewed, highlighting all the major talking points in the article as well as examples presented to ensure that readers can get a clear view of the talking point before being bombarded with the whole article review.

The second section provides a theoretical and background analysis of the highlighted problems in general concepts across global business. This lead to the development of 3 business hypothesis which were later explained under the critical review in the third section of this article review. This critical review tries to justify the business proposal by stating how each could help 3M.

The final section encompasses the evaluation of the article reviewed, the conclusion and bibliography section. This section generally rounds up all that has been discussed in a simplified format.

ORGANIZATIONAL STRUCTURES AND DEVICES 3M USES TO ENCOURAGE ENTREPRENEURSHIP AND WHY THEY WORK

3M has developed into one of the renowned organizations that incorporate entrepreneurship as their core business model. Although this has been long attributed to their place of origin in Minnesota, what is commonly believed across the globe is that 3M is has built its organizational structure around corporate entrepreneurship and this has resulted in their huge success over the years. As highlighted in this article, these are the organizational structures and strategies that have helped 3M become successful over the years.

First strategy – close customer relationship

This is 3M’s first business strategy, developed as they searched ways to attract new customers and increase their sales. Haven its foundation from selling just sandpaper, the company found out that the best way they could increase sale was by getting close to their customers, understanding their needs and demonstrating the quality of their products so that their customer can be persuaded to buy their products.

Berry (1983) defined relationship as a strategy to attract, maintain and retain customer relationships. Gro¨nroos (1994), supported this idea by stating that the aim of relationship marketing is to establish, maintain, and enhance relationships with the stakeholders, at a profit, so that both parties can meet their objectives. Based on these arguments, it can be seen that 3M has a great strategy with the induction of customer relationship as this aided them to gain more customers and thus improve their sales. This worked because, unlike other companies; customers valued the fact that they were treated closely by 3M and therefore, they were able to get their problems sorted out and thus gain confidence their services.

Second strategy - charge premium prices through niche market penetration

The company went on to develop their second business strategy based on the success of the first strategy. The second strategy was to seek niche markets so that they can be able to charge premium prices. This worked because most of these niche markets where unattended to, and by getting close and penetrating into these niche markets; 3M was able to charge premium prices as these markets could not get to other companies to offer them these services.

Niche marketing is a type of market segmentation that tries to breakdown huge markets into smaller sectors based on their primary needs which are being ignored by the mass services offered. Kellor et al (2001, p. 3) described market segmentation as being a part of organizational management of consumers from which an actionable marketing strategy can be developed. Being a new company, adaptation of this strategy by 3M was essential in developing a price penetration strategy and this worked because they could offer services which these niche markets deemed ignored by other big companied.

Third strategy – product and service diversification

3M being an entrepreneurial organization was able to develop their third strategy based on the results of the second strategy. The third business strategy was to diversify their products and services haven found solutions to the customer’s needs. This strategy was successful because through diversification, they created new needs for their customers and gained market leadership by being innovators of those products and services

Diversification both in product and services has been highlighted as the primary source of knowledge sharing in organizations, new market penetration and enabling firms to overcome their imperfections (Chang and Hong, 2000; Guillen, 2000; Yiu et al., 2005; Nolan, 2001). From the above supports, it can be argued that 3M got the third business strategy right as it is destined to gain them both new customers and market leadership.

Fourth strategy – pursue product development and innovation

When companies incorporate product diversification as their business model, it is expected that the company will have to incorporate innovation and creativity as their business model too. This is because, diversification and new product creation is only possible through innovation and creativity. Thus, 3M developed their third business model as a means of ensuring continued productivity and improved service and product quality.

Scholars such as Drucker (1988), and Christensen, (1997) are of the idea that innovation is the driving force for prosperity, growth, sustainability and high profitability in organizations. The success of this strategy can be attributed to the fact that 3M has already incorporated diversification as their business strategy; thus new product innovation and creativity in the organization can be easily given a go in their constantly expanding markets.

Fifth strategy – knowledge sharing in the organization

As the company surged from new ways to ensure constant flow of knowledge in the organization which in no doubt will ensure improved productivity and product innovation, 3M developed their fifth business strategy which is to encourage knowledge sharing within all wings of the organization.

