YANGON UNIVERSITY OF ECONOMICS

DEPARTMENT OF MANAGEMENT STUDIES

ONLINE MBA PROGRAMME

MBA 124: MARKETING MANAGEMENT

ASSIGNMENT (3)

Case 1: 3M: Where Innovation Is a Way of Life

In recent years, companies topping the world’s “most innovative” lists are typically high-tech leaders such as
Google, Apple, Samsung, and Amazon. When thinking of companies that set the world on fire with one
revolutionary product after another, the image of a stodgy company that originated in the mining industry more
than 100 years ago is hardly the icon. But while 3M may not be as flashy as today’s high-tech headliners, it’s
anything but stodgy.
3M—the Minnesota Mining and Manufacturing Company— is a multinational powerhouse with more than
$31 billion in annual sales. Year after year, with machine-like precision, 20 percent of 3M’s sales filter down
as operating profits, allowing the company to increase its dividend to shareholders—something it has done
every year for the past 57 years.
3M sells more than 50,000 products in nearly 200 countries across dozens of industries, including office
products, construction, telecommunications, electronics, health care, aerospace, and automotive. Among its
products are some of the world’s most recognizable consumer brands, such as Scotch Tape, Nexcare first aid
products, Filtrete home filtration products, Command mounting products, and Post-it Notes. But 3M’s portfolio
is also packed with hundreds of brands that most people have never heard of—like Peltor hearing protection
equipment or Pruven waste bags for picking up dog poop.
The unusual breadth of 3M’s product portfolio is both a blessing and a curse for the company. Having a
hand in so many industries shields the company from overreliance on any given market. Even when multiple
industries are down, many more are doing just fine. That explains 3M’s financial strength. But it also explains
why 3M has a hard time thrilling Wall Street. Even a hit new product doesn’t make much of a difference in
3M’s steady but unspectacular growth rate—one that is consistently in the low single digits.
Like 3M, the company’s current CEO, Inge Thulin, is methodical and understated. He keeps a long-term
focus and places strong emphasis on maintaining 3M’s reliable profitability. But Thulin is also interested in
stoking the fire just a bit, to put a little more heat under sales growth. One of the first things Thulin did when
he took over as CEO a few years ago was to trim 3M’s annual sales growth goal from 7 or 8 percent—a goal
the company consistently missed—to between 4 and 6 percent. Then, as the world watched, 3M’s organic sales
growth grew to 5.8 percent. And under Thulin’s leadership, 3M is now on track to maintain that stronger
growth rate.
How did Thulin do it? By doing the same thing 3M has been doing it for decades. At the core of 3M’s
success is its business model—organic growth comes from innovation and the creation of market-changing
products. Such market-changing products have at times created entirely new industries. 3M has sustained this
type of innovation decade after decade by fostering a deep culture of innovation, encouraging collaboration,
and maintaining a dedication to research and development.

