MGMT002 – Technology and World

Change
G4

Business Case: 3M
Written Report

Prepared for:
Dr. Teo Kwong Meng

Prepared by:
LOH Yao Sheng
Michelle TING Mei Chen
Remi CHOONG Ciyuan
Roger KOH Fong Jit

Question 1
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When 3M was founded in 1902, there was hardly any hint of innovation
process that took place within the company. However as 3M developed, it
engaged its product users – the consumers – directly. This allowed the
company to identify product needs a lot better thus it can be said that
their innovation stemmed from its consumers. In the 1990s, with as many
as 30 key technologies, 3M’s innovation process emphasized on finding
new twists to its existing products. To do so, 3M made Research and
Development one of its top priorities by employing numerous scientists,
engineers and technicians. Even though 3M still employed market
research to help identify market needs, there was an obvious shift in its
innovation process – from one that engages its consumers to one that
placed heavy emphasis on innovation from within.

There are numerous reasons as to why 3M ought to regain its historic

closeness to its customer, the most important one being that its current
method of obtaining market research and information failed to recognize
the market needs five or 10 years down the road. From the figures shown
in Exhibit 2, the company is experiencing a slowing growth in terms of its
operating profit. Even though the company is still growing, but it needs to
come up with new products for the market rather than just creating
incremental innovations on its existing lines. This problem is aggravated
by the fact that many of its product concepts and inventions awaited
markets, languishing away in its labs and drawing boards – which have
once again highlighted the importance of engaging its customers.
Moreover, the current process of obtaining market information created
too many interfaces between development teams and customers and the
information obtained was not necessarily proprietary.

Market research information and knowing the market needs are integral
parts of the business process. As shown in Fig. 1 below, they are part of a
self-reinforcing cycle which will ultimately allow the company to grow

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from strength to strength. Also, it is important for us to know that

majority of 3M’s current lines of products were first being created from its
traditional innovation process – one which involves its customer.
Therefore, we can once again see the need for 3M to regain its closeness
with its consumers.

Fig. 1 Business Process Cycle

Creating revenue from incremental products has got numerous benefits,

one of which is the creation of a steady source of revenue. Due to the fact
that there are no uncertainties during the innovation process and that
there already exists a ready market for the new products derived from
incremental innovation, it offers the company stability and ensures a
stream of income.

Another benefit would be that the company would not need overhauls of
its manufacturing facilities every now and then since only minor
adjustments to the facilities need to be made in order to accommodate
the new innovation.

With incremental products, there’ll also be familiarity between the

products and its consumers, thus there would not be a need to change
consumer’s perceptions or get them to adopt a brand new product.

However, the most important benefit obtained from incremental products

is that it leverages upon existing knowledge and resources of the
company, thus allowing the incumbent market leader to maintain its pole
position in the industry.

But besides the advantages of incremental products, we must also draw

light on its pitfalls; one of which is the limited growth prospects that the
product possesses. Since each product has a finite market, the growth in
sales of the product will taper off after its initial boom years, therefore

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incremental products suffer from the fact that it is unable to tap into a
new market and enjoys limited sales growth on its current one.

Moreover, given that the each incremental innovation does not change
the nature of the product by a huge extent, it competes in the very same
market as before. Not only will this product face stiff competition from
other companies – since competitors can easily come up with alternatives
to products which have already existed in the market for a long time – the
product also face the potential problem of its newer edition cannibalizing
on the sales of its older editions.

Lastly, because most companies which focus on incremental products

invest large amounts of capital in the products – in terms of machinery to
produce it or its R&D costs – it runs the risks of having obsolete
production facilities should a radical product be introduced into the
market and thus provides a cheaper and better alternative to the existing
product.

Question 2
Lead users are users of an application, product, service or similar that
experience needs ahead of the masses. They are also in the position to
benefit greatly if they obtain a solution to these needs. They are usually
people or firms who are at the cutting edge of their respective fields and
are most likely eager to participate in the innovation process. The idea of
a new product often originates with a lead user and may even appear in
prototype form in the lead user's firm.

An early adopter is simply a person who embraces new technology before

most other people do. Early adopters tend to buy or try out new products,
and new versions of existing products, sooner than most of their peers,
but they do not participate in the innovation process. Therefore, early
adopters are not lead users.