As Gartner (2002) stated, knowledge management is essential for creating, capturing, organizing, accessing and utilizing the intellectual assets of an organization. This strategy worked for 3M because through knowledge sharing, the company was able to improve the quality of their intellectual assets as staffs can get their doubts cleared and helps given to them on how to improve their ideas.

Sixth strategy – encourage achievement through reward

Although the overall effectiveness of appraisal systems seems to be dominating the research community (Cawley et al., 1998; Jawahar, 2007; Kavanagh et al., 2007; Keeping and Levy, 2000; Kleingeld et al., 2004; Kuvaas, 2006a, b, 2007; Levy and Williams, 2004; Youngcourt et al., 2007), both researchers and practitioners are of the opinion that properly conducted performance appraisal has numerous positive results such as increase workforce motivation and staffs loyalty(Pettijohn et al., 2001).  

The sixth and last business strategy developed by 3M was performance appraisal. Innovating teams are made managers of the product line they innovated, and this is essential for keeping other staffs motivated and working hard to ensure that they one day get rewarded by being made managers of product lines they successfully innovate. This strategy worked because it kept employees motivated and innovative.

HOW 3M DISTINGUISHES BETWEEN INCREMENTAL AND FUNDAMENTAL INNOVATION

In other to distinguish between incremental and fundamental innovation in the organization, a new product department was developed in 1940 to examining the relations between new products and already existing products and technologies. In 1943, the company built a new laboratory where fundamental products and technologies are being researched and examined. Incremental products had a life span research of between 1 to 5 years, while fundamental innovations are researched for up to 10 years.

3M’S ORGANIZATIONAL CULTURE AND WHAT IT DEPENDS ON

3M’s organizational culture was built around innovation. Being a new player in the market, 3M looked for ways to improve their profit and found innovation as their key success foundation. This organization strategy is dependent and has been acclaimed to be from the company’s place of origin Minnesota. Minnesota has been described as a place of non-political, low ego, egalitarian, non-hierarchical, hardworking and self-critical region in the United Stated of America. Coming from such an area, 3M was able to mold their business towards valuing organizational success more than personal achievement by inculcating the culture of innovation in all departments within the organization.

WHY HAVE 3M BEING SUCH AN INNOVATOR FOR SO LONG?

3M’s ability to remain innovative for so long can be attribute to their ability to keep employees motivated. Meta-analyses reveal that motivated employees have much higher task performance and contextual performance (Klein et al., 1999); have high commitment in the organization; are more loyal; and experience higher level of job satisfaction (Eby et al., 1999). From these academic revelations, it can be seen that the previous argument is somewhat reasonable that 3M has been successful for so long due to their ability to keep employees motivated through work and performance appraisal.

CAN OTHER COMPANIES JUST COPY 3M’S CULTURE AND STRUCTURE AND BE AS SUCCESSFUL AS 3M?

Literatures have gone a great way to differentiate between innovation orientation and imitation orientation in an organization (Zhou, 2006). Imitation was describe as essential when companies try to avoid the exorbitant costs associated with basic scientific investigation and development of novel technologies which innovation brings along with it (Kerin et al., 1992).

Although imitation can offer organization certain level of positivity, it must be accepted that total structural and cultural imitation could have their limitation and potentially result in organizational failure. This is because in 3M, their culture is built around innovation and creativity. While this is strategic organizational culture, it is clear that innovation is a thing of individual ability and although other organizations could copy this culture, if they don’t have innovative individuals in their workforce it can potential fail.

PROBLEMS IDENTIFICATION

As the research identified, although 3M has be plunged with numerous success stories over the course of their existence, the company faces many challenges in the ever changing modern day environment. Some of these problems if not well managed, could result in subsequent failures within the organization. The problem faced by 3M is as analyzed below.

Management difficulties – as the company continues to expand, they are faced with management problems, as new product innovation or development could potentially mean formation of new management team. Since these products are new to the market and the managers are the product innovators, questions must be asked as to whether the management team is capable of handling the task.

Competition – in every business organization, competitors are always a big threat to companies. This is also coupled with the fast globalization of world market, which means 3M will not only face local competition but also international competition and this is a big problem to the company.

