Entitlement Quality - 3M’s Strategy for Growth

1. Entitlement Quality - 3M’s Strategy for Growth Robert Mitchell, Lean Six Sigma Operations and Corporate Quality Building Value for Our Customers

2. The pursuit and attainment of our growth objectives must be accompanied by a corresponding pursuit and attainment of productivity and efficiency objectives. George Buckley, chairman of the board, president and CEO October 23rd issue. Stemwinder

4. Building Value for Customers

5. Building a Win-Win…Operational Excellence is a Driver

6. Driving Operational Excellence for Customer Success

7. E-Enabling Productivity and Growth

8. Building Value for Customers Lean Six SigmaIt’s not about an “initiative” …it’s all about

10. Our Results….

11. Operating Margin Total LC Growth +6.5 pts CAGR = 5.3% ROIC % EPS +6.7 pts CAGR = 17.7% Total LC Growth, Margins, EPS & ROIC Maximizing Profitability by Leveraging Volume, Productivity, Mix and Fixed Costs

12. Net Sales (billions) Solid Top-Line Growth $

13. Net Income (billions) A String of Record Profits $ * * Includes net gains related to the sale of a portion of the Pharmaceuticals business, partially offset by restructuring and other items

14. 3M Facts Year-End 2006 Sales Worldwide ………....…….. $22.9 billion Earnings Net income reported …... $5,696 billion Profit Profit Reported .................... $3.9 billion Employees Worldwide ...…...… 75,333

15. 2001 – 2006 We’ve had a Successful Track Record…. • > 55,000 employees trained in Six Sigma and/or Lean Methodologies globally • > 45,000 Projects with Tracking Complete or Closed • > 700 full time employees dedicated to Lean Six Sigma globally • > 760+ Customer Projects In-Process or Closed • Sales per employee have gone up about 50% since 2001, from $212,000 to $304,000. • > $2.5 Billion in Lean Six Sigma Contributions since 2001

16. Building Value for our Customers Into the future How important is quality to protecting your brand and to driving growth for your company?

17. Quality in the news……………………. • “Firestone Tires” recall • “Sony recalls 10 million laptop computer batteries” • “Mercedes racks up problems in quality” • “Chronic quality control problems led to fines, sanctions, and a criminal probe” • “Mattel’s Fisher-Price recalls 1.5 million toys.” • “Toys “R” Us recalls crayon boxes for lead paint.” • “Mattel announces third toy recall”

18. How important is quality to protecting your reputation and brand, and to driving growth for your company?

19. Why Quality Issues Matter – • Reputation Damage • Legal Liability • Manufacturing defect • Supplier quality • Process capability • Design defect • Possible to make it work better, safer – but at what price? • Satisfying consumer expectations • Marketing defect • Failure to warn • False claims or advertising • New world: unfair and deceptive trade practices; unethical, oppressive or immoral conduct • Insurance?

20. Typical Activities • Redefining the function’s role • Managing cross-functionally • Driving business excellence • Embedding Quality culture in the Organization’s DNA Customer focused quality The Gap is Widening … Value of the Quality function - Traditional vs. Customer-focused Flawless execution at the speed of the customer Value Contribution Traditional Contribution • Typical Activities • Implementing methodologies • Managing Suppliers • Conducting quality audits • Tracking compliance • Achieving cost reductions Function evolution Source: Quality Executive Board research

21. Creating Customer Value…. Bradley Gale 4 Steps: • Conformance • Deliver on the basics • Customer Satisfaction • Understand and exceed on key quality and service parameters • Market and value relative to competition • Stay ahead – avoid complacency • Quality a key to customer value management • It’s a key driver for growth

22. It builds our brand and customer loyalty It eliminates the costs of poor quality 3M Entitlement Quality: The highest level of quality that can be expected By Our Customers

23. Process Rigor Defined Crystallization Of Methodologies Customer Focused Quality • Entitlement Quality • ISO • DFSS • PPU • DMAIC • Lean • Commercialization • Supplier Mgmt • BPM • Building customer value • ISO 9000 • Malcolm Baldrige (3M Dental only) • Process & Product Understanding • Business Process Excellence • DMAIC • TQM • Quality Function Deployment • Zero Defects • Theory of Constraints 3MQuality Journey Inspection • Inspection • QA and QC • SPC • Right the First time • 7-Step Method 1900 - 1960’s 1970’s – 1990’s 1990 - 2000 Early 21st Century

