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Minnesota Mining & Manufacturing Company (3M)

Minnesota Mining & Manufacturing Company (3M)

3M Center
St. Paul, Minnesota 55144-1000
U.S.A.
(651) 733-1110
(800) 364-9436
Fax: (651) 736-2133
Web site: http://www.3M.com

Public Company
Incorporated: 1929
Employees: 75,639
Sales: $15.07 billion (1997)
Stock Exchanges: New York Pacific Chicago Tokyo Amsterdam Swiss
Ticker Symbol: MMM
SICs: 2672 Paper Coated & Laminated, Not
Elsewhere Classified; 2834 Pharmaceutical Preparations; 2891
Adhesives & Sealants; 2899 Chemical Preparations,
Not Elsewhere Classified; 3089 Plastics Products, Not
Elsewhere Classified; 3291 Abrasive Products; 3643
Current-Carrying Wiring Devises; 3679 Electronic Components,
Not Elsewhere Classified; 3842 Surgical
Appliances & Supplies

The largest manufacturer in Minnesota, the 89th largest U.S. company overall, and a member of the Dow Jones 30, Minnesota Mining & Manufacturing Company (officially abbreviated as 3M) is Wall Streets epitome of high-tech/low-tech business and solid blue chip performance. Its daunting inventory of some 50,000 products runs the gamut from Post-it Notes and Scotch tape to transdermal patches of nitroglycerin. Its equally daunting global presence extends to subsidiary companies in more than 60 countries and markets in nearly 200, as well as net sales from international operations of $7.8 billion, or 52 percent of the companys total 1997 revenue. 3M owes its formidable strength to its unusual corporate culture, which comfortably fosters innovation and interdepartmental cooperation, backed by a massive research & development budget, which in 1997 exceeded $1 billion. Because of this, 3M ranks as a leader inand in many cases a founder ofa number of important technologies, including pressure sensitive tapes, sandpaper, protective chemicals, microflex circuits, reflective materials, and premium graphics. In 1998, the company realigned into three organizations: Industrial and Consumer Markets; Health Care Markets; and Transportation, Safety and Chemical Markets.

Rough Start As Sandpaper Maker: 1900s-10s

3M was formed in 1902 in Two Harbors, Minnesota, a thriving village on the shores of Lake Superior, by five entrepreneurs in order to mine the rare mineral corundum and market it as an abrasive. The ill-planned venturesparked by a flurry of other forms of mining operations in northeastern Minnesotanearly bankrupted the company, for its mineral holdings turned out to be not corundum but low-grade anorthosite, a virtually useless igneous rock. This unsettling discovery (by whom or when is unclear) was never disclosed in the company records and, for whatever reason, did not deter the owners from establishing a sandpaper factory in Duluth, another more or less illfated scheme that placed the company further in jeopardy (3M faced a host of abrasives competitors in the East and was soon forced to import a garnet inferior to that owned by domestic manufacturers, which resulted in a lower quality product).

In May 1905 a principal investor named Edgar B. Ober, determined to save the company, convinced friend and fellow St. Paul businessman Lucius Pond Ordway to join with him in rescuing 3M from almost certain demise by paying off $13,000 in debt and pumping in an additional $12,000 in capital. Together Ordway and Ober purchased 60 percent of the company; over the next several years, Ordway, a self-made millionaire, spent an additional $250,000 on a company that had yet to produce a profit, and Ober, who proceeded to oversee 3M, went without a salary. Ordways continued backing, despite a strong desire to cut his losses early on and his decision to move the firm to St. Paul in 1910, ensured 3Ms eventual health during the boom years following World War I.