Research and development costs – also highlighted in the article as one of their problems is the cost of research and development. The company pursues Maverick’s high risk approach towards research and development, but recent amendments have seen the drop in research and product development expenditures. This is a big problem to 3M as research and development has proven over the years to be the main key behind their success story.

THEORETICAL FRAMEWORK AND HYPOTHESIS

Product development offers companies the opportunity of gaining competitive advantage, attracting new customers, retaining existing customers, and strengthening ties with their distributors (Kotler and Keller, 2006; Cooper and Kleinschmidt, 1990). This is also supported by the study by Deloitte Touche Tohmatsu (2006), which revealed that long-term success of global companies is dependent on product innovation rather than adjustments on existing products. Based on these arguments, it can be proposed that:

P1: 3M will have to continue with their high risk approach towards innovation and new product development in other to remain competitive in the global market.

These arguments have also leaded to increased interests of researchers and scholars to understand how to improve innovative capacities (Damanpour, 1987, 1996; Koc and Ceylan, 2007; Mayondo and Farell, 2003). These studies singled out organizational culture as the most influential factor that stimulates innovative behavior among staffs in an organization. This is because since organizational structure influences employee’s behavior, it can lead them to accept innovation as the fundamental value of the organization and to fell more involved in the business (Hartmann, 2006). There, it can be proposed that:

P2: 3M should stick with their organizational culture of making product innovators the managers of that product line, as it would motivate other employees to be innovative.

It has also been suggested that marketing departments should work with design departments in developing new products, this will aid information exchanges that use vital for competition (Petiot and Grognet, 2006; Lackman, 2007; Rossler and High, 2007). More importantly, many enterprises confer with the perception that the relationship between design and marketing can lead organizations to meet market requirements, since firms sale both products and designs (Beckman and Barry, 2008). From this argument, it can be proposed that:

P3: 3M should incorporate design through innovation in all their products as a means of remaining competitive in the global market.

CRITICAL REVIEW OF THE PROPOSALS

As proposed above, this section will review all the proposals to critical evaluate the extent of impact they can have on the company if implemented. This review cover the three proposals listed in the above paragraphs.

Proposal 1 – reviewed

As proposed above, 3M will need to continue with their Maverick’s high risk approach towards innovation and new product development in other to remain competitive in the global market. Historically innovation and product development has been the strong feature of companies who through research and development or merger and acquisition were able to introduced new products to the global market. Innovation considered as key in achieving sustainable competitive advantage (Damanpour and Gopalakrishnana, 2001; Hitt et al., 1997; Kleinschmidt and Cooper, 1991; Subramanian and Nilakanta, 1996)

For instance, Haier a Chinese appliance manufacturer noticed that many of their customers where using their washing machine not only for laundry purposes, but also for cleaning vegetables in rural China. By making certain modification, Haier was able to market the new innovated product as a multi-purpose washing machine for both laundry and cleaning vegetables. Few years after the changes, Haier became the market leader in rural areas of China (Sull et al., 2004). In a similar case, P&G has been very successful in Asia for offering health, beauty and household items to middle class in developing Asian economies.

The above instances, illustrates how product innovation is very essential for organizations compositing or wanting to compete in the global economy. Thus, it could be argued that 3M should keep hold of their culture of promoting innovation within all levels of the organization. This is because this will facilitate new product development and innovation of already existing products. This will in the other hand, help them to remain competitive in the global market, and becoming the market leader in various kind of product they could possibly innovate to better satisfy their customers’ requirements.

 Proposal 2 – reviewed

From the original article in review, it was highlighted that 3M has various ways of wonderfully rewarding product innovators, which includes making them the manager of the new product line their innovate or develop. The second proposal above, pointed out that 3M should stick with this organizational behavior of making product innovators managers of the product line, as they are essential for motivating other staffs to be more innovative.

Numerous studies has put forward theoretical explanations for the relationships between culture, other organizational components and organizational innovation (Ahmed 1998: Martins and Terblanche, 2003; McLean, 2005; Mumford, 2000). Likewise, different theoretical focuses have explained that if innovation is to become a source of competitive advantage, it must be incorporated into organizational culture (Barney, 1986).

