3M 2007 Annual Report Download - page 4

2 Leading Through Innovation
True to 3M’s heritage, we continue to create new product
platforms. For example, we are reducing production
costs of our aluminum composite conductor, which has
the potential to significantly change the way electricity is
distributed. In addition, our new mobile projection engine
(small enough to fit in the palm of your hand) can be
integrated into virtually any personal mobile device or
mini projector and project an expanded image. It created
a major buzz at the Consumer Electronics Show in Las
Vegas last year. Several companies have expressed
keen interest in this product, and we are going all-out
to commercialize and capitalize on this opportunity.
Because we are investing both our resources and energy,
innovation is again alive and well all across 3M.
Second, we’re on course with strategic acquisitions.
Sixteen acquisitions were completed last year, bringing
new competencies in products and technologies and a
needed foothold in several new markets. As much as
anything in our strategy, acquisitions bought us speed in
reducing time to market. Speed is increasingly becoming
a competitive weapon. All these actions are helping us
build an incredibly powerful company for the future, even
as we deliver good results in the short term.
Third, we are capitalizing on emerging business
opportunities (EBOs) in adjacent markets. Our six EBOs
— Filtration, Food Safety, Mining & Mineral, Track &
Trace, Renewable Energy and Oil & Gas — generated
approximately $1.5 billion in sales in 2007. While this
is a strong start in some of the world’s faster-growing
markets, the real story here is potential growth in the
next few years. In fact, we expect revenue from EBOs
to more than double over the next five years and EBOs
to account for more than 10 percent of our portfolio five
years from now.
Finally, we look to our International Operations. It’s
increasingly clear that driving growth in the United States
will continue to be challenging in the near term. But
regardless of slowdowns in any one region, because
of our diverse nature we have the ability to repeat
and extend growth opportunities all around the world.
Not many companies have that capability, which has
been honed over the years at 3M. I know of no other
company that can match 3M’s capacity with respect to
international distribution.
In 2007, 63 percent of 3M’s sales were outside the
United States and we expect this to increase to about 65
percent in 2008 to more than 70 percent by 2010. We
are a truly international-oriented company. It is important
to note also that $7 billion of our global sales, or nearly
30 percent of the total, is generated in emerging
economies such as in Central and Eastern Europe,
developing Asia and Latin America. Sales in emerging
markets have been growing at approximately 20 percent
annually over the past five years. We are aggressively
investing today to realize the benefit of growth and
penetration in emerging markets as they mature. Our
2007 investments in Kazakhstan and North Africa are
excellent examples of this.
In addition to executing our growth and supply chain
initiatives, there are three new challenges for 2008.
These are (1) the weaker U.S. economy, (2) U.S. growth
rates and (3) the changing nature of the market for
optical films.
The weaker U.S. economy requires even more creativity
and hard work than normal and it is likely that the
most creative and diverse companies will fare best. So
fostering better differentiation, more innovation and
good service are more important than ever. The United
States is the single most competitive marketplace in the
whole world; and for 3M to meet its long-term growth
aspirations, the U.S. business must also grow faster. This
will become a focus for us in 2008, with a number of
changes being made to boost U.S. growth.
Regarding optical films, it is our plan to transition our
Optical Systems Division into a broad-based supplier