3m, una estrategia emergente para el crecimiento i

8/11/2019 3M, Una Estrategia Emergente Para El Crecimiento I

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3M Investor Meeting 2006 © 3M 2006 All Rights Reserved

George W. Buckley

Chairman, President and Chief Executive Officer

An Emerging Strategy for Growth




Topics We Will Address Today

Demystifying 3M and understanding the workings of the

“3M Lattice”

1

Describing 3M’s strategy for growth while maintainingpremium margins

Explaining the origins of further incremental margingrowth at 3M

Strategic Management of 3M’s Portfolio

2

3

4




3M’s Summary Strategy

Technology lattice protects the downsidesand ensures upsides

Investment through the economic cycles

Driving growth as a way of doing business

Organic Sales

Growth

Earnings

GrowthInvestment

Returns

8%+ and

growing

12 -15%

20%+ Drill into the core. Move towards

scale where markets are large

Move towards higher relative share

in smaller markets

Heavy up on globalization

Technology remains part of whowe are

Careful tradeoffs of share and

growth to maintain value creation

momentum

Building on brands, technology,

people, service & distribution




Portfolio Priorities

Growing the core; fi lling white spaces

Becoming vital to customers

Building broad platfor ms for our technologies

Taking careful and logical adjacency steps

By Technology

Foundation Principles

18%+

Growing

the CoreInternational

GrowthAdjacencies

8%+ andgrowing

13%+

1

12

13%+15%+

Track &

Trace

Nano-

technologies

Electronics

& Software

15%+

1 1 2

Portfolio

Health

Care

Industrial

Hi-Tech

8%+

15%+

Safety

10%+By Activity




ScaleShareNiche Non

Core

What 3M Businesses ShouldLook Like in 5 Years

In every market we will maintain strong

technological superiority

Businesses with relative share

Businesses getting relative share

Smaller Markets

Invent & experiment

Grow, close or sell

Experimental And Niche

Large Markets

Businesses with scale

Businesses getting scale




Building Scale And Relative Share In Our Core

Scotch® branded Industrialand Office Tapes

Abrasives

Automotive after-market Optical Films

Face masks & respirators

Medical tapes and drapes

Post-It® Notes

Traffic Signage

Pharmaceuticals

Touch systems

Precision Optics

Visual displays

Lighting

Electrical Connectors

RFID

Dentistry

Orthodontics

Office supplies

Roofing granules

Commercial Graphics

Adhesives

Scale or Getting Scale

Relative Share or

Targeting Relative Share Sub-Scale




Understanding 3M’s History and Culture

3M’s history is rooted in an “invent and experiment” approachcalled “make a little, sell a little” where markets were built by

bootstrapping. This produced the following outcomes for 3M: – World class materials science and surface chemistry capability was built

over many years

– Markets were often entered only after privileged IP positions were built

– Scale was not considered important

– Demand and capacity were often underestimated

– 3M focused on making “risk free” capital investments by using highlyflexible machine tools capable of making many products in plants that

served multiple businesses. – Cross business use of central technologies was encouraged that led to

3M’s participation in many high-margin niche areas




Understanding 3M’s History and Culture

A high degree of conservatism became the norm

The “make a little sell a little” approach led to an incremental

approach to capacity and strategic planning – Complex supply chains evolved quite naturally, with extrusion

processes at one plant, coating in another plant and final conversion atyet another

– Individual plants were run with superb efficiency, but interconnectinglogistics were often complicated and costly

– Higher inventory and WIP compensated for the complex supply chains

– Chronic underinvestment in core capacity led to many upside salesgrowth opportunities being missed

3M’s inward focus brought margin benefits but often hinderedgrowth and good long-range planning




What Emerged From Our History

A highly capable scientific, engineering and manufacturingcompany with deeply conservative values, participating in

many successful niche markets Underinvestment in core markets that made readily available

growth hard to capture

Incredible inter-segment technology sharing, where newmarkets were continually built via a virtual “adjacency machine”

Hugely capable (and generally unknown) world-classmanufacturing

Modest and unassuming management

Underdeveloped strategic planning capability




Understand our competencies Identify the Basis of Differentiation Resultant Economic advantage

Get Scale Gain relative share

Relative low cost Customer importance Always maintain

technological advantage

Pose a view of the future Play in near adjacencies only Sequencing adjacency moves Watch for discontinuities

Decision criteria Systematic processes Distance from the core Organizational links

We Can Address Growth By Being More Systematic

IdentifyTruly Adjacent

Markets

Create A Long

Term AdditionPath

Achieve

Full PotentialIn The Core

Define The

CoreBusiness




Defining 3M’s Core

3M’s fundamental core competency is applying coatings to backings

– Both the coatings and the backings are traditionally developed inside 3M

– Backings may be woven or non-woven fabrics, paper, cloth, plastics or metal – Coatings are adhesives, abrasives, medicines, nano particles or imprinted optical

patterns

It does this in a highly precise manufacturing approach that involves the

large scale unwinding, winding and splitting of tapes

Incredible manufacturing capability and know how is the hiddenand unsung hero of 3M and a significant barrier to entry





