3M Optical Systems: Managing Corporate Entrepreneurship

Submitted by:

GROUP 6

Padilla, Rachelle Pangader, Abdul Najib P. Penallosa, Mary Ann Pizon, Rosjeb Ravanera, Aaron Sumanpan, Hester Lee

WRITTEN ANALYSIS OF CASE (BA 115)

I.

PROBLEM Mr. Andy Wong is in a dilemma on whether he should support an investment request for a third attempt at launching the privacy screen project developed by the struggling Optical Systems Unit.

II.

POINT OF VIEW Andy Wong

III.

OBJECTIVES 1. To be able to come up with the right decision whether to support, postpone or reject the re-launch of the product. 2. To strike a balance between two important corporate objectives that is, Profitability and Innovation

IV.

AREAS OF CONSIDERATION Corporate Culture and Philosophy 1. Over the years the corporation place great importance at building the companys core technologies and creating an environment in which people could draw on them to innovate. 2. Creating innovations at current technologies is very important to the organization as exemplified by the 15% Rule which allowed employees to devote up to 15% of their time on non-program activities that were related to innovative ideas they believed could be of value to the company. 3. Because of the economic downturn in the 1980s, the organization imposed more discipline, coordination and control on their increasingly diverse and widespread business. It requires all divisions to do more, faster with less which put the company on a

competitive strategic position not only to develop differentiated products but also to create a product that could defend its market position. 4. All employees are taught that products belong to division, but technology belongs to the company to ensure that various divisions help one another in bringing new inventions and innovations. 5. A company CEO introduced the Pacing Program which aimed at identifying, among the thousands of projects in progress at any time within 3M, the hundred or so which could change the basis of competition and ensuring they received the funding and

management attention they deserved. 6. Due to the decentralized structure of 3M, informal channels are common like the relationship between Andy Wong and the former Group Vice President Ron Mitsch and now SVP for Corporate R and D, who has been, through the years, an avid supporter of the OS unit.

Corporate Goals 1. Each Division in the organization is expected to contribute to the corporate objective of inflation-adjusted sales growth of 10%, pretax profit margins of 20% return on capital employment of 27%. 2. The new CEO, Desi Desimonne wants to protect the 3Ms legacy of innovation-based entrepreneurship, and the need to tolerate well-intentioned failure.

3. Most people in 3M believe that the Optical Systems unit needs to earn money for the organization.

Business Unit Related Issues 1. Optical system was created to exploit light control films using the microlouver technology. This technology has been in the organization for more than 15 years. 2. Morale in the unit is low, with many losing confidence that they could build a viable business. 3. Market research in the first two launches was limited due to budget constraints. 4. The unit was losing money since its formation in 1979 and was losing money at the rate of $3 to $5 million a year in the mid 1980s.Because profits were reported by business unit,

everyone was aware that the OS unit was pulling down the SSSDs overall performance numbers. 5. Mr. Rob Noirjean, the Professional Marketing Manager, launch twice the privacy screens but all of them did not meet the expectations set. 6. The new Group Vice President, Paul Guehler, emphasized that he will be giving a lot of attention to the OS Unit and stated that if OS didnt perform, it would not be around in coming years. 7. Mr. Andy Wong, believes that he has four responsibilities which are: 1. To attract and retain good people 2. Build the teams motivation and commitment to the project 3. Ensure that unit

kept making progress towards its objectives 4. Responsibility to keep senior management in the boat 8. Mr. Paul Guehler, has 5 main responsibilities in lined with the corporate culture. These five responsibilities are the following: 1. Create condition for front line managers to seek for good opportunities 2. Support the objectives of innovative and creative environment 3. Encourage manager competence by help 4. Adopt not only support, invest in viable projects but should be disciplined and to ensure give and take relationships 5. Encourage communication and commitment among

employees 9. The third launch of the privacy screen requires $750,000 additional investment primarily for new moulds and assembly equipment. 10. Most people in the division do not support the re-launching of the privacy screen and believes that it will fail. OS unit did not have substantial support from the Commercial Office Supply Division (COSD) and Data Storage Markets Division (DSMD). V. ALTERNATIVE COURSES OF ACTION 1. Reject the re-launching of the privacy screen, re-assign the people to other units and cut-off R&D, and focus instead on its auto component sales. Advantages 1. The Unit will be able to focus its resources to much more promising products

2. Stopping this unprofitable product will help boost the performance of the division 3. This may reverse the negative performance evaluation of Mr. Wong

Disadvantages 1. The organization already spent a lot of resources in this product for years. 2. .This may have a negative impact on the morale of personnel who has been working with this product for years. 3. This strategy is not in line with the corporate culture of innovation for current technologies. 4. Stopping the project may create opportunity costs if this market turns out to be profitable. 5. Focusing on its auto-component sales, the OS unit will eventually go out of business.

