Authorization of expenditure by Andy Wong, the manager of the Optical Systems (OS) at 3M Corporation
Based on the problems encountered in the past and the perceived failure of the products developed by OS, there is a slim chance that the AFE or authorization for expenditure will be approved by higher management. However, Andy Wong and his team believed in the tremendous potential of the privacy screen, considering that there are tens of millions of personal computers in the whole world and if 3M can leverage its brand and its resources to connect with these potential customers then the initial cost that will be needed to create the said product will be recovered and the team can help the 3M Company make money in the long run.
Nevertheless, it would be a major challenge for Wong. And so four major things must be included in his AFE and these are:
- Wong must be able to show that the OS team can maximize the resources that they already have access to;
- Wong must convince Guehler that he is able significantly to reduce the cost of Research and Development and it would be considerably lower than what the other teams under the SSSD will request from him;
- Wong must be able to show that there is a demand for this product and that sales will pick-up one year after its release
- Wong must convince Guehler that this is a new product that contains a great deal of innovation, something that is far advanced than what their competitors can offer to their potential customers.
Wong can point to how they were able to recruit additional workforce and consultants from other departments without having to request additional funding. The willingness of “outsiders” to pitch in and help them with their task can significantly speed up R&D and at the same time ensures that they will be able to come up with cutting edge technology. Wong will then explain that there is no need to start from scratch and therefore there is no need to request significant funding to push through.
Wong will have to reiterate that there is an untapped market of over 30 million personal computers in the United States alone and if they can succeed in America the rest of the world will follow. Currently, it is a $70 million a year business and growing at a significant rate of 20% per year.
This is something that 3M cannot pass up. Wong will have to drive home the point that this is a new product; it is a multi-protection filter that will easily appeal to computer users in the office and the home. It will offer privacy, health benefits as it protects users from harmful radiation coming from computer screens, and finally, it will provide a more pleasant way of viewing the computer screen because of new technology in place.
Paul Guehler’s (Andy Wong’s boss) decision as to the prepared AFE
Wong provided four reasons why Guehler needs to authorize the release of funds for the development of the said multi-protection filter but a thorough analysis of the presentation will reveal that Guehler can only agree to the first reason and not the rest of the presentation. What Wong gave will not stand up to current facts about the product, the market, and the competition.1 Wong was correct that he can maximize the resources on hand because he capitalized on 3M’s corporate culture and the willingness of employees and technical personnel to lend a hand to create an innovative product that in turn will change the world.
Nevertheless, Wong will never convince Guehler that the cost of R&D will be significantly lower. Based on their calculations the cost will still amount to $750,000.2 This may be a small sum but considering that there are two projects under SSSD that received high commendation from corporate leaders and the fact that these projects will require funding for at least $5 million then Guehler will risk the resource allocation for two sure-hit projects if he gambles with Wong’s OS, a department with a proven track record of failure.
Guehler will not give the go signal because he will find out that the sales projection were unrealistic. The reason for this is the retail price of the product. There is simply no way that OS can reduce the production cost to a point that it will be very cheap. This is based on the fact that the cost of a regular PC at that time was $500. In this regard, the new multi-protection filter must cost less than $90 to be marketable but there is no indication that OS can even go below that mark hampering their ability to compete with others on pricing alone.
Finally, Guehler will have to say no because although the multi-protection filter is ahead of others in terms of innovation, there is nothing in it that consumers are willing to pay extra money for. It has been proven that consumers are willing to pay for anti-glare products but this feature is also available in other products offered by competitors and they already had a head start compared to 3M.
The effectiveness of Andy Wong as a front-line manager
The only thing that Andy Wong was able to do in terms of efficiency as far as front-line management is concerned is his ability to choose the right people to do the job that he required, and inspire them to continue working even if the odds are against them. But aside from that, he can be considered a failure as a front-line manager. He must be given credit as an inspiring leader who can sustain the enthusiasm of a group for a particularly difficult project but he was unable to solve the problems of his department and demonstrated a failure to correctly utilize resources to produce a marketable product in the years that he was given free rein in the OS.
One of his major shortcomings is the inability to understand how the consumer views his product. Wong was so much focused on the filter that he was unable to see the whole picture. He failed to grasp that the filter was a mere accessory and it cannot alter the overall performance of the whole unit e.g. the car or the personal computer. As a result, the customer cannot find the justification to spend an extra $100 for a piece of accessory that is as unassuming as a filter.
His second major problem is the inability to see the progress made by his competitors in terms of creating a product that sells. He forgot that a successful company does not only manufacture the most technologically advanced product but to be able to sell it and it is called marketing.3 Wong was never able to work closely with marketing people to truly understand how the real world works. The 30 million PCs in the United States are a mere statistic he has to find a way to turn that number into profit and so far he was unable to do so.
Why the 3M Company is considered one of the most successful entrepreneurial companies in the world
The 3M Company uses a strategy called “corporate entrepreneurship” and in a nutshell, it is the process wherein a firm engages in diversification through internal development.4 As result groups of individuals within 3M are given permission or even encouraged to create a sub-group or a new organization within the firm to create new products, instigate renewal or initiate innovation within the said company.5 This is the reason for their expansion and continuous success.
Conclusion
There is only one reason why the OS department continues to exist even if it clearly shows that it is underperforming and a dead-weight for the SSSD. The reason is that the 3M culture succinctly described as “corporate entrepreneurship” allows its people to fail. There is a good incentive to allow people to experiment because 3M has proven over the decades that it can be the source of innovative products that can generate significant revenue for the company as has been demonstrated for more than one hundred years of existence. However, there is a limit to the firm’s generosity when it comes to providing funds for R&D and Andy Wong has exceeded his limit.
Bibliography
Burgelman, R, Corporate Entrepreneurship and Strategic Management. Entrepreneurship Theory and Practice, 1983.
Bartlett, C. & A. Mohammed, 3M Optical Systems: Managing Corporate Entrepreneurship. Harvard Business School Publishing, MA, 1994.
Daft, R, Organization Theory and Design. South-Western Cengage Learning. Mason, OH, 2008.
Sathe, V, Corporate Entrepreneurship: Top Managers and New Business Creation. MA: Cambridge University Press, 2003.
Sharma, P. & J. Chrisman, Toward a Reconciliation of the Definitional issues in the field of Corporate Entrepreneurship. Entrepreneurship Theory and Practice, 1999.
Footnotes
- V. Sathe, Corporate Entrepreneurship: Top Managers and New Business Creation. MA: Cambridge University Press, 2003.
- C, Bartlett & A. Mohammed, 3M Optical Systems: Managing Corporate Entrepreneurship. Harvard Business School Publishing, MA, 1994.
- R. Daft, Organization Theory and Design. South-Western Cengage Learning. Mason, OH, 2008.
- R. Burgelman, Corporate Entrepreneurship, and Strategic Management. Entrepreneurship Theory and Practice, 1983.
- P. Sharma & J. Chrisman. Toward a Reconciliation of the Definitional issues in the field of Corporate Entrepreneurship. Entrepreneurship Theory and Practice, 1999.