Organizational culture is defined as the values, beliefs and assumptions that members of an organization share in common (Cameron and Quinn, 1999; Denison, 1990; Miron et al., 2004). Various research studies have been conclusive on the key role of culture in innovation (Dobni, 2008; Higgins and Mcallaster, 2002; Jamrog et al., 2006). The major reason has been linked to its ability to stimulate innovative behaviour among staffs since organizational culture can lead them to accept innovation as the organizational value, and enhance their commitments toward innovation (Hartmann, 2006).

From the research references above, it can be argued that the second proposal is feasibly consistent with general idea of researchers across the globe. Making managers of the product innovators is definitely the right path towards incorporating innovation within the organizational stream, and helping encourage other members of the organization to be more creative and innovation as they will be rewarded wonderfully at the end.

Cameron and Quinn (1999) also supported this argument with their four culture definition, stating that ad hocracy culture emphasis creativity, entrepreneurship and risking taking within an organization. Thus, it can be concluded that the second proposal if well implemented is essential for 3M to continue their global market conquering.

Proposal 3 – reviewed

Have tackled the problem of management and research and development in the first two proposals, the third proposal is meant to find a way of handling the problem of competition 3M faces in the global market. The third proposal suggests that 3M should incorporate design through innovation in all their products as a means of remaining competitive in the global market.

Researchers have identified integration of product design procedures in an enterprise as way of enhancing new product development and product differentiation in the global market (Carlsson, 19991; Griffin and Hauser, 1996; Gupta et al., 1985; Ruekert and Walker, 1997; Pinto et al., 1993; Rusinko, 1997; Song et al., 1997), this is because design represents a significant serial loop in an organization’s entire value chain.

A good instance is the Taiwanese made computer and electronics products which poses advantages in design, innovation, quick response, and flexibility in the global 3C (Computer, Communication and Consumer Electronics) Market. Such brands include ACER, Benq, ASUS, Mitac, PQI, and MSI. This have made Taiwan market leader in 3C computer models, and is an examples of how incorporating design in innovation can help ensure that 3M remains competitive in the global market.

Judging from the Taiwanese company case, it can be seen that design is essential for product differentiation in the global market place, and for 3M to remain competitive in the market place, they will need to continue with their high risk approach towards research and development, while incorporating design into their product innovation strategies. This will ensure that their products are fully differentiated in such a way to position the as the market leader.

This argument was also supported by Kelley (1992), where he proposed a strategic platte based on successful product cases, incorporating 12 different design measures. Therefore, it can be concluded that design is critical in 3M’S product innovation in other for them to remain competitive in the global market.

EVALUATION

Judging by the defining elements in determining good articles, which are presentation and readability, it could easily be argued that the article in review is an excellent article. This is because the article was clearly presented in a sequential order, discussing all main points highlighted in the article. The writers were able to elaborate these issues with numerous exemplary references from with 3M, and this was also essential in ensuring that readers fully understood the main contents of the article.

Nevertheless, it could also be clearly seen in the concluding sections of the article that the writers were not elaborative enough with regards to the problems faced by 3M. Although the article was able to point out these problems, it lacked explanations on the causes of these problems and how such problem would impact 3M both in the present and future.

Therefore, based on these analyses, this article can be evaluated as to being detailed with the background analysis of the company over the years, but lacking with detailed explanations of the problems faced by the company. For this article to be fully accepted as worthwhile write up, there is a big need for the missing links in connection to explaining the problems faced by the company in details to be reviewed with full explanations on how these issues will affect the company.

CONCLUSION

In conclusion, this article review has been of fundamental benefit in the sense that it offered numerous opportunities to understand the key elements that make up a well written article, and certain entrepreneurial issues faced by organizations across the globe.

The review was precise in pointing out all the problems faced both presently, and projected to be faced in the future by 3M in the global market. The global market was put into consideration because 3M is market leader in many household brand largely used across the globe.

Have pointed out the problems, the article went on to detail an analysis of all the problems faced by 3M, providing relevant solutions to these problems both in the present and future economy. These solutions where based on secondary research and references from other companies who have faced such problems like 3   M in the global economy. The final stage of the review presents an overview and unbiased evaluation of the article being reviewed.

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