3M Research Paper.docx
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3MResearchPaper
SecretaryofDefense
CorporateFellowsProgram
FINALREPORT
3MCOMPANY
ColDavidW.Ziegler,USAF
May2002
the3mcoMPANY:
SHARPENINGTHEBUSINESSEDGEANDIMPLICATIONSFORTHEDOD
by
DavidW.Ziegler,Colonel,USAF
AResearchReportSubmittedtotheDirector
InPartialFulfillmentofFellowshipRequirements
Advisor:
Mr.EricBriggs
WashingtonD.C
May2002
Disclaimer
TheviewsexpressedinthisacademicresearchpaperarethoseoftheauthoranddonotreflecttheofficialpolicyorpositionoftheUSgovernmentortheDepartmentofDefense.InaccordancewithAirForceInstruction51-303,itisnotcopyrighted,butisthepropertyoftheUnitedStatesgovernment.
Contents
Page
Contentsiii
Illustrationsv
Prefacevi
ExecutiveSummaryvii
3MTheCompany1
3M'sBusiness1
MarketCentersandProducts1
OperationsandRevenue2
3M'sOrganization2
3M'sDecentralizedRoots2
3MTheStrategy3
RecoveringGrowth3
3M'sFiveCoreInitiatives4
Sourcing4
IndirectCosts6
e-Productivity7
3MAcceleration10
SixSigma11
SixSigma12
SixSigma'sRoadto3M13
Motorola13
AlliedSignal13
GE.13
SixSigmaat3M14
CorporateGoals14
TheD-M-A-I-CProcess14
EngagingtheCorporation20
ExpandingtheDefinition22
PerformanceManagementat3M23
AYearintheLife24
StartingtheProcess24
TheDraftC&DS25
StratificationofEmployees26
ManagementTeamReview(MTR)28
FeedbackofResultstotheEmployee29
HealthofOrganization(HOO)30
PerformanceManagementandRetention31
AClimateofInnovation32
AVisionforInnovation32
InnovationandtheBottomLine32
TheFifteenPercentRule34
EquippingThroughEducation34
TheTotalClimateforInnovation34
PatriotsWithoutUniforms35
RecommendationsfortheDepartmentofDefense36
Introduction36
SpecificRecommendations36
RecognitionDuring2001andEarly200244
2001RankingsandRecognition44
Early2002RankingsandRecognition45
InnovationChronicles47
DickDrewandtheInventionofMaskingTape47
PatsyShermanandtheDiscoveryofScotchgard™FabricProtector48
ArtFryandtheInventionofPost-it®Notes49
Bibliography52
Illustrations
Page
Figure1ProcessMap16
Figure2CauseandEffectsMatrix17
Figure3FailureModeandEffectsAnalysis18
Preface
AsaSecretaryofDefenseCorporateFellow,Iwasassignedtothe3MCompany'sheadquartersinSt.PaulfromAugust2001toMay2002.
TheSecretaryofDefenseCorporateFellowsProgram(SDCFP)placesseniormilitaryofficerswithindustry-leadingcompaniesfortheirseniorserviceschoolexperience.Duringtheyear-longprogram,theseofficersworkalongsideseniorexecutivestoobservehowCorporateAmericainnovateswithorganizations,informationtechnologiesandchangemanagementtechniques.
Asprogramobjectivesgo,3MwasideallysuitedtohostaSDCFPFellow.3M'snewchiefexecutiveofficer(CEO)recentlykickedofffivebroadinitiativestoimprovebusinessperformanceandfundamentallytransformthecompany'sworkculture.What'smore,byApril2002,thecompanyappearedtobewellonitswaytomakingthetransformationwork.Mypaperlaysout3M'sstrategyfortransformation,considersthebusinesspracticespropellingthecompanyforward,summarizesearlyresults,anddrawspotentiallyrelevantconclusionsfortheDepartmentofDefense.
Igratefullyacknowledge3M'ssupportduringmyfellowship.Theirenthusiasmfortheprogrammadeforarichexperiencebothpersonallyandprofessionally.IwouldespeciallyliketothankthosemostresponsibleforwhatIsawandIdidovermytenureasaFellow.HaroldLaskin,WaynePletcherandCathyMuggeeadeptlyopeneddoorstoprojectsthatquicklymademepartofthe3Mteam.SteveTrudeauwasaskillfulandpatientteacher,asIgrappledtounderstandCorporateAmerica’slexiconandpractices.JohnSchoenherrandLindaGodbouthelpedmeunlockthesecretsofSixSigmaandgenerouslyarrangedmyforayintotheworldofChampionsandGreenBelts.Inadditiontomycommercialcounterparts,thereareotherstothankinthegovernment.EricBriggsastutelyshepherdedtheprogramatsevencorporationsanddeftlybalancedguidancewiththeflexibilitytoaccommodatetheuniqueenvironmentofeachcompany.SeniorleadersacrosstheDepartmentofDefensekepttheprogramrelevantwiththeirprogramparticipationandsavvycomments.Finally,Iacknowledgethefaithfulcontributionsofmyfamily.Asalways,IcouldnothavedoneitwithoutmywifeJanandtheothermembersofour“corporateboard”Jordan,JessiandNate.Godcontinuestoblessusbeyondmeasure.
