In today's competitive business environment, the effective management of innovation is an essential activity for a firm to maintain its competitiveness and ultimately survive. Traditional methods of managing organisations are said to be ineffective in combating a turbulent world, full of uncertainty. Technological advancements and an accelerated pace of change are major factors influencing management priorities and are challenging traditional business models. This realisation has brought about the evolution of corporate entrepreneurship and the importance managing and developing innovation.
The purpose of this report is to critically evaluate to importance of creating and developing opportunities, managing innovation and corporate entrepreneurship in relation to behaving as an entrepreneurial organisation. The report will discuss the various concepts and will particularly focus on the activities of 3M in relation to the concepts.
The report will begin by providing a background of 3M in relation to its activities, coverage and values and will provide an overview of the topics covered in the report. This will be followed by discussions on creating and developing opportunities, managing innovation and behaving as an entrepreneurial organisation in relation to 3M and its operations.
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Based on the research conducted and conclusions, it is apparent that 3M values creativity and innovation to a high esteem and has incorporated systems and programmes at all levels of the organisation to support an atmosphere of entrepreneurial behaviour. 3M's track record and strong reputation of innovation is evidence that these initiatives have proved successful for the organisation. Despite their success, 3M has also faced various challenges due to the changing nature of the markets which they operate within.
It is recommended that 3M continue to revise their initiatives in order to adapt to the changing nature of the environment. In doing so, 3M will maintain its competitiveness against industry rivals and will continue to promote a healthy atmosphere of innovation, creativity and entrepreneurship. Such organisations will do well to examine the exemplary case of 3M as they provide a good example of success in entrepreneurial behaviour.
The Purpose of this report is to critically evaluate how 3M appears to act in relation to creating and developing opportunities, managing innovation and behaving as an entrepreneurial organisation. The report will begin by providing an overview of 3M; highlighting its key products and services, its business activities and operations and discussing the core value of the company. The scope of the report will be taken from a global scale as 3M is an international organisation and the time frame will cover the early days of the business from its initial beginnings in 1902 to present day, particularly focusing on recent development at 3M.
3M is a science based company who produce products in a range of market sectors from high way safety to health care to home and office products to adhesives and abrasives. The company has 75,000 employees globally with 3,500 within the UK and Ireland. The organisation has more than 35 business unites which are organised into six business which include display and graphics, electro and communication, industrial and transportation, consumer and office, safety, security and protection services and health care.
3M operates in more than 65 countries with 35 laboratories and 35 international companies with manufacturing operations. The business operations cover 28 States in America and the company currently has 6,700 researchers worldwide with 3,400 in the United States. 3M's products are based on 45 technology platforms, some of which include light management, nonwoven materials, abrasives, micro-replication, nanotechnology, adhesives and surface modification.
The company values are based on honesty and integrity and are centred on employee development through various talent and leadership initiatives and also on satisfying their customers with superior quality, value and innovative technology solutions to ensure a sustainable global growth and an attractive return to their investors.
The introduction will be followed by section 3 which will discuss the activities of 3M in relation to creating and developing opportunities. Section 4 will highlight how 3M acts in relation to managing innovation. Section 5 will examine the operations of 3M in relation to behaving as an entrepreneurial organisation. Finally, section 6 will briefly summarise the conclusions.
Creating and Developing Opportunities
According to Wickham (2006), the identification, selection and development of the right opportunities are essential activities for firms in today's dynamic business environment. The 'entrepreneur' is said to be at the heart of the process. An entrepreneur identifies business opportunities to create and deliver value to stakeholders (Companys and Mullen, 2007). Despite this realisation, the exact nature or sources of opportunities are unclear and has caused conflict amongst researchers within the study area (Ardichvili et al, 2003).
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Companys and Mullen (2007), classify opportunities as economic (technological and market opportunities - material innovation), cultural cognitive (cultural innovations) and socio-political (social networks and government structures) and discuss opportunity from a supply and demand perspective. Ardichvili et al (2003), argue that there is a lack of comprehensive research relating to the identification and development of opportunities and that such theory are unable to bridge research and practice in defining a sound solution as a means of responding market requirements.