Culture of Innovation
From its earliest days, 3M created a culture of innovation by allowing team members to take risks in a protected
environment. 3M knows that it must try thousands of product ideas to hit the new product jackpot. One well-
worn slogan at 3M is “You have to kiss a lot of frogs to find a prince.” “Kissing frogs” often means making
mistakes, but 3M accepts blunders and dead ends as a normal part of creativity and innovation. In fact, its
philosophy seems to be “If you aren’t making mistakes, you probably aren’t doing anything.”
As it turns out, “blunders” have turned into some of 3M’s most successful products. Old-timers at 3M love to
tell the story about the chemist who accidentally spilled a new chemical on her sneakers. Some days later, she
noticed that the spots hit by the chemical had not gotten dirty—an attractive benefit. It was that discovery that
eventually led to the creation of Scotchgard fabric protector. They tell about the early 3M scientist who had a
deathly fear of shaving with a straight razor. So he invented a very fine, waterproof sandpaper, which he used
to sand the stubble from his face each morning. Although this invention never caught on as a shaving solution,
it became one of 3M’s best-selling products—wet-dry sandpaper, now used for a wide variety of commercial
and industrial applications.
And then there’s the one about 3M scientist Spencer Silver. Silver started out to develop a super-strong
adhesive; instead he came up with one that didn’t stick very well at all. He sent the apparently useless substance
on to other 3M researchers to see whether they could find something to do with it. Nothing happened for
several years. Then 3M scientist Arthur Fry had an idea. As a choir member in a local church, Mr. Fry was
having trouble marking places in his hymnal—the little scraps of paper he used kept falling out. He tried
dabbing some of Mr. Silver’s weak glue on one of the scraps. It stuck nicely and later peeled off without
damaging the book. Thus were born 3M’s Post-it Notes, a product that is now one of the top-selling office
supply products in the world.
One of the ways 3M fosters a culture of innovation is by encouraging everyone to look for new products. The
company’s renowned “15 percent rule” allows all employees to spend up to 15 percent of their time
“bootlegging”—working on projects of personal interest whether those projects directly benefit the company
or not. And yet there is a vibe throughout the company regarding these precious six hours a week. Who knows
where the next Post-it Note will come from? “It’s one of the things that sets 3M apart as an innovative
company . . . giving every one of our employees the ability to follow their instincts to take advantage of
opportunities for the company,” says Kurt Beinlich, a technical director who oversees a 70-person lab team.
“It’s really shaped what and who 3M is.”
Encouraging Collaboration
Although 3M’s 15 percent program has inspired other companies to follow suit (both Google and HP apply
their own versions), it’s a rare perk in the corporate world. Not only is it an expense, but to be successful it
takes a lot more than simply giving employees the time. Experts suggest that this kind of program works best
at companies where there is a high level of collaboration across employees and departments.
3M has created that collaboration in spades. One example is an annual event that is simple but has a huge
impact. The event resembles a middle school science fair, as employees from dozens of 3M divisions make
cardboard posters describing their 15-percent-time project. Employees hang out next to their posters, await
feedback, and look for potential collaborators. Wayne Maurer, an R&D manager in 3M’s abrasives division,
refers to it as a chance for people to unhinge their “inner geek.” “For technical people, it’s the most passionate
and engaged event we have at 3M.”
The event is more than just an opportunity to show off; it has actually moved projects through the
development phase to commercialization. Past projects that have made it to market include clear bandages,
optical films that reflect light, and painter’s tape that prevents bleeding. The event has even put new life in
projects that have sat on a back burner for years.
One employee had an idea for creating a sandpaper with reshaped grit particles that wouldn’t dull so
quickly. But after playing around with the idea for a while, he shelved it and moved on to other things. Fifteen
years later, the employee resurrected the project during his 15 percent time and made a poster in hopes of
getting some ideas that would move the project along. With the help of new employees and new technology,
3M discovered that a particle’s sharp, pyramid-like shape became more durable with a change in the mixing
order of the ingredients. That discovery led to the launch of Cubitron II, sandpaper that acts more like a cutting
tool. On the market since 2009, it still stumps other companies trying to create copycat products.
Emphasis on R&D
Few companies provide more support for research and development than 3M. For years, 3M invested 6 percent
of sales every year in R&D. But in recent years, that spending had been cut to just 5.5 percent—a small
difference on paper, but one that Thulin believes is significant. “Those long-term investments are needed to
get the growth engine up and going.” If such investments are reduced, Thulin believes, “you will kill the
business.” That’s why 3M’s R&D expenditures are once again up to 6 percent. Thulin believes R&D “is the
heartbeat of this company and it’s a competitive advantage for us.” By comparison, the average of R&D
expenses across corporations is about 3 percent. For the most recent year, Apple spent $4.5 billion on R&D, a
company record that still amounted to only 2.6 percent of sales.
But it isn’t just the amount of money invested that is important for a successful R&D program. It’s how
the money is used. In addition to increasing 3M’s R&D allotment, Thulin is putting more priority on the 3M
technologies that have the most potential for growth. Among these technologies are films designed to protect
everything from smartphones to kitchen appliances and a construction wrap that will outperform DuPont’s
Tyvek as a weather-resistant barrier for homes and buildings.
But Thulin’s plan for allocating R&D funds also includes eliminating 3M units with poor financial
performance or those that aren’t a good fit with the company’s core strengths. For Thulin, it’s nothing personal;
it’s strictly business. Over the past two years, 3M sold Scientific Anglers—which makes fishing line and other
related products—and its Static Control business. Thulin believed there was little symbiosis between develop-
ments in the product lines of these two divisions and other 3M technologies.
Although Thulin’s plan focuses on high-tech areas, it also recognizes the importance of a broad portfolio
that includes low-tech items—such as doggie doo bags. In fact, 3M is committed to a broad range of pet care
supplies. “You cannot have only high-tech in every category because then you will not get space in the shops,”
says Thulin, recognizing that mass retailers want to purchase full lines of products within and across categories
from manufacturers.
This is all reflected in 3M’s first promotional campaign in more than 25 years, “3M Science. Applied to
Life.” This global campaign is a fully digital promotional effort designed to showcase 3M’s technologies and
the ways that they improve everyday life. The company hopes that the campaign will bring greater exposure
to many of its products that have become ubiquitous. “Like any great company, we’re looking at how we can
improve and continue to invest in our strengths,” says Jesse Singh, 3M’s senior VP of marketing and sales.
“We are continuing to invest in R&D, and likewise we felt it important that we continue to take steps to
emphasize the brand.”
3M will likely never have growth rates matching those of Apple, Facebook, or even Microsoft in its heyday.
But it will also likely never experience the potential downturns that even the biggest companies eventually
face. That’s why 3M’s net profits hum along at about 15 percent of sales year after year. It’s also why 3M’s
stock price has doubled over the past four years. 3M’s long-term dedication to innovative new products and
technologies has sustained the company for decades, and there’s no reason to expect that this will change. Who
knows— the next “big thing” may just have “3M” stamped on it instead of “Apple.”