3M sometimes sells its coatings and backings separately,configured as other products, such as face masks, Thinsulate

thermal and acoustic insulation and roofing granules

This same precision machining and materials sciencecapabilities have also been applied in market adjacencies suchas dentistry

Cubitron™

Ceramic GrainRespirator Roofing

Granules





In applying coatings, 3M developed world class competenciesin modifying the shapes and patterns of surface coatings(called micro-replication) that alters the fundamental behaviorof a product

This micro-manufacturing competency, leveraged acrossmany markets into nanotechnology makes 3M so hard to beat

Reinvention of the materials science space over the next few yearswith nanotechnology is one source of the next wave of growth

Trizact AbrasiveFuel Cell MEACubitronVIKUITI™ BEF




In developing the previous “backings and coatings” competencies,broad know-how in adjacent technologies was built, viz

– Micro-replication of surface patterns

– Optics and light management

– Nanotechnology

– Ceramics and adhesives

And 3M extended this adjacent knowledge across multiple marketsin less obvious applications such as

– Post-it® notes (the adhesive is “micro-replicated’)

– Adhesives (on which 3M’s dentistry competency is based)

So 3M is, at its heart, an invention and manufacturing company

Its major strength is in solving and delivering unique solutions forOEM and mass channel customers

Defining 3M’s Core: Other Core Competencies




3M’s Technologies Extend Into Multiple Markets

Adhesives

Abrasives

Ceramics

Electronic packaging

Micro replication

Optics

Specialty materials

Non-woven Materials

Polymer melting

3M Technology Platforms

Architecture & Const.

Auto. & Aerospace

Electronics Manuf.

Graphic arts

Health care

Home and Leisure

Industrial OEM

Consumer & Office

Safety & Security

Telecoms and Utilities

Markets




AdAdhesives

DdDrug

Delivery

DmDisplay

Materials

AcAcoustics

CpChemical

Power

Sources

VpVacuum

Processing

PpPrecision

Processing

MeMetal

Matrix

Composites

SuSurface

Modification

FsFiltration,

Separation,Purification

DoDental &

OrthodonticMaterials

Rf Reclosable

Fasteners

AbAbrasives MrMicro-

replicationPePredictive

Engineering

& Modeling

RpRadiation

Processing

NmNonwoven

Materials

PmPolymer

MeltProcessing

SmSpecialty

Materials

AsApplication

Software

FiFilms

MdMedical

DataMgmt

MiMicrobial

Detection& Control

PoPorous

Materials & Membrane

s

PcPrecision

Coating

CeCeramics

EpElectronic

Packaging

FlFluoro-

materials

ImImaging

IsIntegratedSystems

Design

MoMolding

PdParticle &

Dispersion

Processing

PrProcess

Design &

Control

WoWound

Mgmt

FcFlexible

Converting

& Packaging

FoFiberOptics

IpInks &

Pigments

LmLight

Mgmt

AmAdvanced

Materials

BiBiotech

NtNano

Technology

But Here’s What The Lattice Really Covers;3M’s Other 32 Technology Platforms…




Demystifying 3M: It is not a Conglomerate

In understanding 3M, it is important to realize the company is not aconglomerate with siloed independent business units

3M is a unique model of a technology and manufacturing “adjacencylattice” that shares basic technologies and manufacturing processesacross multiple businesses, markets & product lines

– Almost all of 3M’s basic businesses are connected to each other in

this way, from water filtration to Scotch brand tape

In network theory, the power of a network (or lattice) is proportionalto the square of the number of users.* It is this lattice that makes 3Mso powerful and enduring as an industrial competitor

But ….the lattice can also make 3M difficult to organize for optimalgrowth

* Robert Metcalfe, Inventor of the Ethernet




How The 3M Invention MachineGoes To Market

Roll to Roll Tape

and Cut Out Manf.

