Anyone unfamiliar with the strategy of giant US corporation 3M is liable to be taken aback by the company's decision to establish an innovation center in Israel. Since it was founded at the outset of the preceding century, 3M has embarked on a series of measures seemingly destined for disaster.
In its early days, the company tried to produce a mineral for making sandpaper, but failed. The founders did not give up. They moved their plant to another location, and eventually succeeded in the task. Since 1902, the company has produced a wide variety of products having no obvious connection with each other. Despite this lack of focus, however, 3M (the letters stand for Minnesota Mining and Manufacturing) has a market cap of $90 billion.
"Why Israel? There's a future here."
At a time when young startups are trying to develop revolutionary technologies, 3M is still making duct tape, contact glue, and adhesive bandages - and is making a success out of it. The company is still growing, investing, and gaining a place in the global high-tech scene, thanks to its constant assimilation of innovative technologies, reflected in its acquisition of an Israeli startup and investment in two others in recent years.
At the beginning of the month, 3M inaugurated an innovation center in Israel, in which an observer can be impressed by the corporation's range of business: industry, medicine, infrastructure, transportation, auto, energy, electronics, and consumer products for the home and office. In honor of the opening of the center, which is designed to strengthen the connection between the company and the local R&D community, representatives of company management visited Israel, including international operations executive VP H.C. Shin.
In a "Globes" interview, Shin reveals the company's secret - why, more than a century after it was founded, 3M is still cited as a model in business administration studies, and what it is looking for in Israel. "We've been operating in Israel for 20 years, and it's important to us as a strategic location," Shin explains. "The reason why we're opening the innovation center is to propel our investments into the next stage. We have diverse customers of varying sizes and diverse marketers, but when you want tofind technology, you have to see it in action. Why Israel? I believe that the answer is obvious - Israel is economically stable, and we see that there's a future for 3M here, and the possibility of good penetration."
35 innovation centers around the world
Israel is not the only one, of course. The corporation operates innovation centers in 35 countries;the lastto be opened is in Turkey. "The investment in innovation is our vision," Shin declares.
"Globes": How can a company that has been around for 100 years be innovative?
Shin: "That's a good question. A lot of companies disappear in their first decade, but there are two things we always make sure of. The first is technological innovation. We constantly adopt new technologies. The second is assimilation of technology for the purpose of finding solutions for the customer. For example, air qualityin China is bad. What we have done is to develop individualized facial masks that are being used in Beijing. This is only one of many examples, but the idea is that assimilating a solution to a problem is what enables us to keep going for decades. At the same time, we want to understand how people exist in each society. We can't solve all the problems, but many of them are solvable.The bottom line is thatweidentify problems in the world and find solutions for them."
Does being spread out over a long list of fields, many of which belong to the traditional industries, not pose a problem?
"There are orderly processes we go through in the innovation process before we invest our money. We are known for our liberalityon processes, but what people don't know about us is how we manage it, and what leads us to commercializedifferent products. We check out everything before we get underway."
The liberality mentioned by Shin, among other things, reflects the 15% law for the company's employees, mainly scientists. This law says that they are to spend 15% of their time on raising new ideas. "Many of the things we're doing originated like this," Shin claims. "It's good for both managers and employees."
You are on the way to lecture at the multinational companies forum of the Eli Hurvitz Institute for Strategic Management at Tel Aviv University. What do they study about you at the university?
"It's all aboutinnovation and how to implementinnovation."
"We do scouting for startups in Israel"
Talking about the company's investment policy, 3M Israel managing director Jonathan Pantanowitz says, "Several years ago, the company founded an arm that looks more outwardly at the world of startups. Two of them are in Israel. When we look for startups, we think about cooperation. One such startup is Takadu, which uses monitoring to improve the efficiency of water infrastructure. The second is VocalZoom, which has developed a microphone that filters background noise. The two ideas are related to safety, and we came to them after having considered dozens. We haven't yet decided whether to invest in another, but we're in intensive contact, and several startups have already visited our center in St. Paul."
When you invest in a startup, is your aim to acquire it eventually?
Pantanowitz: "Every option is on the table, but that's not necessarily the idea, and it's not the purpose. We invest in order to see whether the technology suits the activity it's intended for. In general, we’re now looking for startups suitable for more than one division - that will be more lateral. I can say that technology related to sensors interests us a lot, and we're scouting startups in Israel."
"The combination of need and solution"
Further evidence that 3M believes in Israeli high tech is provided by its investment in VocalZoom, which develops technology for voice identification apps, and Takadu, which is developing a solution for monitoring water infrastructure. In addition 3M acquired Attenti (formerly Dmatek, and now called 3M Electronic Monitoring) in 2010 for $230 million, a company dealing in remote monitoring technologies.
Shin: "We have a plant in which we invest in companies doing things tangential to our fields. We're looking for opportunities all the time, and you naturally have a great many interesting startups."
Are more investments in Israel planned?
"I can't say exactly how many and how much, but it's stunning to see the ideas coming out of Israel. I think that the country encourages it, like what's happening in Singapore."
Shin reiterates that that the company finds solutions only for existing problems. "You always have to think about the combination of the need and the solution. I don't believe that you can create technology just for the sake of technology. Our strategy is to focus on several things like air pollution, and then to develop technology - the technology is an answer to the problem, not the other way around," he stresses.
What do you think about companies like Facebook? Do you think they also found a solution to an existing problem?
"They're not in our range of business at all, but they created a great solution that is a way of expression and communication."
Published by Globes [online], Israel business news - www.globes-online.com - on December 18, 2015
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