Case 2: Apple Pay: Taking Mobile Payments Mainstream

After leaving his office in Manhattan, Tag stopped at a nearby Panera to grab a Frontega Chicken Panini and
Green Passion Power Smoothie as a quick dinner on his way to see some friends in Soho. Upon ordering, he
held his Apple Watch to the contactless reader near the register, gently pressed his finger to the TouchID
fingerprint sensor on the small screen, and let Apple Pay do the rest.
Wanting to get across town as soon as possible, Tag used his Uber app to summon an UberX car. During
the car ride, he remembered that he needed a couple of new dress shirts. With a few quick clicks on his watch,
he selected the shirts through his Macy’s app. With a simple tap, he used Apple Pay to seamlessly complete
the transaction. As he neared his destination, Tag added a tip to the bill for the ride through the Uber app,
which he’d already configured to use Apple Pay as the default. With one simple press of his finger to TouchID
on his watch, he exited the cab.
Three purchases—offline, online, and, well, sort of in between—no wallet required. No traditional wallet,
that is. This new reality—one that many early adopters are already living—is rapidly expanding toward what
some experts predict will become the future for everyone. Folks like Tag don’t even carry traditional wallets
anymore, only their mobile devices and perhaps an ID and a backup credit card for retailers that don’t accept
mobile payments—yet. After years of predictions that mobile payments would replace cash and credit cards,
there are finally signs that it might actually be happening. And Apple is leading the way.
Hardly New
The ability to pay for transactions with a mobile device is hardly new. In fact, the first technology for mobile
payments was invented by Sony way back in 1989. It was first put into use in Hong Kong’s subway system in
1997 and began taking root in Japan in 2001. The tech-savvy Japanese warmed to the idea quickly, and mobile
wallet apps were being used on mobile phones throughout Japan by 2004. Ever since, more than 245 million
Japanese mobile phones have been equipped with the capability to make mobile payments, and Japanese
consumers use mobile payments for everything from transportation to food and household purchases.
So it seems odd that a similar system has not taken root in the United States, although it hasn’t been for lack
of trying. Companies have been experimenting with different approaches for years. PayPal was the first to take
advantage of the smart-phone revolution by creating a payment app that gave just about every smartphone the
potential for mobile payments. About a year later, Google entered the mobile payment game with the launch
of Google Wallet. In the past five years, numerous other companies, from small start-ups to electronics and
retailing giants, have tried to gain market acceptance in mobile payments. They include the likes of Samsung,
Square, and CurrentC, a mobile wallet app backed by a consortium of U.S. retailers (with Walmart leading the
way) that hope to cut credit card companies and their fees out of the buying loop.
But none of these players—individually or together—have made much of a dent in replacing traditional credit
cards and cash as a form of payment in the multi-trillion-dollar U.S. retail market. Although the mobile
payments concept may seem like a no-brainer for convenience-loving American consumers, numerous barriers
on both the buyer and seller sides have kept the concept from gaining momentum. With its recent launch of
Apple Pay, Apple is clearly a market follower. But it’s a feat that the innovative company has performed to
perfection time and again—take a new technology, make it better than any of the initial offerings, then watch
the market explode as the Apple version becomes the runaway market leader.
Overcoming Negative Consumer Perceptions
As with every new technology that involves paying for things, consumers have concerns about the security of
mobile payments. Paypal, Google, and the others took significant measures to design secure systems. However,
most consumers just weren’t comfortable with the idea that their phone might be used as a portal to their credit
cards and bank accounts if it fell into the wrong hands. Never mind that the same could be said of a wallet or
handbag, far less secure devices.
Recognizing consumer reluctance to place digital versions of their financial devices in one app, Apple took
security to a higher level. Requiring a fingerprint makes the process much more secure than the more common
safeguard of entering a passcode. And if a mobile device is ever lost or stolen, the owner can use its Find My
iPhone feature to immediately lock down Apple Pay or even wipe the device completely clean.
Additionally, every compatible Apple device is assigned a unique Device Account Number. This is
encrypted and securely stored in a dedicated security chip on the device. That and a transaction-specific
security code are the only numbers that Apple transmits to merchants. In fact, the merchant doesn’t even need