Final Product Configuration

OEM

Channel

Mass

Channel

Backings

Materials Science

Extrusions

Woven

Non woven

Plastics

Metals

Coatings

Surface Chemistry

AbrasivesAdhesives

Oxides

Medicines

Petri Broth

Optical Patterns




Brightness

Enhancement

Fi lm

LCD

Film

LED Ligh t Mixing

Li ght Control

FL G

X-ray

Scan

Notched

Fiber

Large-Diameter

Optical Fiber

FILM

Product And Technology Migration At 3M;Microreplication Technology

1964 1970 1980 1990 2000

OpticalLighting

Film

Glare-free

Overhead

Projector Lens

Lens

Film

Traffic

Signal

Linear

Solar

Concen-trator

Day

lighting

Total

InternalReflection

Ov erhead

Proj ector

Lens

Radial

Solar

Concentrator

Mul ti focal

Interocular

Lens

Low-profile

Overhead

Projector Micro lenses

1983Optical

TechnologyCenterFormed

Structured

Surface

Abrasi ves

Shaped

Particles

Trizact

Abrasi ves

Scotchlite

DGS

Internally

Lit Signs

Light

Pole

Lighted

Guidance

Tube

Lighted

Lane

Marker

Lane MarkersFluorescent

DGS

Conspicuity

DG3

Stem Web

Tape

Control

TAC

Smart

Adhesi ves Micro Comply

Electri cal Conn ector s

Structured

Surface

Filter ISO

porous

Structured

Sur face Sensor

Micro-channel

cooling

Fluid

Transport

High flo w

Filter

Programmed

Optics for Signs

Griplets

LENSES

ILLUMINATION

REFLECTIVE

MATERIALS

ABRASIVES

ADHESIVES

MATERIALS

ELECTRONICS

Prism

Reflectivity

Reclosable

Fasteners

Wid e Ang le

DGS

Cube corner Diamond

Grade

Sheeting




As well as our history, it is the engine of our future growth

We believe that one of the keys to sustainable success is unfettered

and well-directed innovation – But it’s not only about monetary volume, it’s also about direction

– Shared technology model essentially unique

– The 15% rule is alive and well

We’ll be searching for disruptive technologies as well as logicaldevelopments and extensions to invent new futures for our products

We’ll increasingly prospect for “just out of the garage” technologydevelopments key to building our core

The heart and soul of 3M’s approach will remain technologicaldifferentiation and application across multiple lines of business

We’ll add “digital” oriented competencies over time

The Role Of Technology and Innovation at 3M




The World’s Most Innovative Companies 2005

Source: “The World’s Most innovative Companies”, Business Week, April 24, 2006

15. IDEO15. Southwest15. Porsche15. Intel

14. Dell14. Samsung14. Intel14. Sony

13. Sony12. Target12. Sony12. Dell

12. Samsung12. IDEO12. RyanAir 12. P&G

11. Virg in11. Wal-Mart11. IKEA11. Virgin

10. IBM10. Dell10. eBay10. Infosys

9. Starbucks9. IBM9. GE9. Nokia

8. Nokia8. Microsoft8. BMW8. Toyota

7. Proctor & Gamble7. Starbucks7. Virgin7. GE

6. General Electri c6. GE6. Toyota6. IBM

5. Microsoft5. Toyota5. 3M5. Microsoft

4. Toyota4. 3M4. Microsoft4. Samsung

3. 3M3. P & G3. Nokia3. 3M

2. Google2. Google2. Google2. Google

1. Apple1. Apple1. Apple1. Apple

GlobalNorth AmericaEurope Asia




Some Breakthrough 3M Products

Advanced Composite

Conductor

Dual Brightness

Enhancing Films

Littmann® ElectronicStethoscope with A mbient

Noise Reduction Flexible Circuit

3M TrizactAbrasives

Post-it Picture Paper

3M Confirm Laminate with

Floating Image




3M Patent Portfolio

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

P e n d i n g &

I s s u e d

P a t

e n t s

US Pending & Issued OUS Pending & Issued

11.2 % C

AGR

1 3. 5 % C

A G R

Approaching 100,000




3M BRICP Patent Filings

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 Projected

China Brazil India Russia Poland

Approaching 1000 in 2006




3M Will Lead The 21st CenturyMaterials Science Revolution

RapidExpansion of

Manufacturing

1950s - 60s

Material

Substitution (i.e.,

Metal to Plastics)

1970s – 80s

Nanotechnology

2000 ->

Adper ™

Adhesive

Named Top TenNanotech

Product




3M, Becoming the World’s Nanotechnology Giant

What is it?; The application of micro-manufacturing and micro-assembly of products in sizes less than 1000 nanometers

3M has more than $1 Billion in sales from nano products

– And the broadest patent portfolio in the world

The next wave of the breakthroughs will come from nanotechnology

3M has applications in many fields;

– Self assembling molecules in medical applications

– Optical applications

– Adhesives and abrasives

– Fuel cells – 3M Surface Modified Ceramic Nanoparticles for LCD TV screens

New applications are being discovered every day




New Applications of Nanotechnology; Fuel CellsWhat is a Fuel Cell?

The ultimate potential is generation of off-grid electric ity from hydrogenproduced from completely renewable, w idely dispersed energy sources.

Hydrogen

Oxygen from

the air

Stored HydrogenFuel Cell

Heat

Water

Electricity




Nanostructured Thin Film Catalysts for Fuel Cells

50 square km field of new wheat,

4" tall, 2" apart

12,355 Acres

Shrink it dow n by factor

of 100,000

50 cm2 MEA

1 NanostructuredWhisker for EachBlade of Wheat

=~ 4 billion whiskers/cm2




3M Fuel Cell Membrane Manufacturing Lines

Alpha Line

• Input material from CCM line &

GDL process

• Robotic assembly process

• Precision cut

• Sequenced assembly

• Bonded under heat & pressure

• Automated gasket dispensing

• Curing

Pi Line

Menomonie, Wisconsin




Another Nanotechnology SuccessBEF (Brightness Enhancing film) Optical Film Solutions

