3M 2006 Annual Report Download - page 5

Working Our Magic 3
Just as 3M’s history is rooted in innovation and the invention of
new products, so it will be in the future. But to remain successful,
we need to invent and innovate faster and still do it better than
our competition. We have some of the best scientists and manu-
facturing process engineers in the world and their principal task
is to use their creative genius to give our salespeople the products
they need to help our customers and beat the competition. Leader-
ship’s job is to try to create the environment where the magic can
happen. In this new hyper-competitive world, time will never be on
our side, so speed and focus for 3M are as important as creativity.
Nothing will fundamentally change in our approach here, save
for greater focus on potentially high-impact programs in overhead
electrical power transmission, renewable energy, minerals
extraction, security and safety, together with opportunities in
higher growth markets such as air and water quality. But the
traditional core areas of 3M, such as industrial tapes, adhesives,
abrasives and film product of all kind, also will be progressively
strengthened. We value this core greatly; it is who we are,
and we intend to strengthen it.
Localization: Where logical, we will keep administrative and
a few other activities centralized. But localization for us means
increasing local customization and manufacturing of products,
particularly in international markets. Overseas markets are easiest
to penetrate initially by using local brands and local (or regional)
manufacturing, and supporting this approach will form part of
our acquisition strategy. As we gain access to distribution, our
principal mega-brands such as 3M™ , Scotch® , Scotch-Brite®
and Post-it® can be attached to these local brands and pulled
through distribution.
As more growth occurs overseas, we also will gradually grow and
localize our technical resources in those areas. This also will be a
tremendous aid to drive growth through better product localization.
Acquisitions: After completing just four acquisitions in 2005,
we completed 19 in 2006, plus several technology “deals.” These
acquisitions were mostly in the traditional 3M core. This was a
huge achievement by our people and one that gives us great
confidence in our acquisitions strategy.
For 3M, acquisitions are not simply about gaining volume. They are
about much more. But they will always be about getting a sensible
return on investment. They are sometimes used to advance our
technology base, as in Brontes Technologies and Acolyte Biomedica,
sometimes to gain immediate new capacity, as in Nylonge Corp.,
sometimes to fill our product lines, as in Biotrace International, and
sometimes to gain access to new markets, as in General Industrial
Diamond Co. Sometimes they are made specifically to strengthen
the core, as in NorthStar Chemicals, an adhesives company, and
sometimes they are about new adjacency growth areas such
as Security Printing and Systems Limited in the U.K. and CUNO
Incorporated in the United States. As acquisitions help us achieve
all of these goals, above all, they help boost and complement our
capability to drive organic growth and they will remain a key pillar
of our growth strategy going forward.
In summary: The challenge of inventing a new future is never
easy. But against a backdrop of much tougher global competition,
it is imperative that we take actions on many fronts today.
Thoughtful prioritization of our activities is essential, but speed
is important too. The best defense for any business is usually a
potent offense.
Although not everything went 3M’s way this year, our accomplish-
ments were significant both in their scope and in their symbolism.
They reflect our first important strategic steps toward creating
an environment of, and capability for, faster growth. They also
reiterate our profound commitment to innovation, to operational
excellence, to customer service and, importantly, to high ethical
business standards. As 3M achieved the highest levels of sales
volume growth in six years in 2006, we took the essential first
steps toward installing a disciplined, growth-oriented approach
to management that, over time, will truly change the way we do
things at 3M.
We are also taking steps to address more immediate issues.
Factory cost remains the largest single near-term challenge for us,
primarily caused by higher commodity costs occurring in 2006.
So achieving consistency in the improvement of gross margins is
among our top near-term priorities.
Accordingly, our main priorities for 2007 are:
1. Keeping the growth engine going and leveraging it to
the bottom line
2. Creating an environment where creativity is strongly
encouraged
3. Improving factory costs and gross margins
4. Flawless execution of new plant and line startups
Ours is a marvelous company and we are blessed to work for it.
We are working hard to reignite our competitive hunger and using
this to drive growth and world-class performance. And we are
resolved to continue on course to invent a new future for 3M.
Thank you for your confidence in our company. Know that 3M
people are working around the clock and around the world to
make 3M the best company of its kind – a company that delivers
both sustainable growth and consistent results. I am convinced
that through a revitalized culture of innovation, combined with the
courage to invest and modernize, the people of 3M can create a
company that truly is second to none.
George W. Buckley
Chairman of the Board, President and Chief Executive Officer
February 12, 2007