to know the customer’s name. Credit and debit card numbers are stored only on the local device, not on Apple
servers. This makes Apple Pay even more secure and more private than paying by credit card.
Beyond consumer security concerns, previous adoption of mobile payment apps has been slowed by
perceptions of a clunky user experience. If convenience is the biggest draw for consumers, then anything more
arduous than the already convenient swipe of a credit card simply won’t cut it. Setting up any of the existing
mobile payment apps takes time and effort. Using such apps at the point of purchase is far from seamless,
especially if the technology isn’t working quite right. “I don’t want to be that guy holding up the line while we
fumble around to get it all to work,” says one business columnist, “just like I don’t want to be the guy who
holds up the line boarding an airplane because his mobile boarding pass can’t be read.” Mobile apps that hit
the market prior to Apple Pay required entering a passcode and—in some cases—hitting multiple buttons. That
took longer than the traditional swipe of the card, even if everything worked as intended.
With Apple Pay, users still need to configure the app. But Apple already has 800 million credit cards on
file with its existing iTunes store. Not only can this facilitate a set up that is already streamlined compared with
existing apps, it’s a sign that iTunes users may be more comfortable with using the app given that they have
already given their credit card information to Apple. And with the TouchID sensor, Apple has the transaction
down to a one-touch process. That’s quicker than swiping a card and going through the typical menu, not to
mention quicker than inputting a passcode.
Establishing Points of Acceptance
For mobile payments to penetrate the market, consumer acceptance is necessary. But companies face a twofold
challenge in making such a technology successful. Consumers won’t adopt it if retailers don’t accept it, and
retailers won’t invest the resources necessary to accept it unless there is sufficient consumer demand. And the
lack of consumer demand is the biggest factor that has kept retailers from jumping onto the mobile payments
bandwagon. As a result, there are currently too few retailers that accept mobile payments to convince people
that they can leave their credit cards at home.
But thanks to Apple, that situation is changing rapidly. It may be because of Apple’s clout or because of the
company’s massive and loyal user base. But in less than a year, Apple has signed up far more retailers than all
the previous mobile payment providers combined. “You need so many points of acceptance to make mobile
payments work,” says a mobile payments analyst for Forrester Research. “Apple has made that happen, striking
partnerships with top national brands across a variety of categories that will give consumers plenty of
opportunity to use the service.” Apple has also signed up enough credit card issuing banks and credit unions
to cover 83 percent of charge volume. In fact, Apple Pay has gained enough steam that Best Buy and Meijer
will soon be accepting the payment app, despite having signed exclusivity agreements as part of the CurrentC
consortium.
But Apple still faces many challenges. For example, even though Apple Pay is now technically accepted at
more than 700,000 U.S. retail outlets, many of those outlets don’t yet have the hardware installed that will
recognize Apple’s app. That fact can be discouraging to early adopters, hurting repeat usage. One recent survey
showed that 66 percent of iPhone 6 owners had signed up for Apple Pay, but nearly half of them had visited a
store listed as an Apple Pay merchant only to find that the location wasn’t set up yet to process mobile payments
through the app. Additionally, although Apple’s penetration of the market far exceeds that of the competition
and continues to grow each month, the mobile payments leader has a long way to go before reaching critical
mass with 8 million retail outlets. And this doesn’t even take into account online and inapp payments.
Still, Apple remains confident. “We are more convinced than ever that 2015 will be the year of Apple Pay,”
says Tim Cook, Apple’s CEO. While there are still plenty of doubters that mobile payments will replace plastic
as the go-to method for purchasing goods and services, there are also plenty of believers. And while Apple is
clearly ahead in this game, its success also bodes well for the competition. As the concept catches on and
technologies become more compatible, demand among non-Apple users will increase as well.
There is no shortage of options in the mobile payments field. And improvements designed to make the apps
more convenient are being made continually, including the integration of loyalty cards and other promotional
mechanisms. But even as other companies’ offerings get better, expect Apple to be more competitive than ever.
After all, nothing is stopping it from creating Apple Pay for Android devices.