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How does lead user research and the traditional method

differ/complement each other?

There are a few reasons why traditional market research methods make it
near impossible to find new, unmet needs. Firstly, companies typically
obtain the wrong customer inputs, an incomplete set of inputs or a mix of
inputs because the division responsible for data collection is unaware of
what a good input is to begin with. Secondly, because of the way
questionnaires are typically structured and administered, companies
often limit the number of attributes they test in a survey when many
statements often need to be evaluated. This means that a significant
number of the attributes are cut out of the survey prematurely.

For Lead user research, inputs come directly from the expert users, who
are working in the targeted industry. This not only gives the team a
clearer understanding of the unmet needs, these experts can share an
important problem or solution of relevance to the future. The diverse set
of expertise of the team allows cross-functional developments/solutions.

Lead User research tends to follow a non-linear path, as opposed to

traditional market research methods. Lead User researchers work by
coming up with questions leading to new concepts, which starts a new
cycle of asking questions anew. Hence, there is a chance that they are
exploring a development path that leads them astray, meaning a waste of
resources. Traditional market research methods, which work on logic and
quantifiable data, do not face such problems.

Key benefits from “lead user” research

The utmost benefit that the lead user research provides is the direct
contact with the expert users in the targeted field. This avoids the
problem of distorted information provided by the traditional method. The

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new development based on lead user research would better match the
needs of the targeted market.

Question 3
We feel that the success of application of lead user research in 3M cannot
be judged by the success of the products developed as a result of lead
user research. From the information given, we are not able to decide on
the viability of products developed due to lead user research at 3M.
Hence, we measure its success by the key elements as follows:

1. Supportive management

2. Cross-disciplinary team of highly skilled people

3. High level of commitment

4. Clear understanding of Lead User research principles

Although Rita Shor had to spend tremendous effort convincing the senior
management of the project and met with some resistance from Dunlop
during the final stage of the project, the management did not interfere
with the progress of the project. Therefore, our team concludes that even
though the management was skeptical about the lead user approach, we
should take into consideration that it was a significant change from the
traditional research method and that it is natural for people to be wary of
unknown territory.

Next, from exhibit 5 and 6, we can conclude that the 3M staffs and
consultants involved in the project were professionals from different
divisions. This is an essential principle of the lead user research as the
contribution from each member will help in development of cross-
functional products that meets the needs of the targeted industry. A
cross-disciplinary team of skilled personnel from 3M were able to tackle

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the research problems from a variety of angles, producing solutions that

draw from as wide a knowledge pool as possible.

The team also displayed a commendably high level of commitment to the

Lead User research process and stuck to the project schedule in a
disciplined manner, in spite of the fact that they were expected to
perform their traditional duties. Throughout the four stages prescribed by
the Lead User research methodology, the team has demonstrated high
level of dedication.

The Lead User method requires the team to go through four stages,
planning the end of the project, identifying the needs of the targeted
industry, retrieving relevant information from the various lead users,
interpreting all the info and generating new products, service, or
strategies. Under the capable guidance of Sonnack and Churchill, the 3M
team completed the entire Lead User research process on time and with
tangible results, displaying a clear understanding of the Lead User
research principles involved.

Question 4
Our recommendation is for the Medical-Surgical Lead User team to
recommend the three new product concepts to Dunlop but hold the fourth
recommendation, which is to include upstream containment of infections
in the business unit’s strategy. We shall explain how we arrived at our
stand.

Firstly, we would answer the question of whether the three product

concepts could have been obtained using traditional market research
methods. Our stand is that it would have been highly unlikely. These
three product concepts were created from the intense discussion
amongst the lead users and 3M personnel, as part of the Lead User
research process. Without inputs from such a diverse, yet highly relevant

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pool of outside experts (which included unlikely candidates like a make-

up artist and a veterinarian surgeon), it is improbable these three product
concepts could have been obtained. As stated before, the Lead User
process aims to forecast market opportunities by tapping the expertise
and experience base of “lead users”. The process results in richer
information on emerging customer needs and better quality of product
development process as compared to the traditional market research
method, which is encumbered by its linear and logical approach.