Ardichvili et al (2003) build on existing theoretical and empirical studies and propose a framework to assist in the opportunity identification and development process. They also state that opportunity recognition is often a difficult process and is one which is influenced by the following factors:
Prior Knowledge and information asymmetry
Personality traits (optimism, self belief, and creativity)
The types of opportunity
Ardichvili et al (2003), state that in addition to the identified factors, careful investigation of and the sensitivity to market needs as well as the ability to identify optimal deployment of resources will help in the development process. A limitation to their research is that it focuses on the development process in relation to an entrepreneur. Despite this, their research provides an understanding into the opportunity identification and development process and can also be adapted to an organisational level in order to exploit market opportunities. Below is a basic model of the innovative process which is a valuable tool for searching, selecting, implementing and capturing opportunities:
Figure 1: Basic Model of the Innovation Process
3M recognises the importance of the opportunity identification and development process and that their customers play a crucial in the process. According to (Bassant & Tidd, 2007) 3M strive to maintain a close relationship with their customers and do not leave the identification process to their marketing team. 3M believes that their best ideas originate from their customers and they commission their researchers to spend a lot of time with their end user customers to understand their requirement. Problem solving teams are also sent out to customer sites to deal with their unique problems. This is an important way for 3M to maintain relationships with their customers and also a way to develop their competencies and generate solutions to potential problems where 3M employees may find the inspiration to innovate or develop new technology solutions. 3M believes that long lasting loyalty can be achieved from customer commitment. Dr William E. Coyne (Senior Vice President of Research and Development at 3M) supports this view:
"We want to grow. Indeed we must grow if we want to survive - and to do that we need the loyalty of our customers. To get that loyalty we need to address their needs. The best way to address those needs is with innovative products and technologies."
Additionally, in 1982 3M developed planning centres called Strategic Business Centres (SBC) as a means to coordinate the knowledge and activities of their operating units in order to gain a competitive advantage in the various markets that they operate within. The purpose of the SBCs is to recognise related technologies, capabilities, and systems and linking them with customer requirements. The aim is to work together in the identification and development process of new products and technology solutions (Tita & Allio, 1984). This is another example of 3M's attempts to create and develop opportunities.
Burns (2008) identifies six pivotal strategic thrust which demonstrates the evolving nature of 3M activities in creating and developing opportunities:
Get close to customers and understand their needs
Seek out niche markets
Having identified market opportunities, diversify into these related areas
Pursue product development and innovation at every level of the organisation through research
Get different parts of the organisation to communicate, share knowledge and work together
Encourage achievement through recognition and reward schemes
These strategic thrusts evolved as 3M's learning experiences evolved over the time period of 1920 to present day. Emphasis was particularly placed on getting close to their customers and understanding their requirement in order to recognise potential market opportunities. 3M employees were the tools for exploiting these opportunities. Employees with technical skills and previous knowledge provide the required inputs for product evaluation and development.
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The next section will discuss how 3M act in relation to managing innovation. The section will begin by providing an overview of innovation management, highlighting key theories and linking them to the activity of 3M.
Trott (2002) argues that innovation is the engine for growth and that companies must be able to adapt and evolve if they wish to survive. Managing innovation is said to be a fundamental task for decision makers in sustaining a firm's competitiveness and allowing for continued growth (Kuczmarski, 1996). Despite this realisation, there is considerable disagreement amongst many organisations regarding the need to maintain stability and a routine of activities to accomplish daily tasks or the need for creativity and the development of new ideas and products to remain competitive (Deakins & Freel, 2009). This poses one of the most fundamental problems for management today with tension surrounding organisational efficiency gains against creativity gains (Trott, 2002).
The management of innovation is a complex process because it involves the effective management of a variety of different activities across different functions (Burns, 2008). Reilly & DiAngelo (1987), state that effective communication (formal and informal) with the business environment (internal and external) along with a support infrastructure and top down encouragement will assist in the process of innovation management. Below is a basic model of organisational innovation.