Early Dual Leadership Instills Legacy of Innovation: 1920-40s

Of greatest significance to both the companys foundation and future were the Wrings in 1907 and 1909 of William L. McKnight and A.G. Bush, respectively. Former farmhands trained as bookkeepers, the two worked as a team for well over 50 years and developed the system that helped make 3M a success. McKnight ran 3M between 1916 and 1966, serving as president from 1929 to 1949 and chairman of the board from 1949 to 1966. He created the general guidelines of diversification, avoiding price cuts, increasing sales by ten percent a year, high employee morale, and quality control that fueled the companys growth and created its unique corporate culture. In some ways, the sales system overshadowed the guidelines. McKnight and Bush designed an aggressive, customer-oriented brand of salesmanship. Sales representatives, instead of dealing with a companys purchasing agent, were encouraged to proceed directly to the shop where they could talk with the people who used the products. In so doing, 3M salesmen could discover both how products could be improved and what new products might be needed. This resulted in some of 3Ms early innovations. For instance, when Henry Fords newly motorized assembly lines created too much friction for existing sandpapers, which were designed to sand wood and static objects, a 3M salesman went back to St. Paul with the news. 3M devised a tougher sandpaper, and thus captured much of this niche market within the growing auto industry. Another salesman noticed that dust from sandpaper use made the shop environment extremely unhealthy. Around the same time, a Philadelphia ink manufacturer named Francis G. Okie wrote McKnight with a request for mineral grit samples. According to Virginia Huck, McKnights handling of Okies request changed the course of 3Ms history. He could have explained to Okie that 3M didnt sell bulk mineral.... Instead, prompted by his curiosity, McKnight instructed 3Ms Eastern Division sales manager, R.H. Skillman, to get in touch with Okie to find out why he wanted the grit samples. The reason soon became clear: Okie had invented a waterproof, and consequently dust-free, sandpaper. After purchasing the patent and then solving various defects, 3M came out with WetorDry sandpaper and significantly expanded its business, eventually licensing two other manufacturers, Carborundum and Behr-Manning, to keep up with demand. It also hired the inventor as its first full-time researcher. This marked the creation of one of the nations first corporate research and development divisions.

Sending salesmen into the shops paid off a few years later in an even more significant way, by giving 3M its first non-abrasives product line. In 1923 a salesman in an auto body painting shop noticed that the process used to paint cars in two tones worked poorly. He promised the painter that 3M could develop an effective way to prevent the paints from running together. It took two years, but the research and development division invented a successful masking tapethe first in a line of pressure-sensitive tapes that now extends to over 900 varieties. The invention of Scotch tape, as it came to be called and then trademarked, established 3M as a force for innovation in American industry. Taking a page from its sandpaper business, 3M immediately began to develop different applications of its new technology. Its most famous adaptation came in 1930, when some industrious 3M workers found a way to graft cellophane, a Du Pont invention, to adhesive, thus creating a transparent tape.

Transparent Scotch tape, now a generic commodity, provided a major windfall during the Depression, helping 3M to grow at a time when most businesses struggled to break even. Another salesman invented a portable tape dispenser, and 3M had its first large-scale consumer product. Consumers used Scotch tape in a variety of ways: to repair torn paper products, strengthen book bindings, mend clothes until they could be sewn, and even remove lint. By 1932 the new product was doing so well that 3Ms main client base shifted from furniture and automobile factories to office supply stores. During the 1930s, 3M funneled some 45 percent of its profits into new product research; consequently, the company tripled in size during the worst decade American business had ever endured.

3M continued to grow during World War II by concentrating on understanding its markets and finding a niche to fill, rather than shifting to making military goods, as many U.S. corporations did. However, the war left 3M with a need to restructure and modernize, and not enough cash on hand to do so. To meet its building needs, in 1947 3M issued its first bond offerings. Its first public stock offering, coupled with its tremendous growth rate, attracted additional attention to 3M. In 1949, when President McKnight became chairman of the board (with A.G. Bush also moving from daily operations to the boardroom), it marked the end of a tremendous era for 3M. Under McKnight, 3M had grown almost 20fold. By its 50th year, it had surpassed the $100 million mark and was employing some 10,000 people.

Growing Reputation: 1950s

Such growth could not be ignored. Now that 3M was publicly traded, investment bankers took to recommending it as a buy, business magazines sent reporters to write about it, and other companies tried to figure out how 3M continued to excel. McKnights immediate successor as president, Richard Carlton, encapsulated the companys special path to prosperity with the phrase: well make any damn thing we can make money on. Yet the 3M method involved a great deal more than simply making and selling. Its metier had been, and continues to be, finding uninhabited markets and then filling them relentlessly with high-quality products. Therefore, research and development received money that most companies spent elsewheremost companies still did not have such departments by the early 1950sand the pursuit for ideas was intense.

Company Perspectives:

At 3M, we are committed to satisfying our customers with superior quality and value; providing investors with an attractive return through sustained, high-quality growth; respecting our social and physical environment; and being a company of which employees are proud.

Carlton kept the company focused on product research (today, 3M rewards its scientists with Carlton Awards), which led to another innovation in the 1950s, the first dry-printing photocopy process, ThermoFax. 3M breezed through the 1950s in impressive fashion, with 1959 marking the companys 20th consecutive year of increased sales. Yet, for all its growth and diversity, 3M continued to produce strong profits from its established products. In a way, this was almost to be expected, given 3Ms penchant for being in uninhabited markets. As noted by John Pitblado, 3Ms president of U.S. Operations, almost everything depends on a coated abrasive during some phase of its manufacture. Your eyeglasses, wrist watches, the printed circuit thats in a TV set, knitting needles... all require sandpaper.

