07.24.12
17. 3M Healthcare
$5 Billion ($29.6B total)
KEY EXECUTIVES:
Inge G. Thulin, President & CEO
David W. Meline, Sr. VP & Chief Financial Officer
Brad T. Sauer, Exec. VP, Health Care Business
Frederick J. Palensky, Exec. VP, Research & Development and Chief Technology Officer
John K. Woodworth, Sr. VP, Corporate Supply Chain Services
Hak Cheol Shin, Exec. VP, International Operations
Roger H.D. Lacey, Sr. VP, Strategy & Corporate Development
NO. OF EMPLOYEES: 84,198 (total)
GLOBAL HEADQUARTERS: St. Paul, Minn.
“Innovation is the specific instrument of entrepreneurship.
The act that endows resources with a new capacity to create wealth.”
Inspiration is a fickle beast. It seldom arrives by invitation, preferring instead to surprise its hosts with intrusive entrances amid ordinary places or circumstances.
The beast certainly followed protocol when it showed up on Arthur Fry’s doorstep in 1973. The 3M scientist was singing in his church choir when he had perhaps the greatest idea of his professional life.
Frustrated by the scraps of paper he used to mark his church hymnal (the makeshift bookmarks always moved around or fell out), Fry had long been searching for a better page-marking system. On the day inspiration struck, Fry remembered a work seminar he attended on a unique adhesive developed by another 3M scientist named Spencer Silver. The adhesive was strong enough to cling to objects but weak enough to allow for a temporary bond.
If Silver’s adhesive could be coated on paper, Fry theorized, then it would certainly hold a bookmark in place without damaging the page on which it was placed.
The next day, Fry requested a sample of the adhesive. He began experimenting, coating only one edge of the paper so the portion extending from a book would not be sticky. Fry used some of his experiments to write notes to his boss, leading him to broaden his original idea into the concept that eventually became the Post-it note.
Fry came up with the now iconic product during his “15 percent time,” a 3M program that allows employees to use a portion of their paid time to chase rainbows and hatch their own ideas. While it may seem like an wasteful employee perk, the program actually has produced many of the company’s best-selling products and has set a precedent for some of the top technology companies of the day, such as Google and Hewlett-Packard.
The program also has kept the company focused on innovation, which executives believe is the path to future prosperity.
“We can neither save nor spend our way into prosperity, but we can and must imagine, innovate and invest our way there. It is the only thing which guarantees success,” 3M Chairman, President and CEO George W. Buckley told shareholders in his farewell letter included within the company’s 2011 annual report. Buckley retired in February 2012 and was succeeded by Inge G. Thulin, a 32-year 3M veteran who most recent served as executive vice president and chief operating officer.
“An innovative company cannot be built just on inanimate lab work or mathematics alone,” Buckley’s letter continued. “It is built on a belief in the power of R&D, belief in the people doing that kind of work and a deep conviction that the collective power of their imagination and creativity will generate future opportunity and financial betterment for the company.”
Imagination and creativity certainly have been well-rewarded over the last several years: The global technological conglomerate responsible for such revolutionary inventions as masking tape, dry-silver microfilm and immune response modifier drugs increased its research and development spending by 21.4 percent since 2009. Last year, R&D funding climbed 9.5 percent to $1.57 billion, the highest total in at least six years.
Such investment in future innovation indubitably contributed to the company’s growth since the depths of the Great Recession. Net sales jumped 11.1 percent last year to $29.6 billion and operating income rose 4.4 percent to $6.1 billion, according to the firm’s 2011 annual report. Since falling off a proverbial cliff in 2009, 3M’s earnings have rebounded significantly—sales have skyrocketed 28.1 percent, operating income has swelled 28.3 percent and net income has ballooned 34.1 percent.
The company’s Health Care segment earnings have followed the same trajectory; sales have grown 17.2 percent and operating income has risen 10.3 percent over the last three years, 3M financial data indicate. The segment, which makes surgical supplies, food safety products, inhalation and transdermal drug delivery systems, and oral care products (among others), was one of three divisions to report a double-digit revenue increase in 2011 (the others were Industrial and Transportation, which posted a 19.5 percent sales hike, and Safety, Security and Protection Services, which recorded a 15.2 percent increase). Sales jumped 11.5 percent to $5 billion, due partly to foreign currency exchange rates and demand for products inherited in the 2010 acquisition of Arizant Inc., an Eden Prairie, Minn.-based manufacturer of blankets and hospital gowns that keep patients warm on the operating table and guard against hypothermia. Executives estimate the Arizant acquisition contributed 1.2 percent to the Health Care sector’s revenue growth.
Operating income in Health Care rose 9.3 percent to $1.5 billion last year but income margins were down—29.6 percent compared with 30.2 percent in 2010. Executives attributed the decrease in part to growth investments in the health information systems and infection prevention solutions.
Those investments include a collaboration with Cary, Ill.-based Sage Products Inc. to help minimize the risk of healthcare-associated infections. 3M also agreed to sell Sage products in certain international markets.
Another significant infection prevention investment that took place in 2011 (year ended Dec. 31) was the development and market release of the 3M Clean-Trace Hygiene Management System, a tool that can help hospitals assess surface cleanliness in less than a minute. The Clean-Trace System detects adenosine triphosphate, a substance in all living cells that is found on any contaminated surface.
The company’s Health Care sector also unveiled a new mobile software system for doctors that enables them to manage their daily schedule, review patient information, dictate progress notes and log charges. The 3M Mobile Physician Solution also provides instant access to patient information from any location. Upon its release in May 2011, 3M touted its physician-oriented software system as the “industry’s first mobile solution to offer comprehensive intelligent coding advice to physicians as they capture and record professional fees.”