Figure 2: Basic Model of Innovation
Trott (2002) identifies organisational characteristic that facilitate the process of managing innovation:
Companies that are innovative have the objective to grow the business and actively plan for long term profits
This requires continuous scanning of the environment (internal and external) by all members of an organisation and not just senior management. Often formal or informal and this information should be shared with other functions
Commitment to Technology
A firm must have a long term approach to investing in technology and a commitment to resources such as intellectual input from scientist and engineers in order to retain and attract quality employees
Acceptance of Risks
A firm must have the willingness to consider carefully risky opportunities. This also includes making risk assessments and taking calculated risks
This requires the ability to build relationships between various functions (marketing and R&D) and the ability to resolve any cross functional conflicts
The capability of an organisation to be aware of, identify and take effective advantage of externally developed technology
This involves allowing individuals a certain degree of freedom or flexibility to think, experiment, discuss ideas and be creative
An organisation must be ready to accept change in the way it manages its internal activities and must have the ability to adapt to the changing environment
Diverse Range of Skills
An organisation requires a combination of specialist skills and knowledge along with general skills to facilitate cross-fertilisation of the specialist knowledge. Additional, hybrid managers and individuals with technical and commercial knowledge are required to assist the transfer of knowledge
Table 1: Organisational Characteristics that Facilitate Innovation Management
According to Bassant & Tidd (2007), 3M has established a clear reputation as a major innovator and that their successes can be measured in terms of the number household breakthrough products they have introduced which include Scotch tape, Post-it Notes and Scotchgard carpet protection.
Kuczmarski (1996), states that innovation is a mindset and that it is best described as a pervasive attitude that allows businesses to see beyond the present and create a future vision. According to (Bassant & Tidd, 2007), the innovative mindset became apparent in the early 1920s when William McKnight became the company's new leader. McKnight began his management approach by hiring an inventor by the name of Francis Okie who developed the concept of a waterproof sand paper which proved successful amongst 3M's customers. This prompted a new market strategy for 3M of product differentiation and Francis Okie became the first full time employee who focused on product development.
The success of such initiatives encouraged McKnight to put his faith in the abilities of his workforce and prompted talks with his management team to play a pivotal role in creating an atmosphere where their workforce felt inclined to produce extraordinary results. This later became the central theme of organisational management at 3M and is evident in the following quotes by William McKnight:
"As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those men and women, to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way."
"Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authorities exactly how they must do their jobs."
"Management that is destructively critically when mistakes are made kills initiative. It's essential that we have many people with initiative if we are to continue to grow"
The corporate structure of 3M also plays a key role in the process of managing innovation. 3M has a divisional structure which has developed organically from bottom up as a result of successful innovations nurtured in projects (Burns, 2008). The structure initially appears hieratical because of the different levels, groups and divisions; however, decision making is decentralised and there is a horizontal flow of information which allows for quick decision making and for collaboration amongst the various groups. The role of managers at 3M is to support and encourage an atmosphere of creativity and innovation whilst top management serve as the mechanism to reinforce the acceptance of failure and to legitimise risk taking.
3M's commitment to innovation is evident when considering their long-term investments in R&D (estimated at US $1 billion per year which is 6% of sales) and their sales targets. According to Bassant & Tidd (2007), 3M plan on a yearly basis to derive 30% of sales from products introduced within four years, with 10% of sales from products introduced to market within one year. The principles behind their ambitious targets is that innovation is time sensitive and that speeding up the product development and marketing time will confuse their competition and ultimately enhance their competitiveness.
To date, 3M conveys a consistent image of innovation via publications and when conducting interviews with potential employees. The philosophy of 'the way we do things around here' is said to be the key to 3M's success because it creates the conditions in which innovations can be developed by anyone and from any direction such as deliberate innovations and lucky accidents. An example of a luck accident is that of the development of the Post-it Note by a researcher Art Fry who spotted the potential of a failed adhesive product.
The next section will examine how 3M behaves in relation to being an entrepreneurial organisation. The section will begin by exploring the notion of an entrepreneurial organisation, highlighting key theories and linking them to the activity of 3M.
