July
Enterprise Q&A
In China, 3M products may be as ubiquitous as the water one drinks or the air one breathes, but they’re also just as easily taken for granted. That is until the Sichuan earthquake in May, which threw even the expectation of basic necessities into sharp relief. Within the week of the quake, 3M donated vital respirators and water purifying systems. Suddenly, 3M products were all over the news—with a grim backdrop. It’s hardly the way Kenneth Yu, the managing director of 3M’s operations in greater China , envisioned promoting his company’s brand image. Despite its 25 years in China, 3M’s greatest challenge, Yu says, is getting their various brands on the radar. Still, he’s hardly disheartened. Robust and engaging, Yu says he’s happy for the company’s solid growth in China - sales of more than USD $2.4b, but what thrills him most is his team’s developments in technology and innovation. He speaks with Newsweek Select’s Megan Shank. Excerpts:
You said this tragedy is actually a sort of opportunity for 3M. What are the pitfalls associated with that kind of thinking?
Of course we’d rather no tragedy happened at all. It is fortunate that many of our products are helpful for rescue relief efforts. Business opportunities as a result of such factors are fine, but they are not the reason why we do what we do. After all, additional sales of such products represent only a very small part of 3M’s total portfolio.
I understand the donation of water purifying systems was the result of an initiative from a subordinate. What does that say about 3M’s work culture?
It’s not just 3M China. At 3M the organization is very flat, and it is very easy even for entry-level employees to speak with the leadership freely — be it via our in-house same time messaging service or office visits.
With a staff of more than 5,000 employees, how do you communicate?
For example, for the past two years, I’ve written an internal blog where I publish articles to teach my staff. You know, with young people, if I send you an e-mail, they may not read it. They get hundreds of e-mails every day. But with a blog it’s different. I try to make the stories short and sweet. It’s light-hearted and bilingual.
Can you give an example of an instructional blog post?
There’s an article I wrote about disposable diapers. When my first son was born, the hospital wrapped his bottom with a disposable diaper – a very famous brand. My wife used the brand religiously for the first year and kept heavy inventory at home. One day, she went to supermarket to replenish the inventory, but that brand was out of stock. She reluctantly bought another brand and discovered the new one was just as good. From that point onward she was on brand number two until the baby was out of diapers. Now let’s say you are the marketing manager or the product manager of brand number one. You can spend money on advertising or improve your products like there is no tomorrow. But you ain’t gonna get my wife’s business any more. The only time you might have a chance is if the brand she’s using is out of stock. Moral of the story? Thou shalt not run out of inventory. Stories like this are best told through a blog.
What kind of hits do you get on these internal blogs?
(Scrolling on his blog.) On average about 3,000 to 4,000 hits per post; look at the hundreds of comments.
How do you encourage your staff to innovate?
You cannot make people innovative, but you can provide an environment that promotes innovation. That means supporting people, encouraging people when they’re moving in the right direction. For example, we have a researcher who was obsessed with the ability of the lotus flower to repel anything from sticking to it. He came out with a coating that is almost as good as the lotus flower, except that it would wear off after two days. Up to this point, the story seems interesting but not rewarding—regardless of its innovative origins, a failure to achieve its original purpose. The next part of the story is entrepreneurship and innovation in marketing. One of this researcher’s colleagues said, “what if you put this substance on the inside surface of a miner’s face piece or a surgeon’s goggles and prevented them from fogging? You would make their work safer and more effective.” And the nice thing about something that doesn’t last that long is that a customer has to buy more of it. Not bad at all!
How do you retain the kind of talent that’s driving these products?
You have to pay competitively. We also provide training opportunities. But most importantly, we make sure that people who do the right things are appreciated
What’s your greatest challenge? It doesn’t seem you have an iconic product here, as you do in the United States.
Right, we have struggled with brand awareness and been painstakingly trying to improve brand equity for the past seven years. We focused too much on business-to-business campaigns; now we need to focus more on consumer awareness. Because we’re such a diversified company and because most of our products are not those that can be seen or touched by consumers, it’s hard to get on the radar with people. We’ve made some headway, but we’ve still got a lot of work to do. The fortunate thing is that Chinese believe in brands probably even more than Americans. In China, many products are coming up simultaneously, so people see everything as being more or less equal. What tips the balance is brand.
So Chinese consumers care more about brand than price?
It is impractical to generalize all Chinese consumers. However, it is safe to say that Chinese consumers have demonstrated far more loyalty to brands than most suppliers have expected, especially in the bigger cities. But lower price points do appeal to a broader consumer base.
How do you compete with local companies here?
We’ve been growing at about 25% for the past five years. Because our products are so diversified, we have no “biggest competitor,” per say. We don’t’ fall for the false idea, however, that Chinese products are all cheaper and of poorer quality. These Chinese competitors are growing very strong. Right now about 70% of everything we sell in China has been made with localized content, and we don’t do much export at all.
How does 3M develop products that are specific for the market?
Telecommunications systems are a perfect example. Every country has its own system. So our R&D people develop products to fit, and then we source components locally—China is rich in raw materials—to manufacture at good price.
One of the biggest challenges China faces is how to facilitate economic growth while protecting the environment. What are 3M’s emissions standards?
We are a pioneer of pollution protection. We’re not talking about international standards –that’s generally too low. We either use the country standard or the industry standard—whichever is higher. Take China: there’s no way to regulate Volatile Organic Compound emissions. As long as your chimney is tall enough that your neighbors don’t complain, you’re ok. But back in 1995, for example, when we had a factory that made tape, we installed a thermo-heat oxidizer—basically a burner—that eliminated the VOC. No one else was doing this at the time.
What was the incentive?
To be a good company. It’s just part of our core values. And the incentive is becoming more of a monetary one as our customers become more green.
But has there been any conflict between pleasing shareholders and staying loyal to principles?
Do not assume that pollution prevention costs money. Take the VOC burners for example. Many of the 3M tapes are not using the VOC system any more. We’re using water-based systems now. And it actually cuts costs. It seems to cost money in that there’s an upfront cost because it forces you to come up with a better way, but in the long run you’ll save. And, as customers are demanding more of companies, the one that has the better reputation is going to win out in the end.
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