The notion of Innovation Portfolio Management (IPM), is primarily correlated with the process of provisioning corporate’s resources through its portfolio of new services and products that are aligned with the business strategy (Meifort, 2016). Thus, and to ensure superior control of growing rivalry, corporates must have an efficacious IPM in place that would safeguard a constant pipeline of innovative and quality products (De Maio et al., 1994).
In this article, I will be addressing 3M company, with a target to grow into the most innovative company across the world, through utilizing an extensive variety of Knowledge Management Systems (KMSs), facilitating a suitable working environment, as well as effectively motivating its people (Brand, 1998).
In line with preceding objective, 3M realized that its structure should be a reflection of company’s portfolio management, that is principally built on two main verticals: acquisitions and restructuring. Therefore, in terms of restructuring, the company decided back in 2013 to be divided into five divisions. And through that move, it facilitated the path for 3M to attain significant reductions in terms of operational cost by improved effectiveness, throughput and scale. Moreover, it has as well assisted the company to effectually recognize industries that actually boost development and innovation. As a result, 3M disclosed a recent statement that it is stripping its business in the static control domain, in order to pay extensive consideration to further innovative and profitable business opportunities (Forbes, 2015).
While regarding acquisitions, then 3M and through its strategy is considering them as an essential move for progression, growth of products’ portfolio and reinforcing its global presence, with a target to allocate a hefty budget of as high as $10 billion on acquisitions through the year 2017 (Forbes, 2015). And with that regards, I will bring two recent examples. The first one goes back to July 2014 when 3M secured a large presence in the Japanese market, through buying 25% of Sumitomo Electric in a move that helped the company to fully acquire the joint venture enterprise Sumitomo 3M, and eventually have a bigger control in world’s third largest economy (Reuters, 2014). Speaking of the second example, then 3M realized the high potential in the healthcare IT segment with a potential to reach $66 billion by the year 2020. Accordingly, they have acquired back in February 2014 Treo solutions, a company that is specialized in providing comprehensive business intelligence systems for healthcare suppliers and users (3M News, 2014).
Speaking of the R&D and it is impact on 3M’s portfolio and products growth, then the company announced in its last year’s sustainability report (3M, 2015), that 30% of company’s sales are generated out of the products that were developed over the course of last 5 years. As a result, and due to company’s belief in R&D’s significance in market dominance, 3M’s management decided to allocate almost 5.6% of company’s profit on R&D activities, and to increase the allocated ratio to 6% by the year 2017 (Forbes, 2015).
Conclusion:
After considering the foregoing elements of 3M’s portfolio management, that is accompanied with a set of innovative and distinguished range of products, we can realize how 3M managed to maintain its competitive edge and even dominate a substantial pricing power, that helped the company to sustain growth and maintain a significant influence in the market.
References:
3M (2015), ‘Sustainability Report’. Available online from: http://multimedia.3m.com/mws/media/1064170O/3m-2015-sustainability-report.pdf. [Accessed on November 12th 2016].
3M News (2014), ‘3M to Acquire Treo Solutions‘. Available online from: http://news.3m.com/press-release/company/3m-acquire-treo-solutions. [Accessed on November 12th 2016].
Brand, A., (1998), ‘Knowledge Management and Innovation at 3M‘, Journal of Knowledge Management, Vol. 2, Iss 1, pp.17 – 22. Available online from: http://dx.doi.org/10.1108/EUM0000000004605. [Accessed on November 12th 2016].
De Maio, A., Verganti, R., and Corso, M., (1994), ‘A Multi-Project Management Framework for New Product Development’. European Journal of Operational Research, 78, 178–191. Available online from: https://goo.gl/3DkGj7. [Accessed on November 12th 2016].
Forbes (2015), ‘3M’s Key Growth Levers: Portfolio Management, R & D, Business Transformation‘. Available online from: https://goo.gl/XKGa83. [Accessed on November 12th 2016].
Meifort, A., (2016), ‘Innovation portfolio management: a synthesis and research agenda‘, Creativity and Innovation Management, 25, 2, pp. 251-269, PsycINFO, EBSCOhost. Available online from: https://goo.gl/L3dFdc. [Accessed on November 12th 2016].
Reuters (2014), ‘3M to buy Sumitomo stake for $885 million to control Japan business‘. Available online from: http://www.reuters.com/article/us-3m-japan-idUSKBN0FL1XU20140716. [Accessed on November 12th 2016].