Wickham (2006), state that changes in technology, market competition and customer expectations is changing traditional methods of managing an organisation. Wickham (2006) argues that due to an accelerated rate of change there is an increased level of uncertainty and turbulence within many industries which is forcing today's businesses to rethink their corporate strategies in order to survive. This argument is supported by Burns (2008), who states that entrepreneurial management has become a highly valued skill to be nurtured, developed and encouraged.
Burns (2008), continues to state that traditional management practices which focused on efficiency and effectiveness rather than creativity and innovation are not enough to remain competitive and in being responsive to market changes. This realisation has brought about the concept of corporate entrepreneurship and the quest of becoming an entrepreneurial organisation. Despite this, there appears to be little consensus on the meaning of the term (Deakins & Freel, 2009). Below is a model of the entrepreneurial process as identified by Timmons & Spinelli (2006):
Figure 3: The Entrepreneurial Process
According to Burns (2008), corporate entrepreneurship can be described as the behaviour of an organisation that encourages creativity and innovation at all levels in the organisation (corporate, groups, divisions, business units and functional or project teams) with the objective of gaining a competitive advantage. Entrepreneurial management is an emerging concept within the study area which is described the ability to lead and manage and entrepreneurial organisation in a way which encourages innovation, seeking for opportunities, questions conventional ideas and practices and continuously seeking ways to improve and create a competitive advantage (Burns, 2008).
Burns (2008) identifies the following factors as influencing the entrepreneurial management process: strategy, leadership, organisational learning, culture, marketing, innovation and creativity, knowledge management and entrepreneurship. This implies that the entrepreneurial management process is complex and that it demands a multidimensional approach to managing. Below is a basic model which represents an entrepreneurial organisation.
Figure 4 : Basic model of an Entrepreneurial Organisation
Adam Brand (Manager of Business Information Services at 3M UK) discusses the importance of knowledge management and innovation at 3M in relation to behaving as an entrepreneurial organisation. Brand (1998) states that the objective of 3M is to become the most innovative company in the world and that the effective use of knowledge management initiatives are the tools for realising their objectives. Brand (1998) continues by stating that long term commitment from top management, recruitment of the right people and strong support and recognition systems are required to ensure conditions for innovation and entrepreneurship are in place.
Below are the identified management initiatives and support programmes within 3M which facilitate an atmosphere for innovation and entrepreneurship:
Total Company Involvement
Top management see it as one of their major duties to support and encourage individuals, groups and divisions
Encourages knowledge linkages and collaboration
Lifetime employment and promotion from within are important traditional 3M policies
Low employee turnover, increased motivation and job satisfaction
Management encourage employees to work and visit other divisions, departments and countries
Builds a personal connection with other 3M employees and across different departments and cultural boundaries
Loyalty Over Time
Lifelong employment and promotion from within means employees trust 3M and will be loyal over time
Allows time for creative thinking to be nurtured and innovative breakthroughs to take place
Tolerance of Mistakes
3M does not punish mistakes but encourages risk taking
Creates an environment where employees are not afraid to use their initiative and encourages innovative thinking
Top managers who joined the company at a young age and who have absorbed the company's traditions and stories re-tell those stories and their experiences
This reinforces the traditions, values and attitudes which promotes an atmosphere that encourages innovation
3M's flat organisational structure allows decision making to be made at all levels
This allows 3M to continuously develop, to adapt and to search for new sources of gaining a competitive advantage
3M has taken two main approaches to innovation: defining needs that 3M could use its technology (knowledge by design) and developing new technologies that require product applications to be found (knowledge by emergence)
Approach one allows technical employees to define customers unarticulated needs which often leads to new innovation whilst approach two allows innovations to emerge over time
Cross Divisional Cooperation
Top management encourages cross divisional cooperation
Breaks down barriers and allows for innovation to spread across 3M rather than being centred in specific clusters
Coping with Chaos
Top management make allowances and are not quick to judge, assess and audit projects
This allows innovative individuals to develop their ideas over time without tight constraints
Table 2: Top Management Long-Term Commitment
3M have put in place a number of structures and recognition programmes
To maintain the balance and to avoid over emphasis on efficiency and controls at the cost of learning