Skyrocketing 1960s to Earthly Ups and Downs in the 1970s and 1980s

In the 1960s 3M embarked on another growth binge, doubling in size between 1963 and 1967 and becoming a billion-dollar company in the process. Existing product lines did well, and 3Ms ventures into magnetic media provided excellent returns. One venture, the backdrops used for some of the spectacular scenes from the 1968 movie 2001: A Space Odyssey, earned an Academy Award. During the 1970s a number of obstacles interfered with 3Ms seeming odyssey of growth. Among these were the resignations of several of the companys top executives when it was revealed that they had operated an illegal slush fund from company money between 1963 and 1975, which included a contribution of some $30,000 to Richard Nixons 1972 campaign. Sales growth also slowed during the decade, particularly in the oil crunch of 1974, ending 3Ms phenomenal string of averaging a 15 percent growth rate. 3M responded to its cost crunch in characteristic fashion: it turned to its employees, who devised ways for the company to cut costs at each plant.

The company also had difficulties with consumer products. Particularly galling was the loss of the cassette tape market, which two Japanese companies, TDK and Maxell, dominated by engaging in price-cutting. 3M stuck to its tradition of abandoning markets where it could not set its own prices, and backed off. Eventually, the company stopped making much of its magnetic media, instead buying from an overseas supplier and putting the 3M label on it (3M instead focused attention on data storage media for the computer market, in which it continues as a world leader). The loss of the cassette market was not overwhelming: revenues doubled between 1975 and 1980, and in 1976 3M was named one of the Dow Jones Industrial 30.

Unfortunately, price-cutting was not the only problem confronting 3M as it entered the 1980s. Major competitors seemed to face the company on all fronts: the niches of decades past seemed extinct. When Lewis Lehr became company president in 1981, he noted that there isnt a business where we dont have to come up with a new technology. He promptly restructured 3M from six divisions into four sectors: Industrial and Consumer, Electronic and Information Technologies, Graphic Technologies (later renamed Imaging and combined with Information and Electronic), and Life Sciences, containing a total of some 40 divisions. He also established a goal of having 25 percent of each divisions earnings come from products that did not exist five years before. Lehrs concern was not to keep the company going, for 3M was still well-respected, with a less than 25 percent debt-to-equity ratio and reasonable levels of growth. Shareholders, too, had little to complain about, for 1986 marked the 18th consecutive year of increased dividends. Rather, Lehr wanted to ensure that 3M would continue to develop new ideas. The major product to come out of the 1980s was the ubiquitous Post-it, a low-tech marvel created by Art Fry.

Challenges of the 1990s

L. D. DeSimone, who joined 3M in 1958 as a manufacturing engineer and moved into management while working in international operations, was named CEO in 1991. He took the helm of a ship being buffeted by economic recession and stiff price competition: sales rose an annual average of just two percent from 1991 to 1993. Kevin Kelly wrote in a 1994 Business Week article, It turned out that the creative juices that had transformed 3M into a paragon of innovation and the inventor of everything from ubiquitous yellow Post-it notes to surgical staples werent producing new products fast enough.

DeSimone pushed research staff to work more closely with marketers and transform existing technology into commercial products. Connecting with customers needs took on more urgency. Product turnaround time was slashed; product development rivaled basic research. Customer-driven products gleaned from the new system included the Never Rust Wool Soap Pad made from recycled plastic bottles and a laptop computer screen film which enhanced brightness without heavy battery drain.

On the international front, foreign sales produced more than 50 percent of total 3M sales for the first time in company history in 1992. The Asia Pacific region yielded nearly 27 percent of the $7 billion foreign sales volume. A major restructuring of European operations was completed in 1993: manufacturing plants were closed and consolidated and the workforce was trimmed in response to declining operating income.

The company achieved record sales, operating income, net income, and earnings per share in 1994. More than $1 billion of the $15 billion in total sales came from first-year products. DeSimone raised the bar: at least 30 percent of future sales were to come from products introduced within the past four years.

On a more somber note, in 1994 3M took a $35 million pretax charge against probable liabilities and associated expenses related to litigation over 3Ms silicone breast implant business operated through former subsidiary McGhan Medical Corporation. 3M was named in more than 5,800 lawsuits claiming injuries caused by leakage or rupture of the implants.

In 1996, 3M dismantled the Information, Imaging and Electronics sector which accounted for a fifth of its business. It was the largest restructuring effort in company history. The divisions making floppy disks and other data-storage media, x-ray film and specialty imaging equipment were spun off as an independent, public company, and the audio and videotape operations shut down entirely. 3M retained the businesses making electrical tapes, connectors, insulating materials, overhead projects, and transparency films. The company cut about 5,000 jobs.