Main LCD for Mobile Phone

Sub-LCD for Mobile Phone

Digital Still Camera

PDA

Thin BEF

Thin BEF

Light guide plate

ESR

LCD Panel

Structure of Backlight




New Functionalities Enabled byMultilayer Optical Films

Mirrors

withoutmetal

Polarization without

absorption

Color without colorants

Light without heat

Reflec tive po lar izer for LCD

brightness enhancement

98.5 - 99.5% reflective

Highest efficiency mirror

known Multiple bounce for light

transport and redirection

99.5%




Advancing 3M’s GrowthAdvancing 3M’s Growth




Adjacency Mega Trends

Seeded by small M&A

Electronics and software

Facilitated by grouping

RFID/Wireless/GPS

Minerals extraction

Oil & Gas

Food safety

Border crossing & security

Consumer Electronics

The Four Principal ElementsOf Growth We’ll Use

Grow the CurrentCore Business

Build NewBusiness via EBOs

Strategic

Thrust

ComplementaryAcquisitions

InternationalGrowth

Defend and extend the

coreBuild scale

Build relative share

Emphasize localization

Disruptive technologies

Build long termcompetency

Follows core

strategySupports

adjacencies

Mostly tuck-ins

Baby bear strategy

BRICP

Eastern Europe

Western Europe

Japan

Australasia

Growth

everywhere




Growing The Current Core Business

Imagine, dream and invent

Beat competitors to the future

Plan for cannibalization

Licensing as a route

Avoid NIH syndrome

Invent aNew Future

Build Broad Long

Term Competencies

Develop broad based long-term capabilities

Acquire supporting core technology with quality brands

Build volume and scale

Build key customer partnerships

Customization as tool

Constant reinvention; drill down

Localization and differentiation

Grow the

Current Core

Extend The Core

Build first where we’re strong

Get scale & build relative share

Fill in the product “white spaces”

Become important to customers

Use dual branding

International product localization

Local acquisitions

Private labeling

C St t




Core StrategyGrow the Current Core

Build first where we are strong

Constant reinvention in the Current Core(Light Pipes → BEF → DBEF→ APF)

Build even stronger key customerpartnerships

Customize for customers

– Solving their needs as well as ours

– Drilling into the niche and capturing newproduct segments

Localization of production

– Factories, businesses, productconverting

Becoming more intimate with our customers

Invent a

New Future

Grow the

Current Core



Extend The Core

Build Broad LongTerm Competencies

Build key cus tomer partnerships


Consta nt reinvent ion; drill down

Localization and differenti ation Im agine, dream and invent


Plan for cannibalization

Lice nsi ng as a route

Avoid NIH syndrome

Develop broad based long-term capabilities

Acquire supporting core technology with quality bran ds


Invent aNew Future

Grow theCurrent Core

Build firs t where we’ re s trong

Get scale & build relati ve share



Use dual branding


Local acquisitionsPrivate labeling

C S




Core StrategyExtend the Core – Build Scale and Relative Share

Extend the core to build scale and growrelative share

Fill in the product “white spaces” andbecome more important to our customers

Defend created markets against newentrants

Use dual branding in the upper middlemarket

Emphasize product localization; usea mixture of brands & local acquisitions

Thoughtfully extend private labeling

Accurate capacity planning

Significant new volume exists in the core. Lack of product breadthoften weakens our customer influence

Invent aNew Future

ExtendThe Core

3M Investor Meeting 2006 © 3M 2006 All Rights Res erv ed


Extend The Core

Build Broad Long

Term Competencies

Bu ild key customer partnerships

Customization as tool Constant reinvention; drill down

Localization and differentiation Imagine, dream an d invent

Bea t competitors to the future

Plan for cannibalizationLicensing as a route

Avoid NIH s yndrome

Develop broad based lon g-term capabilities

Acquire supporting core technology with quality b rands


Invent aNew Future


Build first where we’re strongGet scale & b uild relative share

Fill in the product “white spaces”Become importa nt to cust omers

U se dual b randingInternational product localization

L ocal acquisitions

Private labeling

C S




Core StrategyUsing Differentiated Brands and Technology to Grow Our Market

Selective privatelabeling or

manufacturing JVs to

support partnershipcustomers

Use principal

brands and

differentiatedtechnology

or features

Use

Secondary

Brands /

Technologies

Industrial Consumer

Diamond Grade™

High Intensity Grade

Engineering Grade

C St t




Core StrategyVigorously Focus On Inventing A New Future

While developing and growing the existingmarket, plan for cannibalization by inventinga new future

Use our technological prowess to invent thenatural substitute technology

To aid speed we’ll:

– Strategic licensing of technology

– Investment in small technology companies

– Greater University support and liaison

– Use imagination and invention extensively

Avoid the NIH Syndrome

Beat our competitors to our future

All markets wax and wane; we want to be there when it waxesand reinvent it before it wanes

