The Stitch House: a Case of Entrepreneurial Failure

Topics: Research and development, Market, Research Pages: 6 (1778 words) Published: October 16, 2012
Case Studies in Entrepreneurship

3M has been known for decades as an entrepreneurial
company that pursues growth through innovation. It generates a quarter of its annual revenues from products less than five years old. 3M started life as the Minnesota Mining and
Manufacturing Company back in 1902. Its most successful
product - flexible sandpaper - still forms an important part of its product line but this now comprises of over 60000 products that range from adhesive tapes to office supplies, medical supplies and equipment to traffic and safety signs, magnetic tapes and CDs to electrical equipment. Originally innovation was encouraged informally by the founders, but over more than a century some of these rules have been formalised. But most important of all there has built up a culture which encourages innovation. And because this culture has built up a history of success, it perpetuates itself.

3M started life selling a somewhat inferior quality of sandpaper. The only way they could do this was by getting close to the customer - demonstrating it to the workmen that used it and persuading them to specify the product - an early form of relationship selling. This was the first strategic thrust of the fledgling business - get close to the customer and understand their needs.

However, the company was desperate to move away from selling a commodity product and competing primarily on price and its closeness to the customer led it to discover market opportunities that it had the expertise to capitalise on. The first such product was Three-M-Ite™ Abrasive - an abrasive cloth using aluminium oxide for durability in place of a natural abrasive. This was followed by waterproof sandpaper an idea bought from an inventor who subsequently came to work for 3M. This was followed shortly by Wetordry™ - a product designed for use by the car industry in finishing body-work. And with this the second strategic thrust of the company was developed - to seek out niche markets, no matter how small, which would allow it to charge a premium price for its products. The company began to realise that many small niche markets could prove to be more profitable than a few large ones. In the 1990s this began to change somewhat to the extent that some technologies became more sophisticated and the investment needed to develop new products increased. Therefore the return required became larger and markets needed correspondingly bigger. Luckily the world was increasingly becoming a global market place. At the same time, competition was becoming tougher and the rapidity of technological change and shortening of product life cycles made 3M recognise the need to dominate any market niche quickly. Speed of response was vital. By the 1990s, many of the market niches 3M was pioneering were turning out to be not that small at all, particularly in the global market place. So, the approach remained the same, but the speed of response and size of market niche, world-wide, increased.

Entrepreneurship and Small Business

Paul Burns

Case Studies in Entrepreneurship
The company really started to diversify when it entered the tape market in the 1920s, but even this built on its expertise in coatings, backings and adhesives. What is more the way the first product evolved demonstrates perfectly how an entrepreneurial architecture works. By being close to its customers 3M saw a problem that it was able to solve for them through its technical expertise. In selling Wetordry™ to carbody finishers, an employee realised how difficult it was for the painters to produce the latest fad in car painting - two tone paintwork. The result was the development of masking tape - imperfect at first, but developed over the years ‘out-of-hours’ by an employee to what we know it to be today and from that technology developed the Scotch™ range of branded tapes. So, the third strategic thrust was developed having identified a market opportunity through closeness to the customer,...
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