3m Optical Systems

3M Optical Systems

1) Company & Case Overview:

• Established in 1902 to mine abrasive minerals in Minnesota. In 1920, they evolved into a sandpaper manufacturer, eventually hitting hard times. They had a dramatic turnaround when waterproof sandpaper & adhesive tape were developed.
• By 1992, they had developed a portfolio of over 100 technologies rooted in adhesives, abrasives and coating technologies. They also had almost 4,000 profit centers and 47 divisions operating in 57 countries.
• A micro louver technology was created and operating within the New Business Ventures Division, but was eventually disbanded on the belief that it would be more successful “operating within a mother unit.” As a result, in 1979, Optical Systems business unit was created to exploit and capitalize on the light film control technology. Unfortunately, the technology though was not much more successful in the OS Unit, and was losing approximately $3-$5 million each year. Andy Wong was appointed to manage and turn around the unit.
• Wong implemented a 3-year plan to streamline, collaborate, and consolidate the OS Unit. He also looked for potential applications of the technology and saw Museum Lighting, ATM’s, and Government Computing. Through this exploration, they stumbled across government computing.
• Wong then needed to develop the new multi-protection filter to be used in the government-computing concept, as well as to test the concept itself. The steps Wong took were:

1. Developing the product itself by fine-tuning it. This process also showed him that they had a competitive advantage with their existing distribution network and with the technology itself.
2. Undertaking a feasibility analysis to see if they could scale the technology to make a profit. A hidden gem in this process was that Wong brought in internal and external expertise and found it to be wildly successful.
3. Developing a business plan. Final calculations showed that a $750,000 investment would be needed for success. Unfortunately, 3M was weary of any new investments into the OS Unit, as they had a relatively bad track record(although Wong had taken steps in the right direction).

• Wong had 4 options: 1) He could postpone or reject the proposal 2) fund it within his unit by outsourcing 3) try to get division funding or 4) talk with senior level management.

2) As Andy Wong, how would you handle the authorization expenditure (AFE) for the re-launch of the privacy screen?

• If I were Andy Wong, I would do anything and everything in my power to try and realize the OS units potential. Divesting resources from the unit and focusing on the auto division sales would be squandering a potential “$200 million a year market.” I also think utilizing several of the listed strategies could compliment each other.
• I would definitely reach out to Senior Level Management. During Wong’s tenure manager of Optical Systems business unit, he had already reduced manufacturing costs by 50% and doubled sales (granted, it was only from $10,000 to $20,000). Although Mitsch, Wong’s former mentor, was no longer in charge of the division, he would be another good contact with sway in the company to reach out to.
• I think this tactic could lead to divisional funding, as the concept has a lot of potential. I also think that Wong could look within the unit for more ways to make revenue (or reduce additional manufacturing costs). Outsourcing certain items could help achieve this.

3) As Paul Guehler, would you approve the AFE if Wong sent it up to you?

• If I were Paul Guehler, I would approve the AFE sent by Wong. Granted, the safer approach for Guehler would be to deny it and tell Wong to focus on auto division. However, I believe that Wong has a proven track record and a well thought out business plan. I’d go for the homerun instead of the auto division’s base hit at best.

4) How effective has Wong been as a 3M division in the 3M context? What about Guehler in his position?

• Andy Wong: He has been very effective by reducing manufacturing costs and increasing sales. I thought he was very effective also at hiring(Noirjean), as well as bringing in people from different divisions within 3M and outside of 3M.
• Paul Guehler: Guehler has also been effective. He took a hard give and take approach that probably made some people not like him. Letting the OS unit know that “they wouldn’t be around next year without results” helped the unit focus intensely on effective solutions.

5) What is it about 3M that make it the most consistently entrepreneurial large company in the world?

• It starts with the top management and trickles down. Company philosophy also shoots for 25% of its sales to be generated by products introduced in the last 5 years. They also reinvest 6-7% of their sales into new projects and have programs, like the Pacing Program, to fast track great new ideas.

6) Summary and Conclusions

• Andy Wong has a proven track record as the OS Unit’s manager. He should leverage that track record, and any existing relationships in the company that could provide sway (including Mitsch), and go all out to get the AFE approved. Outsourcing certain materials to reduce additional costs could also prove to be helpful in turning the business concept into reality. Even though failing could lead to a demotion, $750,000 is a relatively small amount of investment for 3M, especially considering the $200,000 potential market. Pursuing the project, all out, is best for the company.