Invent aNew Future

Invent aNew Future

3M Investor Meeting 2006 ©3M 2006 All Rights Reserved


Extend The Core

Build Broad LongTerm Competencies

Build key customer pa rtnerships


Consta nt reinvent ion; drill down

Localization and differenti ation Im agine, dream and invent


Plan for cannibal ization

Licensing as a route

Avoid NIH syndrome

Develop broad based l ong-term capabilities

Acquire supporting c ore technology with quality brands


Invent aNew Future


Build f irst where we’ re strong

Get s cale & build relativ e share



Use dual branding


Local acquisitions

Private labeling




Acquisitions and Divestitures

Over time we’ll divest or close those businesses where;

– We cannot, over time, build scale or good relative share, or

– We cannot differentiate through technology, or – The base technology is at “end of life” and cannot be refreshed, or

– The risk profile suggests another owner could extract morevalue than 3M

The majority of acquisitions will be EPS accretive or neutral inyear 1 and EVA accretive by the end of year 3

They will closely reflect and support our strategic plan

We’re prepared to sacrifice some % margin for additional growthprovided net shareholder value creation is positive. We expectreturns to remain high

Grow the Current

Core Business

Build New

Business via EBOs

Strategic

Thrust


International

Growth




Growth Acquisitions - Screening Criteria

Inorganic

Growth

Opportunities

High GrowthMarket

Screen

Select Healthcare

segments

Safety &

Protection

Track & Trace

Energy Display &

Graphics

Consumer

OperatingMetrics & Fit

Screen

Double digit growth

Potential for margin

improvement

Ability to leverageacross current

customers

Integration withcurrent 3M

innovation

processes

Valuation

andSize

Valuation

andSize

Mostly Mid-sizerather than

transformational

Early EPS

accretion

Mostly Mid-sizerather than

transformational

Early EPS

accretion

PotentialTargets

Grow the Current

Core Business

Build New

Business via EBOs

Strategic

Thrust


International

Growth




EBO Adjacencies

Concept

– Enhanced focus on emerging business opportunities with high growth – Concept used where capability exists with ready adjacencies but no

current focus

“EBOs” are Emerging Business Opportunities used to drive faster growth

Attributes

Collect all related activities into a

single entity “Housed” in a Segment

Leader reports directly to the EVP

Acquisitions and additionalresources provide support

Growth and speed are the focus

Init ial EBO Candidates

Filtration

Track & Trace

Energy & minerals extraction Food Safety

Init ial EBO Candidates Filtration

Track & Trace

Energy & minerals extraction

Food Safety

1

2

3

4

Grow the CurrentCore Business

Build NewBusiness via EBOs

Strategic

Thrust


InternationalGrowth




EBO Adjacencies: Filtration

What produ cts do we have?Membrane cartridges, antimicrobial media

What bus iness are we in?

Fluid Processing - cleaner, safer fluids:reduce operating costs

Healthcare Market - depth filtration mediaWater Filtration - bacteria reduction

2,324Total

137Patents

12Business Development

What is the scale of the opportunity?

CAGR2009E2006E($MM)

10%$7,300$5,500Market

What are our assets?

Manufacturing Capabi lit y

400Marketing & Sales

Membrane materials & processing

1700Manufacturing / Other

212Technical

People

CUNO is a strong player with industrial fluid processing customers

Filtration EBO: A Critical Capability for 21st Century




Filtration EBO: A Critical Capability for 21 CenturyHealthcare & Industrial Production

Filtration

Water

Appli ance

Appli ance

manufacturers Direct

marketers

OEMs

Residential

Plumbing

w holesalers

RetailersWater

Specialists

Kitchen &

Bath

Food

Service

RestaurantsPost mix

drinkCoffee

service

FluidProcessing

General

Industrial

Paints /

Coatings

Electronics

Chemicals

Oil & Gas

Wafer

Handling

Packaging

Components

Health

Care

Depth

Filtration

Membrane

TFF /

SystemsChromato-

graphy

Food &

Beverage

Filter Aids

TFF /

Systems

Filter

Sheets

Pharma

BioprocessBiologics




What products do we have?Library -3M™ One-Tag RFID SystemOffice/Legal -3M™ RFID Tracking Solutions: File LocationCommunication s / Utilities

-3M Dynatel™ Location and Marking Products -Telecom Access Control – CMD GermanySupply Chain Execution -HighJump™ Software

What business are we in?

Automated tracking of critical assets andproducts

Benefits include: Asset utilization, cycle timereduction, working capital reduction & productsecurity

EBO Adjacencies: Track & Trace

176Total

80Patents



CAGR2009E2006E($MM)

100%$35,000$9,300Market


What other assets do we need?

56Marketing & Sales

GPS, wireless, other electronics andsoftware capability

12Manufacturing / Other

94Technical

People

Specific applications for high value asset management solutions




Track And Trace Has Broad Based Opportunities

Existing and Potential Solution Spaces

How Am I?

Where Am I?Sensor Networks• Sensors• Temp• Vibration• Humidity

• Light• Contaminants

Who Am I?