Fairs, Technical Audits and Chapters
3M employees are invited from around the company to examine ideas and to assess whether the different ideas can be applied to the various markets in which 3M operates within
This brings together people, skills and knowledge from diverse backgrounds which often results in the generation of new ideas and innovations
3M's 15% rule allows employees to spend 15% of their time working on innovative ideas or projects of their own choosing
This encourages employees to work on side projects of personal interest to them and has resulted in a number of important new businesses for 3M
3M employees can apply for a Genesis or an Alpha grant to assist in the development of a project (equipment or labour to do their existing work whilst they spend time on their 15% project) or developing ideas (non technical processes)
Provides funding to assist with the development of projects or an idea and gives employees flexibility to focus on their individual pursuits outside of work requirements
There are a number of promotion schemes (dual ladder process - promotion to vice president) and recognition awards (Golden Step Award and Circle of Technical Excellence)
This ensures that innovative individuals are known and recognised across the company and also to encourage other to initiate their own activities
Table 3: Programmes for Supporting Innovation and Entrepreneurship
Recruitment and Selection
3M recruiters search for people who are creative, have a strong worth ethic, are self motivated and resourceful, and are problem solvers with broad interests
Attracts individuals who are eager to learn, willing to explore ideas with others, have a multi-disciplinary approach and who are happy networking
3M has a learning and experimental culture which is supportive and allow individuals to flourish
Creates an empowering and caring culture which encourages initiative which increases employee satisfaction and motivation levels
Table 4: Recruiting and Keeping the Right People
3M's record and reputations as an innovative company is evidence that these initiatives are effective tools for managing an entrepreneurial organisation. Brand (1998), argues that merely implementing such systems are not enough to guarantee success for an organisation but rather creating a culture or an entrepreneurial climate which supports innovation and attracting the right people are necessary conditions for developing an entrepreneurial atmosphere. 3M has a strong culture of innovation which has permeated the organisation from top management. This culture has been in place for many years at 3M and is considered more of a tradition and is a core feature of the values and beliefs of 3M. The activities of 3M demonstrate their commitment to continuous improvement and will ensure they continue achieving their mission of being 'the most innovative company in the world'.
According to Burns (2008), today's challenge for 3M is to maintain its momentum and reputation for innovation. As a result of 3M's growth, its activities have increased in complexity and also due to the variety of its different product offerings, in different markets and at different stages of the product life cycle 3M has recognised the importance of adopting different managerial approaches to ensure continued success. Burns (2008), continues by stating that although 3M has had a lot of success from different initiatives, its high risk approach to R&D and innovation is not appropriate to all sectors, some of their ambitious targets may not be achievable by all divisions and also as a result of increased competition initiatives such as the 15% rule have been placed under intense pressure, to the point of being described as an attitude rather than a reality.
The next section will summarise the conclusions and key ideas discussed in the report.
The research conducted in the areas of innovation and entrepreneurship has highlighted the importance of recognising the evolving nature of today's business environment. It has provided an understanding into ways of creating and developing opportunities, managing innovation and behaving as an entrepreneurial organisation.
It is fair to suggest that 3M behaves in a manner which can be classified as an entrepreneurial organisation. The systems, programmes and initiatives have been fundamental mechanisms in enabling 3M to create an atmosphere of innovation and entrepreneurship. This has proved successful for the business and is evident in the number of household products which have been introduced to the market. Despite 3M's track record of success, they must also recognise the evolving nature of their business environment and continue to evolve to the changing needs of their markets.
3M must also address their current challenges and plan strategies to manage them effectively. If not effectively managed, 3M's employees can lose their motivation and their innovative spark. It is not enough for 3M to rely on previous knowledge and experiences as mechanisms to stimulate entrepreneurial behaviour. 3M must continue to evolve at the rate their business environment is maturing in order to continue creating and developing opportunities, managing innovation and continue behaving as an entrepreneurial organisation. In doing so, 3M will be able to continue living up to its mission of being 'the most innovative company in the world'. Organisations will do well to examine the exemplary case of 3M as they provide a good example of success in entrepreneurial behaviour.