2. Postpone the re-launching of the privacy screen and extend sales effort to penetrate the market and divert the attention of the unit to new promising projects like the brightness enhancement product. If these products turn out to be successful then the unit may revive the Privacy Screen Project Advantages 1. The unit will be able to use its funds and resources to more promising projects like the bright enhancement product.

2. If other projects were to succeed then the unit can revive the privacy screen project and internally fund the expansion of the. 3. Mr. Wong will still be able to continue its privacy screen project and support his other projects. 4. Extending sales efforts in selling the current product may generate additional sales that may fund the re-launching of the project 5. Retaining the project is in line with corporate culture of respecting the people behind the project and promoting innovations. 6. Postponing the project is not an option as competitors will most likely have the market saturated in a few years anyway.

Disadvantages 1. This approach may instead prolong the negative performance of the privacy screen project. 2. Other projects of the OS unit may turn out to be failures 3. If this new promising projects turn out to be profitable, it may overshadow the privacy screen project and management may lose interest about it.

3. Support the re-launching of the privacy screen and ask the help of Ron Mitsch with the assurance that once it fails for the 3rd time then further developments will be stopped and people in the unit will be re-assign to other units. Advantages 1. This will build the morale and commitment of the OS people in the project. 2. This will ensure faster approval of the project and release of the funds needed.

3. This is in line with the corporate culture of promoting a creative and innovative environment. 4. This course of action will at least give the OS unit a last chance to prove themselves 5. This last chance may motivate the people in the OS unit to work even harder to achieve their goals.

Disadvantages 1. There is a possibility that the new project may fail and this entails a lot of cost to the organization. 2. Excessive use of the informal channels may turn out to be disadvantageous in the future. 3. There is no absolute assurance that Mr. Ron Mitsch will be able to help in the approval of the project since he is now the SVP for R and D and not for Operations. 4. Taking the proposal to a senior-level mentor is going too far and would probably jeopardize Wongs position in the company.

4. Support the re-launching of the privacy screen and defend it personally to top management for additional investment. Market research should be extended which should include extensive customer surveys and use of reliable data that would create realistic estimates and product. Advantages 1. This course of action will not make use of the informal channels and will instead reserve it for future use in other projects.

2. The OS unit may prove to their detractors that they deserve another chance through results of the extensive market research and not because of a single support from a top executive. 3. The extensive market research will greatly take a look at customer perceptions and needs and incorporate these with the design of the product. 4. Maintaining the project is in line with corporate culture of creative innovations. Disadvantages 1. Going through the formal business process will take a lot of time. 2. There is no absolute assurance that top management will support the new project even if market research turns to be positive 3. Extensive market research may require additional cost with the company.

5. The project can be funded by the OS unit by outsourcing and restructuring the project so that it can be done within the units budget, without seeking approval through either informal channels or going through the tedious business approval process. Extend market research and convince other divisions to gain substantial support in sales and distribution.

Advantages 1. The OS unit will not make use of informal channels and not go through the tedious business approval.

2. The OS unit will be able to save since there will be no need to purchase new moulds and additional equipment. 3. Improve internal morale. Because results had never matched the high potential of their technology, the unit had become defensive and isolated. OS needed to communicate to get more support within the division. 4. OS may be able to focus its resources in developing major new applications and to concentrate on the promising, new, unrelated project that was projected to develop into a $200 million business, and would need $5 million in money. 5. The fact that he would soon need funding for two other projects in development was another reason to stay away from seeking more money at higher levels. Wong should save the use of these informal channels for more important projects.

Disadvantages 1. Outsourcing the frames may affect the quality of the product. 2. Extensive market research may take a long time and also entails additional cost to the unit. 3. Additional support from within the SSSD and other division may not be realized. 4. The market is already established and soon-to-be saturated and the OS unit may not be able to penetrate it. VI. RECOMMENDATION