$5 Billion ($29.6B total)
KEY EXECUTIVES:
Inge G. Thulin, President & CEO
David W. Meline, Sr. VP & Chief Financial Officer
Brad T. Sauer, Exec. VP, Health Care Business
Frederick J. Palensky, Exec. VP, Research & Development and Chief Technology Officer
John K. Woodworth, Sr. VP, Corporate Supply Chain Services
Hak Cheol Shin, Exec. VP, International Operations
Roger H.D. Lacey, Sr. VP, Strategy & Corporate Development
NO. OF EMPLOYEES: 84,198 (total)
GLOBAL HEADQUARTERS: St. Paul, Minn.
“Innovation is the specific instrument of entrepreneurship.
The act that endows resources with a new capacity to create wealth.”
— Peter F. Drucker
Inspiration is a fickle beast. It seldom arrives by invitation, preferring instead to surprise its hosts with intrusive entrances amid ordinary places or circumstances.
The beast certainly followed protocol when it showed up on Arthur Fry’s doorstep in 1973. The 3M scientist was singing in his church choir when he had perhaps the greatest idea of his professional life.
Frustrated by the scraps of paper he used to mark his church hymnal (the makeshift bookmarks always moved around or fell out), Fry had long been searching for a better page-marking system. On the day inspiration struck, Fry remembered a work seminar he attended on a unique adhesive developed by another 3M scientist named Spencer Silver. The adhesive was strong enough to cling to objects but weak enough to allow for a temporary bond.
If Silver’s adhesive could be coated on paper, Fry theorized, then it would certainly hold a bookmark in place without damaging the page on which it was placed.
The next day, Fry requested a sample of the adhesive. He began experimenting, coating only one edge of the paper so the portion extending from a book would not be sticky. Fry used some of his experiments to write notes to his boss, leading him to broaden his original idea into the concept that eventually became the Post-it note.
Fry came up with the now iconic product during his “15 percent time,” a 3M program that allows employees to use a portion of their paid time to chase rainbows and hatch their own ideas. While it may seem like an wasteful employee perk, the program actually has produced many of the company’s best-selling products and has set a precedent for some of the top technology companies of the day, such as Google and Hewlett-Packard.
The program also has kept the company focused on innovation, which executives believe is the path to future prosperity.
“We can neither save nor spend our way into prosperity, but we can and must imagine, innovate and invest our way there. It is the only thing which guarantees success,” 3M Chairman, President and CEO George W. Buckley told shareholders in his farewell letter included within the company’s 2011 annual report. Buckley retired in February 2012 and was succeeded by Inge G. Thulin, a 32-year 3M veteran who most recent served as executive vice president and chief operating officer.
“An innovative company cannot be built just on inanimate lab work or mathematics alone,” Buckley’s letter continued. “It is built on a belief in the power of R&D, belief in the people doing that kind of work and a deep conviction that the collective power of their imagination and creativity will generate future opportunity and financial betterment for the company.”
Imagination and creativity certainly have been well-rewarded over the last several years: The global technological conglomerate responsible for such revolutionary inventions as masking tape, dry-silver microfilm and immune response modifier drugs increased its research and development spending by 21.4 percent since 2009. Last year, R&D funding climbed 9.5 percent to $1.57 billion, the highest total in at least six years.
Such investment in future innovation indubitably contributed to the company’s growth since the depths of the Great Recession. Net sales jumped 11.1 percent last year to $29.6 billion and operating income rose 4.4 percent to $6.1 billion, according to the firm’s 2011 annual report. Since falling off a proverbial cliff in 2009, 3M’s earnings have rebounded significantly—sales have skyrocketed 28.1 percent, operating income has swelled 28.3 percent and net income has ballooned 34.1 percent.
The company’s Health Care segment earnings have followed the same trajectory; sales have grown 17.2 percent and operating income has risen 10.3 percent over the last three years, 3M financial data indicate. The segment, which makes surgical supplies, food safety products, inhalation and transdermal drug delivery systems, and oral care products (among others), was one of three divisions to report a double-digit revenue increase in 2011 (the others were Industrial and Transportation, which posted a 19.5 percent sales hike, and Safety, Security and Protection Services, which recorded a 15.2 percent increase). Sales jumped 11.5 percent to $5 billion, due partly to foreign currency exchange rates and demand for products inherited in the 2010 acquisition of Arizant Inc., an Eden Prairie, Minn.-based manufacturer of blankets and hospital gowns that keep patients warm on the operating table and guard against hypothermia. Executives estimate the Arizant acquisition contributed 1.2 percent to the Health Care sector’s revenue growth.
Operating income in Health Care rose 9.3 percent to $1.5 billion last year but income margins were down—29.6 percent compared with 30.2 percent in 2010. Executives attributed the decrease in part to growth investments in the health information systems and infection prevention solutions.
Those investments include a collaboration with Cary, Ill.-based Sage Products Inc. to help minimize the risk of healthcare-associated infections. 3M also agreed to sell Sage products in certain international markets.
Another significant infection prevention investment that took place in 2011 (year ended Dec. 31) was the development and market release of the 3M Clean-Trace Hygiene Management System, a tool that can help hospitals assess surface cleanliness in less than a minute. The Clean-Trace System detects adenosine triphosphate, a substance in all living cells that is found on any contaminated surface.
The company’s Health Care sector also unveiled a new mobile software system for doctors that enables them to manage their daily schedule, review patient information, dictate progress notes and log charges. The 3M Mobile Physician Solution also provides instant access to patient information from any location. Upon its release in May 2011, 3M touted its physician-oriented software system as the “industry’s first mobile solution to offer comprehensive intelligent coding advice to physicians as they capture and record professional fees.”
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