24. Why did 3M embrace Lean Six Sigma? • Achieves excellence in our business processes and customer perceived quality • Provides Leadership Development throughout all disciplines within the corporation • Develops transferable skills to all levels • Right Process for Data-based Business decisions within 3M • Provides Common Approach to Process Improvement • Institutes a common language throughout the corporation on a global basis 2001 2004 + 2003

25. The Synergy of Lean and Six Sigma Six Sigma eliminates defects, Lean eliminates waste. Integration reduces the Cost of Process Complexity Overall Yield vs. Sigma • # of Steps • ±3s • ±5s • ±6s • ±4s • 1 • 93.32% • 99.379% • 99.9767% • 99.9996% • 7 • 61.63 • 95.733 • 99.839 • 99.9976 • 50.08 • 93.96 • 99.768 • 99.9966 • 10 • 20 • 25.08 • 88.29 • 99.536 • 99.9932 Lean Reduces Non-Valued Add Steps Lean Six Sigma Drives Quality, Speed and Cost Simultaneously • 40 • 6.29 • 99.074 • 99.9864 • 77.94 • 0.10 • 53.64 • 97.70 • 99.966 • 100 • 500 • - - - • 4.44 • 89.02 • 99.830 • 1,000 • - - - • 0.20 • 79.24 • 99.661 Six Sigma Reduces Defects Source: Six Sigma Research Institute, Motorola University, Motorola, Inc.

26. Corporate Vision Statementfor “Quality” “Flawless Execution … at the Speed of our Customer”

27. 3M Lean Six Sigma Vision Achieving Breakthrough Performance for our Customers, Employees and Shareholders

28. Shareholders • Growth • Productivity • Cash Lean Six Sigma Quality: Supporting 3M Company Goals Employees • Customers • Entitlement Quality • Responsiveness • Connecting with the Voice of the Customer • Development of Talent • Energizing Organization

29. Customer Quality Index - Metrics • COPQ • Cp, Ppk • DPPM • CCRT • OTIF • Satisfaction • Loyalty

30. DMAIC is a methodology that improves the performance of any process by reducing variation, decreasing defectsand improving quality • DFSS is a methodology that supports the commercialization process in product development. DMAIC Roadmap Commercialization/ DFSS Roadmap PPU Roadmap Lean Roadmap • PPU is a methodology that aligns the voice of the process to the voice of the customer and promotes the documentation of that knowledge. • Lean is a methodology that improves speed and reduces the cost of any value stream (process) by removing waste. And eliminating non value-added activities

31. DMAIC is a methodology that improves the performance of any process by reducing variation, decreasing defectsand improving quality • DFSS is a methodology that supports the commercialization process in product development. DMAIC Roadmap Putting it all together to Drive Sustainable Growth Commercialization/ DFSS Roadmap PPU Roadmap Lean Roadmap • PPU is a methodology that aligns the voice of the process to the voice of the customer and promotes the documentation of that knowledge. • Lean is a methodology that improves speed and reduces the cost of any value stream (process) by removing waste. And eliminating non value-added activities

32. In the age of information and knowledge workers, there is one – and only one – source of competitive advantage. It is the ability of an organization’s human assets to out-think, out-learn, and out-create the competition of the future. Michael Porter

33. Chart the Course Communicate clear vision Translate vision to action Change course when necessary Raise the Bar Six Sigma entitlement Clarify risks and opportunities Elevate employee and customer satisfaction Energize Others Create winning atmosphere Inspire, motivate and teach Risk taking (Courage) Celebrate success/ acknowledge disappointments Resourcefully Innovate Navigate ambiguity and complexity Drive revenue growth mindset Live 3M Values Acts with uncompromising honesty, ethics and integrity Earn trust and respect Encourage and reward inclusiveness and diversity Constructively challenge Demonstrate boundaryless behavior Commitment to ethics/integrity Exercise effective business controls; demand from others Deliver Desired Results Focus on the endpoint Achieve consistent execution Aggressively manage difficulties Seize all opportunities Personal Accountability Leadership Attributes

34. Quality………It’s about Leaders………… Building Value for Customers

35. Thank you……….