Since DeSimone took command, 3M had pumped $1.2 billion into the Information, Imaging and Electronics division, yet operating profit margins remained only a third of the Industrial and Consumer Products and Life Sciences divisions. Persistent pricing pressures from competitors such as Kodak plus rising raw material costs prompted DeSimone to pull the plug on the audio and videotape business. A smaller, leaner operationthe new $2 billion Imation Corporationwas deemed to have better prospects in the equally fierce data-storage marketplace.

Future Forecast

Following restructuring, 3M concentrated product development efforts on about two dozen core technologies. In 1997 the company achieved one of DeSimones goals: 30 percent of total sales were generated from products introduced within the past four years. But 3Ms numbers began slipping again in 1998. Michelle Conlin wrote in an October 1998 Forbes article, Are these unavoidable downward blips on a rising curve? Or are they signs of deeper trouble? 3M has been glacially slow to respond to the economic meltdown in Asia, where it gets 23% of its business. In the U.S. a flood of cheaper products made by competitors like Korean polyester film outfits SKC and Kolon have cut into 3Ms sales.

Conlin conceded that 3M had promising products, such as bendable fiber-optic cable and a fluid to replace ozone-depleting chlorofluorocarbons, already in the pipeline. In the long run, 3M has little to worry about. Despite its gargantuan size, the company maintains a distinctively entrepreneurial environment and, through one of its several legendary rules, allows its employees to spend up to 15 percent of company time on independent projects, a process called bootlegging or scrounging. As In Search of Excellence authors Thomas J. Peters and Robert H. Waterman, Jr., have written, because heroes abound at 3M, because scrounging is encouraged, because failure is okay, because informal communications are the norm, because overplanning and paperwork are conspicuously absent, because of these and a half-dozen more factors functioning in concertover a period of decades, innovation works at 3M. A near fixture on Fortunes annual list of the most admired companies in America, 3M is that most prized of conglomerates: a perennial money-maker with the innovative culture and managerial drive to ensure that it remains so.

Principal Subsidiaries

Dyneon L.L.C. (54%); Eastern Heights State Bank (99%); 3M Unitek Corporation; 3M Argentina S.A.C.I.F.I.A.; 3M Australia Pty. Ltd.; 3M Oesterreich GmbH (Austria); 3M Belgium S.A./N.V.; Seaside Insurance Limited (Bermuda); 3M do Brazil Limitada; 3M Canada Inc.; 3M A/S (Denmark); Suomen 3M Oy (Finland); 3M France, S.A.; 3M Deutschland GmbH (Germany); 3M Hong Kong Limited; 3M Italia Finanziaria S.p.A. (Italy); Sumitomo 3M Limited (Japan; 50%); 3M Health Care Limited (Japan; 75%); 3M Korea Limited; 3M Mexico S.A. de C.V.; Corporate Services B.V. (Netherlands); 3M Nederland B.V. (Netherlands); 3M (New Zealand) Limited; 3M Norge A/S (Norway); 3M Puerto Rico, Inc.; 3M Singapore Private Limited; 3M South Africa (Proprietary) Limited; 3M Espana, S.A.; 3M Svenska AB (Sweden); 3M (East) A.G. (Switzerland); 3M (Schweiz) A.G. (Switzerland); 3M Taiwan Limited; 3M Thailand Limited; 3M United Kingdom Holdings P.L.C.; 3M Venezuela, S.A.

Principal Operating Units

Industrial and Consumer Markets; Health Care Markets; Transportation, Safety and Chemical Markets.

Further Reading

And Then There Were Two, Economist, November 18, 1995, pp. 74-75.

Conlin, Michelle, Too Much Doodle? Forbes, October 19, 1998, pp. 54-55.

DeSilver, Drew, Aftershock Layoffs Seen for 3Ms Spin-Off, Minneapolis/St. Paul CityBusiness, November 17, 1995, pp. 1, 45.

Dubashi, Jagannath,Technology Transfer: Minnesota Mining & Manufacturing, Financial World, September 17, 1991, pp. 40-41.

Fredrickson, Tom, 3M Unifies Its Empire in Europe, Minneapolis/St. Paul CityBusiness, August 13-19, 1993, pp. 1, 29.

Gilyard, Burl, Tale of the Tape, Corporate Report Minnesota, January 1998, pp. 35-38.

Goldman, Kevin, Scouring-Pad Rivals Face 3M Challenge, Wall Street Journal, January 11, 1993, p. B5.

Houston, Patrick, How Jake Jacobson Is Lighting a Fire Under 3M, Business Week, July 21, 1986, pp. 106-07.

Huck, Virginia, Brand of the Tartan: The 3M Story, New York: Appleton-Century-Crofts, 1955.