Our point is that since these three product concepts could only have
come about through using the Lead User research methodology, the Lead
User research process has already been a justifiable success. We should
also take into account the fact that the Lead User team managed this
achievement even when they were performing their traditional duties.
Therefore, we feel that the proposed change of the business unit’s
strategy is an unnecessary element which may have disastrous
consequences if it does not achieve the desired results.

The team’s fourth recommendation involved a radical change in the

Medical-Surgical business unit’s strategy, to include upstream
containment of infections. The conventional wisdom was to treat every
patient in the same manner, with regards to infection containment. The
team’s recommended approach involved a new level of sophistication,
such as targeting specific individuals for interventions based on their risk-
level and detecting specific contaminants. Through the Lead User
research process, the team realized the area of early intervention in the
disease process was a relatively untapped market and it was where 3M
could find a new growth area. It had an immense profit potential and
could be the catalyst that revived the stagnating Medical-Surgical
Markets Division.

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However, several factors weigh heavily against the new business

strategy’s chances of success. First of all, even though there was no real
competition in this venture, 3M itself lacked the expertise to pull it off.
The new business strategy required combining technologies from more
than one core area or from areas in which 3M was not strong in.
Moreover, it was clear that the new business strategy would face stiff
resistance from Sam Dunlop. With opposition from senior management, it
was highly unlikely the new business strategy would be pursued whole-
heartedly and therefore, there was only a slim chance of success. We lack
the means to quantify the risks and returns for this new business strategy
but we believe that the lack of both proper expertise and management
support translates into a less than desirable success rate for the team’s
proposed new business strategy. Next, we looked into the risk posed to
both the Lead User process at 3M and the Medical-Surgical business unit
if the proposed new business strategy fails.

The Medical-Surgical Markets Division was one of the first divisions at 3M

to focus product development based on the Lead User method. It was
Mary Sonnack and Joan Churchill’s goal to disseminate the Lead User
process throughout 3M, as part of efforts to get 3M back to its roots of
working closely with customers and understanding their market needs. In
a very practical way, the Lead User process carried out by the Medical-
Surgical team was a “trial-run”. Its success or failure would influence 3M’s
senior management in their decision whether to continue spreading the
Lead User method throughout other divisions. If the new business
strategy didn’t succeed, it would give certain management the perfect
opportunity to discredit the entire the Lead User research methodology.
Therefore, the risk of failure was not just limited to squandering the
commitment of the Medical-Surgical team but also the entire Lead User
research process as well.

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Next, we consider the risk posed to the Medical-Surgical business unit.

Despite being number one in its market niche of surgical drapes, the
business unit was stagnating. Growth in domestic markets was limited
and weaker foreign currencies made 3M products uncompetitive in
overseas markets. The business unit had gone a decade with only one
successful product and management was considering selling off the entire
business unit. If the new business strategy didn’t succeed, it might be the
proverbial “last straw that broke the camel’s back”, causing the division
to be cast off.

Once again, we reiterate our stand that the Medical-Surgical Lead User
team should recommend the three new product concepts and hold the
fourth recommendation. We feel this would be in line with 3M’s
incrementalist approach to product innovation. Furthermore, the three
product concepts are more likely to be favourably received by the
markets and they fall within 3M’s scope of expertise.

Question 5
Since the dawn of Taylor’s Scientific Management, many firms have been
quick to jump onto the bandwagon due to its perceived benefits and
breakthrough techniques. However, 3M has proven otherwise and taught
us some lessons.

Firstly, 3M gives its staff huge space for innovation and discretion. The
company sees its employees as assets with knowledge and ability,
instead of a means of production. These can be exemplified by 3M’s
famous method of allowing their staff to spend 15% of their time to
explore new ideas, which resulted in Post-it Notes, among other
innovations.

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Secondly, 3M has taught to accept change and to select management

staff who practice that philosophy. Lead User Research might have not
have been integrated into 3M if the management is not receptive to
change.

Thirdly, areas of expertise should be focused. 3M has done this with their
“dual ladder” approach which allows engineers to promote without going
into management. The notorious Challenger Space Shutter disaster might
not have happened should Morton Thiokol understood the need to
separate managers from engineers. This also decreases staff turnover
and keep staff happy.

Lastly, 3M has shown us that knowing consumers’ needs are not enough.
We need to anticipate them. This is exemplified by 3M’s stagnating
surgical drapes business before Lead User Research was implemented.