• RFID Tag• Bar Code• Database

• Tracking Software• RFID Network

• Wireless Location• RTLS• GPS• Road Tolling

Improve and

Advantage Me!

• Location-based serv ices• Supply chain optimization• Competitive “superiority”

in Order Fulfillment – Supply chain

– Distribution

Example Opportunities in the




p ppRFID and GPS Space

RFID

+GPS 1

2

3

4

5

6

Container Monitoring

Food Supply Chain

Medical Specimen Tracking

Yard and Warehouse Management

Oil, Gas and Minerals Extraction

Ground Vehic le Asset Tracking

Innovation41

Track and Trace Needs RFID and GPS Capabi lit y

RFID +GPSTrack and Trace

RFID +GPSTrack and Trace

Perhaps the Largest




p gSingle Growth Opportunity

GPS

RFID

UHFID

Consumer

Medical

Information

Security

Military Agriculture

Transport

Industrial

Children

Border

Crossing PassportsID cards

Criminals

Pets

Navigation

Target IDBattlefieldMngmt

AssetMngmt

Automotive

RailwaySignals

Road Toll

Asset

TrackRunwayMgmt

Vehicle

Security

AnimalsFish

Farms

Vehicle

Security

Navigation Outdoor Ski

Hike

Fish

Personal

Patients

Pathology

Records

Transplants

Assets

Library

Government

Surveying

Records

Asset

Track

Warehouse

Containers

Packages

Adj EBO P T i i




Adjacency EBOs: Power Transmission

What products do we have?

Family of high performance hightemperature ACCR conductors that canreplace any of the overhead lineconductors in use today

What business are we in?

High performance overhead cables toincrease transmission capacity by 2-3Xusing existing towers and infrastructure

Cost competitive, quick solution, no visualchange to line, no permitting because it useexisting rights of way

26Patents



CAGR2009E2006E($MM)

7%$24,550$19,000Market


2Marketing & Sales

11Total

8Technical

People

Multiple test lines with utilities; lower manufacturing costs is the key

Th O t it f I t ti l G th




The Opportunity of International Growth

International growth rates 2X – 3X US

61% of 3M sales are outside theUnited States today, ≈ 70% in 2011

Focus is on BRICP; double investments there

China growing ≈ 35% CAGR, expectingcirca $1Bn sales in 2006

India growing at 40%+

Double digit growth rates in E. Europe and LA

W. Europe grows faster on localization strategies

Acquire local brands and manufacturing as well asorganic expansion

Grow the Current

Core Business

Build New

Business via EBOs

Strategic

Thrust

Complementary

Acquisitions

International

Growth

C it l E dit i BRICP C t i




Capital Expenditure in BRICP Countries

Increased Capital Expenditures to BRICP drives OUS growth

$34 $34

$64

$98

$166

$217

$240

$280

$0

$50

$100

$150

$200

$250

$300

2002 2003 2004 2005 2006 2007 2008 2009

BRICP Capital Investment

Building Emerging Country Capacity; End 2006




Building Emerging Country Capacity; End 2006

INDIA

● 722 Employees

● 2 Plants

POLAND● 652 employees

● 2 Plants

RUSSIA

● 237 Employees

● 1 Plant

BRAZIL

● 2,943 Employees

● 3 Plants

CHINA

● 2,070 Employees

● 6 Plants

International Growth




Investing in Higher GDP - Growth Economies

*GDP is weighted average of 3M sales by regi on

2003 2006E 2011E

APAC

25%US

46%

LAC

7%

EM EA

22%

APAC

29%US

38%

LAC

8%

EMEA

25% EMEA

26%

LAC

9%

US

30% APAC35%




Operational Excellence

Our Foundational Beliefs on Competitiveness




Our Foundational Beliefs on Competitiveness

We compete on six competitiveplatforms

Low cost is the ultimatecompetitive deadly weapon

Scale and relative share arevital for efficiency and competitiveness

Follow the customer value chain

Pristine service and brands canovercome price in some markets

We can compete best in the core,but the core evolves dynamically

People

Cost

Brands

Service

Technology

Distribution

6σ & LeanGlobal sourcing

Factory costs

Taxes

Secure the best

Secure the broadest

Nanotechnology

Electronics & Software

Speed to market

OTIF

Quality

Inspire and guide

Develop leadershipContinuing education

Protect the PrimarySecondary for local

Keeping Our CommitmentT O ti l E ll




To Operational Excellence

Our commitment to operational excellence and Six Sigmaremains strong

Put process in where it belongs… and ignore it whereit doesn’t

Six Sigma is evolving to also include “Lean” methods, beginningfirst in manufacturing