Kelly, Kevin, The Drought Is Over at 3M, Business Week, November 7, 1994, pp. 140-41.

______, It Really Can Pay to Clean Up Your Act, Business Week, November 7, 1994, p. 141.

______, 3M Run Scared? Forget About It, Business Week, September 16, 1991, pp. 59, 62.

Larson, Don, Land of the Giants: A History of Minnesota Business, Minneapolis: Dorn Books, 1979.

The Mass Production of Ideas, and Other Impossibilities, Economist, March 18, 1995, p. 72.

Mattera, Philip, Minnesota Mining and Manufacturing Company, World Class Business: A Guide to the 100 Most Powerful Global Corporations, New York: Henry Holt and Company, 1992, pp. 465-67.

McSpadden, Wyatt, 3M Fights Back, Fortune, February 5, 1996, pp. 94-99.

Meyers, Mike, 3M Reports 9% Increase in Net Income on Worldwide Sales Gain of 2.3 Percent, Star Tribune, May 4, 1993, p. ID.

Mitchell, Russell, Masters of Innovation: How 3M Keeps Its New Products Coming, Business Week, April 10, 1989, pp. 58-63.

Moskowitz, Milton, et al, 3M, Everybodys Business: A Field Guide to the 400 Leading Companies in America, New York: Doubleday, 1990.

Our Story So Far: Notes from the First 75 Years of 3M Company, St. Paul, Minn.: 3M Public Relations Department, 1977.

Peters, Thomas J., and Robert H. Waterman, Jr., In Search of Excellence, New York: Harper and Row, 1982.

3M Co., Minneapolis/St. Paul CityBusiness, February 17, 1995, p. 26.

3M Co., Minneapolis/St. Paul CityBusiness, December 13, 1996, p. 24.

3M Co., Minneapolis/St. Paul CityBusiness, November 7, 1997, p. 36.

3M: New Talent and Products Outweigh High Costs, Financial World, February 18, 1992, p. 19.

3M: 60,000 and Counting, Economist, November 30, 1991, pp. 70-71.

Weinberger, Betsy, 3M Breaking New Ground with Plan for China Plant, Minneapolis/St. Paul CityBusiness, April 9, 1993, pp. 1, 24.

Weiner, Steve, A Hard Way to Make a Buck, Forbes, April 29, 1991, pp. 134-35, 137.

Jay P. Pederson
updated by Kathleen Peippo

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Minnesota Mining & Manufacturing Company (3M)

Minnesota Mining & Manufacturing Company (3M)

3M Center
St. Paul, Minnesota 55144-1000
U.S.A.
(612) 733-1110
Fax: (612) 737-2759

Public Company
Incorporated: 1929
Employees: 87,015
Sales: $13.88 billion
Stock Exchanges: New York Pacific Chicago Tokyo Paris Amsterdam Swiss German
SICs: 2672 Paper Coated and Laminated, nee; 2678 Stationery Products; 2891 Adhesives and Sealants; 3086 Plastics Foam Products; 3089 Plastics Products, nee; 3291 Abrasive Products; 3695 Magnetic and Optical Recording Media; 3841 Surgical and Medical Instruments; 3842 Surgical Appliances and Supplies; 3843 Dental Equipment and Supplies; 3844 X-Ray Apparatus and Tubes; 3845 Electromedical Equipment; 3861 Photographic Equipment and Supplies

The largest manufacturer in Minnesota, the 29th largest industrial company in the United States, and a member of the Dow Jones 30, Minnesota Mining & Manufacturing Company (officially abbreviated as 3M) is Wall Streets epitome of high-tech/low-tech business and solid blue chip performance. Its daunting inventory of some 60,000 products runs the gamut from Post-it Notes and Scotch tape to floppy disks and trans-dermal patches of nitroglycerin. Its equally daunting global presence extends to subsidiary companies in 57 countries and markets in more than 200, as well as net sales from international operations of $7 billion, fully half of the companys total revenue. 3M owes its formidable strength to its unusual corporate culture, which comfortably fosters innovation and inter-departmental cooperation, backed by a massive research & development budget, which in 1992 exceeded $1 billion. Because of this, 3M ranks as a leader inand in many cases a founder ofa number of important technologies, including flexible magnetic media, pressure sensitive tapes, sandpaper, protective chemicals, synthetic casting materials, reflective materials, and premium graphics. The company is divided into three major sectors: Industrial and Consumer ($5.2 billion in 1992 sales); Information, Imaging, and Electronic ($4.6 billion); and Life Sciences ($4 billion).