ExecutiveSummary
The3MCompanyisadiversemanufacturerwithtotalrevenuesofalmost$17Bfromoperationsandsalesacrossnearly300countries.Thecompanyhasbeenprofitablesince1916,whenitpaiddividendsthatcontinueuninterruptedtothisday.
Despitepastsuccesses,3Mistakingstepstosignificantlyimproveitsgrowth.UnderitsnewCEO,Mr.JimMcNerney,thecompanyispullingtogetheritstraditionallydecentralizedorganizationsaroundsharedcorporateinitiatives.Theinitiativesaimtomake3Mmorecompetitivebytacklingcompanyprocessesinprocurement,researchanddevelopment,andchangemanagement.Theseprocessesinclude:
(1)improvedprocurementusingglobalteams,betterdiagnosticspenddata,andless-expensiveoverseassuppliers,
(2)reducedspendingoncommoditiesandservicesthatarenotdirectlypartofa3Mproductoritscapitalbase,(3)e-Productivitythroughnewbusinessprocessespoweredbyelectronictoolssuchason-lineorderentry,supplier-managedinventory,e-Auctions,ande-Travel,(4)accelerationofthemostpromisingtechnologiestomarket,and(5)SixSigma.SixSigmais3M’snumberoneinitiative.Itisaveryeffectivedisciplineformanagingchangeacrossthecorporationateverylevel.
Inadditiontoitsfiveinitiatives,3Misfine-tuningthewayitmanagestheperformanceofemployeesandnurturesitswidelyrecognizedclimateofinnovation.Recentchangesmorequicklyidentifythecompany’stopandlowerperformerswithaneyeoncareerdevelopmentandimprovedperformanceinbothcases.Overthecourseofayear,3Msystematicallyevaluateseveryemployee,aswellasthebroader“peoplehealth”ofitsorganizations.
3Mcultivatesinnovationfromtoptobottom.Fromthetop,innovationisawatchwordin3M’scorporatevisionandcustomerpromises.Whenitcomestoprofits,corporateleadersexpecttheirbusinessunitstogenerate30percentofannualsalesfromproductsintroducedinthelast4years.Thesameleaderssupportthatexpectationthroughawell-establishedsystemofgrantsandseedmoneyforpromisingideas.3Mcomplementsthistop-downsupportforinnovationwithabottoms-uppush.Researchersareencouragedtospend15percentoftheirtimeonproduct-relatedprojectsoftheirownchoosing.Toenhancethequalityofthoseefforts,thecompanyliberallyfundseducationforallemployees.
Thispaperdrawson3M’sbusinessapproachtomakeninerecommendationsfortheDepartmentofDefense:
1.AligntheDODwithclearlyarticulatedinitiativesandgoals.Justas3Maligneditselfwithfivecentralizedinitiatives,theDODwouldgreatlybenefitfrominternallyaligningitsorganizationswithwell-articulatedinitiatives.
2.LeveragetheDOD’ssizetoachieveprocurementefficiencies.3Mbuysover$7Binrawmaterials,services,equipmentandsupplies.Undertheirsourcinginitiativethecompanyiscollectivelyworkingandontracktosave$500Mbytheendof2002.Federalregulations,decentralizedspendingauthorities,anddifferentServicesystemsconspireagainstcentralizedspendingstrategiesintheDOD.Wherelegalandfeasible,however,theDODshouldconsiderthesameactionsthatcorporateleadersarenowbeginningtolaunchincluding:
(1)globalspendmanagementteams,
(2)centralizationofpurchasingauthorities,(3)automationofspenddatacollection,and(4)expandedbusinesswithlessexpensiveoverseassuppliers.
3.Attack“indirectcosts”acrosstheDOD.3Mreducedindirectspendingby$500Min2001comparedto2000.Theyapproachedtheinitiativethroughcross-functionalIndirectCostReductionteams.ThesameapproachcouldaidtheDODinitsowneffortstoreduceindirectcosts.
4.Investsmartlyine-Productivity.3M’se-Productivityinitiativeisaboutusingelectronictechnology,suchaselectronicdatainterchangeandtheInternet,toimprovebotheffectivenessandefficiency.Implementing3M’sapproachwouldleadtheDODto:
(1)automateitspurchasesfromthepointofinitialordertoreceiptofgoodsandservices,
(2)morecloselycollaboratewithsupplierstomanageinventories,(3)judiciouslyusee-Auctionsforappropriatespendcategories,and(4)conductallaspectsoftravelon-line.
5.Releasethepowerofacommonorganizationalapproachtochangemanagement.SixSigmais3M’snumberoneinitiative.Itisachangemanagementdisciplinethatengagestheentirecompanytopursuecommoncorporategoalsthroughacommonproblemsolvingprocess.There’snoquestionthatchangemanagementdisciplines,suchasSixSigma,canpromotepositivechangeintheDOD.Thefundamentalquestion,fortheDOD,iswhetheritcouldcreatetheconditionsrequiredforsuccess.
6.Institutionalizeprogramstoimprovethelowertierofperformers.AswiththeDOD,3M’sperformancemanagementsystemisdesignedtofindanddevelopitstoptalent.UnliketheDOD,3Mrecentlyformalizedquotasforitslower-tierperformersitssupervisorsmustranktenpercentoftheiremployeesinthe“lower”performancecategory.AsimilarpolicyintheDODmightleadtomoreproductiveemployeeswhoaremoreloyaltotheinstitutionthatcamealongsidetohelpmakethemmoreeffective.
7.En