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McNerney's Challenge in the "Culture of Innovation"
By Andrew Haeg
December 5, 2000
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3M has named General Electric executive James McNerney as its new chairman and CEO. The move ends months of speculation over who would take over when current CEO L.D. DeSimone retires. McNerney's challenge will be to apply General Electric's decisive, profit-centered management philosophy to 3M's culture of innovation.

W. James McNerney Jr.

Born: 8/22/49 in Providence, R.I. Grew up in Pennsylvania, Michigan and Illinois. The oldest of five children (three brothers, one sister)

Education: BA, Yale University, 1971; MBA, Harvard University, 1975.

Work History & Highlights:
  • 1997-present: President & CEO, GE Aircraft Engines, Cincinnati, OH.
  • 1995-97: President & CEO, GE Lighting, Cleveland, OH.
  • 1993-95: President, GE Asia-Pacific, Hong Kong.
  • 1991-92: President and CEO, GE Electrical Distribution & Control, Plainville, CT.
  • 1989-91: Executive Vice President, GE Financial Services and GE Capital, Stamford, CT.
  • 1988-89: President, GE Information Services, Rockville, MD.
  • 1982-86: GM of GE Mobile Communications.
  • Before joining GE in 1982, he first worked for Procter & Gamble in brand management and then as a senior manager at McKinsey & Co.

    Source: 3M

    Listen online to McNerney's news conference held December 5, 2000.
    3M'S CAMPUS spreads over more than 430 acres of suburban Maplewood. Managers work in 28 buildings handling 3M products ranging from Post-it Notes® to fiber optics.

    With revenues of nearly $16 billion, 3M is one of Minnesota's largest and strongest corporations, and McNerney says he wants to help it become even bigger.

    "My objective is to participate with growing this company," McNerney says.

    But analysts say that for 3M to grow, it must change the way it does business. McNerney says he agrees, but took pains that it's not his intention to transform this company and its culture.

    "The onus is on me to become part of this rather than to come here with some big-fix plan, nothing could be farther from the truth. Nothing needs fixing. It's a matter of building on this huge potential," he told a news conference in Maplewood.

    McNerney will be the first outsider chosen to lead 3M in all of its 98-year history. CEOs usually rise from within, after being steeped in the corporation's culture and philosophy.

    That 3M looked looked outside its ranks to a veteran from General Electric veteran means company insiders are pushing 3M to become nimbler and quicker to action.

    "GE is an organization that's known to make the hard decisions fast," says Joe Martha, who surveys the manufacturing industry for Mercer Management Consulting. "Whatever they decide to do, they do it very quickly. So if he's able to bring some of those characteristics and add it to the 3M culture of innovation and development of new products, that's a very good mix."

    Martha says General Electric CEO Jack Welch, commonly touted as the best manager in the world, taught his proteges some important lessons.

    "He would bring some of that attributes that he learned from Welch, a very different type of management style that was much more involved in running some of the day-to-day operations, along with a very strategic view of where the company needs to be," says analyst Bill Fiala.

    Fiala estimates that about 20 percent of 3M's businesses is considered slower growing. Especially with McNerney at the helm, Fiala predicts 3M will start selling or discontinuing those businesses. But Fiala says applying GE's fast-moving, profit-focused management style to 3M's more deliberate, entrepreneurial culture won't be easy.

    Fred Zimmerman, a professor of business at St. Thomas University, is wary that by bringing in McNerney, 3M is trying to fix a company that isn't broken. 3M faltered during the Asian crisis, but regained its footing by focusing on newer products.

    That 3M looked looked outside its ranks to a veteran from General Electric veteran means company insiders are pushing 3M to become nimbler and quicker to action.
    But as Zimmerman watches the high-tech sector slide, he wonders whether its wise to charge forward into new territory when 3M is doing just fine with its core products.

    "The worst thing that 3M could do would be to get involved in a lot of new businesses that are faddish, in which the company has no particular expertise. It has all this special technology in things like microstructures and coating systems. It's a wonderful company technologically. The best thing they can do is leverage those previous successes," says Zimmerman.

    McNerney agrees he brings a fresh approach, but says he's keen to follow Desimone's example and encourage innovation.

    "You can't get innovation if you don't let people take swings," he says. "If people are going to get clobbered every time they take a swing, you don't get innovation."

    The baseball metaphor is a fitting one for McNerney. He received his undergraduate degree from Yale, where he played on the same team with presidential candidate George W. Bush.

    McNerney takes the helm on January 1st. DeSimone will stay on until April 1 to try to ensure a smooth transition.