3M was formed in 1902 in Two Harbors, Minnesota, a thriving village on the shores of Lake Superior, by five entrepreneurs in order to mine the rare mineral corundum and market it as an abrasive. The ill-planned venturesparked by a flurry of other forms of mining operations in northeastern Minnesotanearly bankrupted the company, for its mineral holdings turned out to be not corundum but low-grade anorthosite, a virtually useless igneous rock. This unsettling discovery (by whom or when is unclear) was never disclosed in the company records and, for whatever reason, did not deter the owners from establishing a sandpaper factory in Duluth, another more or less ill-fated scheme that placed the company further in jeopardy (3M faced a host of abrasives competitors in the East and was soon forced to import a garnet inferior to that owned by domestic manufacturers, which resulted in a lower quality product).

In May 1905 a principal investor named Edgar B. Ober, determined to save the company, convinced friend and fellow St. Paul businessman Lucius Pond Ordway to join with him in rescuing 3M from almost certain demise by paying off $13,000 in debt and pumping in an additional $12,000 in capital. Together Ordway and Ober purchased 60 percent of the company; over the next several years, Ordway, a self-made millionaire, spent an additional $250,000 on a company that had yet to produce a profit, and Ober, who proceeded to oversee 3M, went without a salary. Ordways continued backing, despite a strong desire to cut his losses early on and his decision to move the firm to St. Paul in 1910, ensured 3Ms eventual health during the boom years following World War I.

However, of greatest significance to both the companys foundation and future were the hirings in 1907 and 1909 of William L. McKnight and A. G. Bush. Former farmhands trained as bookkeepers, the two worked as a team for well over 50 years and developed the system that helped make 3M a success. McKnight ran 3M between 1916 and 1966, serving as president from 1929 to 1949 and chairman of the board from 1949 to 1966. He created the general guidelines of diversification, avoiding price cuts, increasing sales by 10 percent a year, high employee morale, and quality control that fueled the companys growth and created its unique corporate culture. In some ways, the sales system overshadowed the guidelines. McKnight and Bush designed an aggressive, customer-oriented brand of salesmanship. Sales representatives, instead of dealing with a companys purchasing agent, were encouraged to proceed directly to the shop where they could talk with the people who used the products. In so doing, 3M salesmen could discover both how products could be improved and what new products might be needed. This resulted in some of 3Ms early innovations. For instance, when Henry Fords newly motorized assembly lines created too much friction for existing sandpapers, which were designed to sand wood and static objects, a 3M salesman went back to St. Paul with the news. 3M devised a tougher sandpaper, and thus captured much of this niche market within the growing auto industry. Another salesman noticed that dust from sandpaper use made the shop environment extremely unhealthy. Around the same time, a Philadelphia ink manufacturer named Francis G. Okie wrote McKnight with a request for mineral grit samples. According to Virginia Huck, McKnights handling of Okies request changed the course of 3Ms history. He could have explained to Okie that 3M didnt sell bulk mineral Instead, prompted by his curiosity, McKnight instructed 3Ms Eastern Division sales manager, R. H. Skillman, to get in touch with Okie to find out why he wanted the grit samples. The reason soon became clear: Okie had invented a waterproof, and consequently dust-free, sandpaper. After purchasing the patent and then solving various defects, 3M came out with WetorDry sandpaper and significantly expanded its business, eventually licensing two other manufacturers, Carborundum and Behr-Manning, to keep up with demand. It also hired the inventor as its first full-time researcher. This marked the creation of one of the nations first corporate research and development divisions.

Sending salesmen into the shops paid off a few years later in an even more significant way, by giving 3M its first non-abrasives product line. In 1923 a salesman in an auto body painting shop noticed that the process used to paint cars in two tones worked poorly. He promised the painter that 3M could develop an effective way to prevent the paints from running together. It took two years, but the research and development division invented a successful masking tapethe first in a line of pressure-sensitive tapes that now extends to over 900 varieties. The invention of Scotch tape, as it came to be called and then trademarked, established 3M as a force for innovation in American industry. Taking a page from its sandpaper business, 3M immediately began to develop different applications of its new technology. Its most famous adaptation came in 1930, when some industrious 3M workers found a way to graft cellophane, a Du Pont invention, to adhesive, thus creating a transparent tape.

Transparent Scotch tape, now a generic commodity, provided a major windfall during the Depression, helping 3M to grow at a time when most businesses struggled to break even. Another salesman invented a portable tape dispenser, and 3M had its first large-scale consumer product. Consumers used Scotch tape in a variety of ways: to repair torn paper products, strengthen book bindings, mend clothes until they could be sewn, and even remove lint. By 1932 the new product was doing so well that 3Ms main client base shifted from furniture and automobile factories to office supply stores. During the 1930s, 3M funnelled some 45 percent of its profits into new product research; consequently, the company tripled in size during the worst decade American business had ever endured.