Operational excellence focus will be expanded to coverprocurement and logistics

– Offers large opportunities for margin expansion & sales growth

Initiatives will be driven into the fabric of 3M’s culture

Moving The Supply Chain Closert Th C t I A P i it




to The Customer Is A Priority

Master

Production

Schedule

FG Inventory

Time

10 Days

220 Days

Reducing

Cycle Times

Finished

GoodsPlant 1

Plant 2

Plant 3

Plant 4

Plant 5Plant 6

Raw Materials

Shortening

SupplyChains

History Of Flags - Manufacturing




History Of Flags Manufacturing

2006WIP/RM’s: <20 days

Cycle time: <15 days

Loli ta, TX

BOPP Jumbo

Hutchinson, MN

•Jumbo Coating & Printing

•Slitting

• Al l Assembly

MN

Custom Printing

Greenvil le, SC*Polyester Jumbo

Hart ford City , IN

*Matte Coating

Nevada, MO

*LAB, Adh, Color

*Slitting

*1” Assembly*2” Assembly

Milwaukee, WI

*2” Prtg (Ind ex)

*Leaderstrips

Amery, WI

*Split Flag Asmby

*2” Prtd Asmby

*Hldy Tags Asmby

Minneapolis, MN

*1” , 2” Prin ted

*Holiday Tags*Quality Fl ags

U.S./O.U.S.Distribution

U.S./O.U.S.

Distribution

1988-1996WIP/RM’s: 100 days

Cycle time: 95+ days

CMA

Jumbo

Production

12” Master Roll converting

into Lefts and Rights

Gannicott Master Pad

Converting

Automated Assembly

and Pack-out

And Here’s What Happens To CostWhen You Do It




When You Do It

6 8 3- 4 /6 8 3 - 4 A B U n i t C o s t B r e a k d o w n

$ 0 . 0 0

$ 0 . 1 0

$ 0 . 2 0

$ 0 . 3 0

$ 0 . 4 0

$ 0 . 5 0

$ 0 . 6 0

$ 0 . 7 0

$ 0 . 8 0

$ 0 . 9 0

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

- Y T D

L o n g c a r d

2 P

a c k

O th e r P a c k a g in g

I n d i r e c t

H o ld D o w n L a b e l

L o g o L a b e l

D i s p e n s e r

P a d

M a c h i n e

L a b o r

100%

50%

25%

75%

0%

Non-Material Unit CostFlags

Cost element 1Cost element 2

Cost element 3

Cost element 4

Cost element 5

Cost element 6

Cost element 7

Cost element 8

ECB Service Improvements Drive Growth




C S p G

► Approximately 1/3 of business recovery due to improved service

► Improved fill rate 2000 bps from a low of 75% in Dec ’03 to a high of 95% in Aug ’05

► Consistently achieving 90% or better

► Customers are recognizing better service with loyalty

Critical business differentiator that powers growth

70%

75%

80%

85%

90%

95%

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

ECB Service ECB Sales Growth

% O

n - T i m

e & I n - F u l l

Y OY S al e s Gr ow t h

Jan ’03 Mar ’06

Step-Change

Improvementin Service and

Sales

Manufacturing Footprint




g p

We’re going where the customers are going

Where we have scale, or can get scale, manufacturing will be done

in single focus plants in high volumes close to the customer base – Shorten supply chains, improve order on-time-in-full (OTIF) and drive out

WIP and FG

– Over time, more supply chains will be designed for Make To Order supply

“X-Factors” are increasingly with us and, while unpredictable indetail and nature, are probably a feature of life going forward

Plants will be highly automated and designed with a small amountof surge capacity

Sourcing: Price vs Inflation




g

Pricing initially difficu lt in 2004

Added value made posit iv e pricing

power better in ’05

Negative price sti ll expected to be afactor in ‘06

Asian sourcing up 30 % over 2004

Local sourcing developed before

local manufacturing

Operating sourcing offices inEastern Europe, China and Latin

America

Global business process driving

down back office costs

Reverse auctions for

commodities showing great

promise

Legal entity and tax structures

important

Net Impact ($MM)

264 209 110 316

68

-300

-100

100

300

500

'02 '03 '04 '05 '06Net Cost Savings Pricing

Great Progress, More To Do

So There’s Still More On the TableIn Operations




In Operations

3M purchases $8Bn plus of materials and services each year. A 1% improvement in this cost improves OP margin by 30 bps

Logistics; stretched by the complex nature of 3M’s manufacturingfootprint, logistics will be eased by:-

– Release of capital for new capacity in the core

– Close to market manufacturing

OTIF performance will be improved with selected capacityincreases. Sales growth is a non-linear positive function of OTIF

Shortened supply chains will release working capital that can be

put to work on growth Scale in more businesses will continue to reduce factory costs



Summary Target Growth Picture




3% - 5% sales growth in market

adjacencies, acquisitions andEBOs, 20% incremental margin;

using new or primary brands

2% - 4% sales growth in

subsidiary markets, at or

above peer margins;

using secondary brands

International expansion

occurs in all three

dimensions.

Traction and momentumwill occur at different rates.

