3M bets big on innovation in five-year growth plans

For the first time since taking the helm as CEO, Inge Thulin laid out a plan Thursday to broaden 3M Co.'s already enormous lineup of 55,000 products and counting.

Over the next five years, the Maplewood conglomerate will pounce on mega-trends like mobile devices, medical technology and energy and have a deeper penetration in developing nations. Thulin also expects brisk sales of popular products ranging from airplane sealants to new components that protect cell phones.

"I am confident that 3M innovation, along with world-class talent, strong R&D and manufacturing and unparalleled global reach ... will drive future success for our company and our shareholders," Thulin told roughly 100 Wall Street analysts and investors at the company's headquarters in Maplewood.

During the investor day, Thulin boosted his commitment to R&D spending from 5 percent to 6 percent of sales by 2017. The target is lower than the 7 and 8 percent set by former CEO George Buckley, but analysts noted it was higher than the 3 percent average for the past 10 years and more realistic, given tougher economic conditions.

"Inge did a great job of showing what direction he wants to take things," said Mark Henneman, vice president of Mairs and Power Inc., an investment firm that owns more than 2 million shares of stock in the $30 billion conglomerate. The presentation by managers, "just cements my already solid view of how deep of a team they have got."

Henneman was thrilled to learn Thursday that a technology he's discussed with 3M for 10 years is gaining traction. During the meeting, officials touted a new power cable that uses a composite that lets utility companies transmit massive amounts of power over long stretches without sagging. 3M has figured out a way to cut production costs, and utility companies are biting.

"This is one of their new marquee products, and I am excited about it," Henneman said.

The medical market will be a major area of growth for the company, with revenue in 3M's $5 billion health care division expected to rise by 5 percent a year. 3M Vice President Joaquin Delgado showed analysts slides of 3M medical products poised for growth thanks to the growing number of aging baby boomer patients and the race for hospitals to digitize medical records.

Kejriwal applauded Thulin's management depth and expects 3M will get to its targets with lots of small product introductions, big research spending and significant efficiency gains that drive earnings growth. Thulin's approach blends the strategies of 3M's two prior CEOs, he said.

"Inge is a 3M insider and has been there for 20-plus years. So look for incremental change, not wholesale change, and much more financial discipline, meaning cost controls," Kejriwal said.

Thursday's meeting was Thulin's latest imprint on the maker of Scotch tape, Post-it notes, respiratory masks and tens of thousands of other products made around the globe. 3M is one of Minnesota's bedrock companies, with more than 80,000 employees across the globe.

In September, Thulin reorganized 3M from six business units to five and said 3M's new business model will be broader and simpler, designed to house services and products aimed at similar customers.

Various 3M business leaders gave presentations highlighting product bright spots, cost-saving opportunities and plans for global growth.

Brad Sauer, executive vice president of 3M's largest division, the $9.6 billion Industrial Business Group, said his division is seeing steady growth from aerospace products, an area that had been a niche segment until recently.

Other officials noted that 3M will continue making factories and processes more efficient through so-called lean manufacturing. One industrial division expects to save $80 million this year by wringing out factory waste and improving the supply chain.

Officials also outlined plans for 3M Electrical and Energy, a $5.6 billion business that Thulin recently cobbled together from several existing units. Business Vice President Mike Kelly said 3M will continue to cater to makers of cell phones, laptops and tablet computers, as well as other technology firms.