3M continued to grow during World War II by concentrating on understanding its markets and finding a niche to fill, rather than shifting to making military goods, as many U.S. corporations did. However, the war left 3M with a need to restructure and modernize, and not enough cash on hand to do so. To meet its building needs, in 1947 3M issued its first bond offerings. Its first public stock offering, coupled with its tremendous growth rate, attracted additional attention to 3M. In 1949, when President McKnight became chairman of the board (with A. G. Bush also moving from daily operations to the boardroom), it marked the end of a tremendous era for 3M. Under McKnight, 3M had grown almost twentyfold. By its fiftieth year, it had surpassed the $100 million mark and was employing some 10,000 people.

Such growth could not be ignored. Now that 3M was publicly traded, investment bankers took to recommending it as a buy, business magazines sent reporters to write about it, and other companies tried to figure out how 3M continued to excel. McKnights immediate successor as president, Richard Carlton, encapsulated the companys special path to prosperity with the phrase: well make any damn thing we can make money on. Yet the 3M method involved a great deal more than simply making and selling. Its metier had been, and continues to be, finding uninhabited markets and then pursuing to fill them relentlessly with high-quality products. Therefore, research and development received money that most companies spent elsewheremost companies still did not have such departments by the early 1950sand the pursuit for ideas was intense.

Carlton kept the company focused on product research (today, 3M rewards its scientists with Carlton Awards), which led to another innovation in the 1950s, the first dry-printing photocopy process, ThermoFax. 3M breezed through the 1950s in impressive fashion, with 1959 marking the companys 20th consecutive year of increased sales. Yet, for all its growth and diversity, 3M continued to produce strong profits from its established products. In a way, this was almost to be expected, given 3Ms penchant for being in uninhabited markets. As noted by John Pitblado, 3Ms president of U.S. Operations, almost everything depends on a coated abrasive during some phase of its manufacture. Your eyeglasses, wrist watches, the printed circuit thats in a TV set, knitting needles all require sandpaper.

In the 1960s 3M embarked on another growth binge, doubling in size between 1963 and 1967 and becoming a billion-dollar company in the process. Existing product lines did well, and 3Ms ventures into magnetic media provided excellent returns. One venture, the backdrops used for some of the spectacular scenes from the 1968 movie 2001: A Space Odyssey, earned an Academy Award. During the 1970s a number of obstacles interfered with 3Ms seeming odyssey of growth. Among these were the resignations of several of the companys top executives when it was revealed that they had operated an illegal slush fund from company money between 1963 and 1975, which included a contribution of some $30,000 to Richard Nixons 1972 campaign. Sales growth also slowed during the decade, particularly in the oil crunch of 1974, ending 3Ms phenomenal string of averaging a 15 percent growth rate every five years. 3M responded to its cost crunch in characteristic fashion: it turned to its employees, who devised ways for the company to cut costs at each plant.

The company also had difficulties with consumer products. Particularly galling was the loss of the cassette tape market, which two Japanese companies, TDK and Maxell, dominated through engaging in price cutting. 3M stuck to its tradition of abandoning markets where it could not set its own prices, and backed off. Eventually, the company stopped making much of its magnetic media, instead buying from an overseas supplier and putting the 3M label on it (3M instead focused attention on data storage media for the computer market, in which it continues as a world leader). The loss of the cassette market was not overwhelming: revenues doubled between 1975 and 1980, and in 1976 3M was named one of the Dow Jones Industrial 30.

Unfortunately, price cutting was not the only problem confronting 3M as it entered the 1980s. Major competitors seemed to face the company on all fronts: the niches of decades past seemed extinct. When Lewis Lehr became company president in 1981, he noted that there isnt a business where we dont have to come up with a new technology. He promptly restructured 3M from 6 divisions into 4 sectors: Industrial and Consumer, Electronic and Information Technologies, Graphic Technologies (later renamed Imaging and combined with Information and Electronic), and Life Sciences, containing a total of some 40 divisions. He also established a goal of having 25 percent of each divisions earnings come from products that did not exist five years before. Lehrs concern was not to keep the company going, for 3M was still well respected, with a less than 25 percent debt-to-equity ratio and reasonable levels of growth. Shareholders, too, had little to complain about, for 1986 marked the 18th consecutive year of increased dividends. Rather, Lehr wanted to ensure that 3M would continue to develop new ideas. The major product to come out of the 1980s was the ubiquitous Post-it, a low-tech marvel created by Art Fry.