5% - 8% sales growth in

traditional 3M core; 40%

incremental leverageusing primary brands



Coordinated Value Creation Strategy




Strategy ► Review business units by keymetrics including growth and capitalefficiency

► Work in high growth spaces withreasonable EPS targets. Value creation

orientation. Less margin obsessive

Strategy ► Increase leverage on the balancesheet. Be willing, if necessary, to dip

below AA rating to A

Near Term

Tactics

► Put ongoing review metrics in place

► Divestiture of Pharmaceuticals

► Examine others for divestiture

► Use cash flow for investment,acquisitions and share buybacks

Near Term

Tactics

Near Term

Tactics

► Safety & Protection

► Medical, Dental & Orthodontics

► Display & Graphics (Optics & Films)

► Track & Trace (RFID/Wireless/GPS)► Wider Consumer Offerings

Near Term

Tactics

► Focus on adjacent segmentswith higher growth, cost andrevenue synergies

Strategy ► Focus on mega trends, scale and relativeshare in core business

Strategy

Selected

Divestiture

Selected

Divestiture

Organic

Growth

Capital

Strategy

Capital

StrategyAcquisitionsAcquisitions

Near-Term Organic Local CurrencyGrowth Target




10.0%8%+Safety , Security and ProtectionServices

7.1%5-8%Electro and Communications

5.6%5-8%3M

5.7%5-8%Consumer and Office

6.7%8%+Display and Graphics

4.0%6-8%Health Care Business (ex. Pharma)

4.2%5-8%Industrial and Transportation

Business

Last 4 Qtr. Avg.LC* Target

g

*Local Currency Sales Growth = Volume + Price

Strong Contributions Across the Portfolio

Organic

Return on Equity andReturn on Invested Capital




32.0%

16.1%17.8%

28.8%

23.5%

30.5%32.9%

13.2%14.0%13.3%

0%

5%

10%

15%

20%

25%

30%

35%

2001 2002 2003 2004 2005

3M Peers Median (1)

25.9%

10.9%

13.0%

22.3%

19.3%22.6%

22.2%

9.1%10.5%11.0%

0%

5%

10%

15%

20%

25%

30%

2001 2002 2003 2004 2005

3M Peers Median (1)

Note: ROE represents Net Income/Shareholder Equity; ROIC represents tax-affected EBIT/(Debt + Shareholder Equity + Minority Interest) .(1) Peer group includes Danaher, Emerson, Eaton, General Electric, Honeywell, Ingersoll-Rand, ITT Industries, Illinois Tool Works, Textron,

Tyco, and United Technologies.

Return on Equity Return on Invested Capital

p

3M vs. Peers ……. DuPont Analysis




Source: FactSetSee Appendix page 44 for details. Data for 2005.

Note: GE removed for comparison purposes because of its financing business. GE NI margin = 12.3%, Asset Turn = 0.22x,Leverage = 6.15x, and ROE = 16.7%

3MITW DanaherIR Emerson TycoUTX EatonHON Textron

ITT

Net Income x Sales x Assets = ROE %

Sales Assets Equity

Net IncomeMargin % x Asset Turn x Leverage = ROE

15.3% 1.03x 2.03x 32.0%11.6% 1.13 1.52 19.8%11.4% 0.87 1.80 17.8%10.0% 0.90 2.04 18.3%8.8% 1.04 2.18 20.0%8.3% 0.64 1.92 10.1%7.4% 0.93 2.70 18.6%7.2% 1.09 2.70 21.3%5.7% 0.86 2.87 14.0%5.1% 0.61 5.04 15.8%

4.2% 1.05 2.59 11.5%




So ….. In Summary

Moving Forward




A broad base of support for growth exists across 3M.

– Employees are ready for growth after years of internal focuson cost reduction

Accelerated growth is available while maintainingsuperior margins

Barriers to growth have been mainly internal and even selfgenerated, not external

The unique nature of 3M’s business model lends power unseenelsewhere in American Industry

Technological differentiation will remain hallmarks of 3M’s

competitive strategy for the future We’ll “weed and feed” on divestitures and acquisitions to optimize

focus, opportunity and value

Moving Forward




Our Number 1 growth priority is to build scale and relative share in3M’s traditional core markets

– Solve the chronic capacity underinvestment in the core

– We’ll build scale and relative market share everywhere – The need for speed dictates a blended solution of capacity investment and bolt

on acquisitions, themselves dictated by reasonable price and availability

Our Number 2 growth priority is international expansion with a

focus in BRICP countries Our Number 3 growth priority is adjacency expansion in high

growth EBOs

Supported by attitudinal change to secondary markets

– Standing firm in markets 3M has traditionally vacated when IPR wanes

– Keeping costs down and margins well above our competition, while drivingfor growth

Moving Forward




Focus our technical resources on supporting the strategic plan

Build shorter and more nimble supply chains to drive cost savingsand OTIF improvements

– Relentless focus on productivity and efficiency

– Will require some increased Capital Expenditure

Improved technological platforms in software and electronics

– Needed to support Track and Trace initiatives and Software Services More effective use of branding, particularly secondary brands

in international markets

Greater product and brand localization

Growth is not magic, but it’s a different and often harder, butultimately more rewarding kind of work

3m, una estrategia emergente para el crecimiento i

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