Despite its gargantuan size, the company maintains a distinctively entrepreneurial environment and, through one of its several legendary rules, allows its employees to spend up to 15 percent of company time on independent projects, a process called bootlegging or scrounging. As In Search of Excellence authors Thomas J. Peters and Robert H. Waterman, Jr., have written, because heroes abound at 3M, because scrounging is encouraged, because failure is okay, because informal communications are the norm, because overplanning and paperwork are conspicuously absent, because of these and a half-dozen more factors functioning in concertover a period of decades, innovation works at 3M.

For the future, the company may be expected to increase its global stature (in May 1993 it began construction of a $21 million electrical components factory in Malaysia); adopt a more aggressive marketing posture (in January 1993 it introduced Scotch Brite Never Rust scouring pads and planned a $9 million ad campaign targeted at Brillo and SOS users); and continue its massive R&D spending (the new, leading corporate rule, under CEO L. D. DeSimone, is 30 percent of sales from products introduced in the last four years). In the long run, 3M has little to worry about. A near fixture on Fortunes annual list of the most admired companies in America, 3M is that most prized of conglomerates: a perennial money-maker with the innovative culture and managerial drive to ensure that it remains so.

Principal Subsidiaries

Media Networks, Inc.; National Advertising Co.; Riker Laboratories, Inc.; Sarns, Inc.; 3M Argentina S.A.C.I.F.I.A.; 3M Australia Pty. Ltd.; 3M Oesterreich GmbH (Austria); 3M Belgium S.A./N.V.; 3M do Brazil Limitada; 3M Canada Inc.; 3M A/S (Denmark); 3M Health Care Limited (England); 3M United Kingdom P.L.C.; Suomen 3M Oy (Finland); Laboratories Riker, S.A. and Moser 3M S.A. (France); 3M France, S.A.; 3M Deutschland GmbH (Germany); Kettle-hack Riker Phrama GmbH (Germany); 3M Far East Limited (Hong Kong); 3M Hungaria Kft. (Hungary); 3M Italia Fi-nanziaria S.p.A. (Italy); 3M Health Care Limited (Japan); 3M Mexico S.A. de C.V.; 3M Nederland B.V. (Netherlands); 3M Norge A/S (Norway); 3M Puerto Rico, Inc.; 3M Singapore Private Limited; 3M South Africa (Proprietary) Limited; 3M España, S.A.; 3M Svenska AB; 3M 9East) AG; 3M (Schweiz-land) AG (Switzerland); 3M Manufacturera Venezuela, S.A.; Eastern Heights State Bank of St. Paul (99%); Sumitomo 3M Limited (Japan; 50%).

Further Reading

Dubashi, Jagannath,Technology Transfer: Minnesota Mining & Manufacturing, Financial World, September 17, 1991, pp. 401.

3M: New Talent and Products Outweigh High Costs, Financial World, February 18, 1992, p. 19.

Goldman, Kevin, Scouring-Pad Rivals Face 3M Challenge, Wall Street Journal, January 11, 1993, p. B5.

Houston, Patrick, How Jake Jacobson Is Lighting a Fire under 3M, Business Week, July 21, 1986, pp. 10607.

Huck, Virginia, Brand of the Tartan: The 3M Story, New York: Apple-ton-Century-Crofts, 1955.

Kelly, Kevin, 3M Run Scared? Forget About It, Business Week, September 16, 1991, pp. 59, 62.

Larson, Don, Land of the Giants: A History of Minnesota Business, Minneapolis: Dorn Books, 1979.

Mattera, Philip, Minnesota Mining and Manufacturing Company, World Class Business: A Guide to the 100 Most Powerful Global Corporations, New York: Henry Holt and Company, 1992, pp. 46567.

Meyers, Mike, 3M Reports 9% Increase in Net Income on Worldwide Sales Gain of 2.3 Percent, Star Tribune, May 4, 1993, p. ID.

Mitchell, Russell, Masters of Innovation: How 3M Keeps Its New Products Coming, Business Week, April 10, 1989, pp. 5863.

Moskowitz, Milton, et al, 3M, Everybodys Business: A Field Guide to the 400 Leading Companies in America, New York: Doubleday, 1990.

Our Story So Far: Notes from the First 75 Years of 3M Company, St. Paul, MN: 3M Public Relations Department, 1977.

Peters, Thomas J., and Robert H. Waterman, Jr., In Search of Excellence, New York: Harper and Row, 1982.

3M Annual Reports, St. Paul, MN: 3M, 1951, 1990-1992.

3M: 60,000 and Counting, The Economist, November 30, 1991, pp. 701.

Weiner, Steve, A Hard Way to Make a Buck, Forbes, April 29, 1991, pp. 13435, 137.

Jay P. Pederson

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