President and CEO Inge Thulin On 3M's Focus On Innovation

Inge Thulin, 3M

President and CEO, was on CNBC's Squawk Box Monday morning to talk about how the company famous for Ace, Post-it, Scotch and Nexcare brands makes its product innovations, and about some of the company's longterm plans. Recently, 3M's LED lightbulb won an Edison Award for innovation. Thulin appeared live from a 3M customer innovation center in Mexico City, where they show consumers new and innovative products. He said it's called costumer-inspired innovation because costumers work directly with their scientists to make 3M's products better. He's very focused on Latin America's economy, where they've been since 1946, as well as optimistic about its future, but Thulin says that there's as much opportunity for them in China, where they've been since 1984. He said that their portfolio in China is very much concentrated around manufacturing, electronics, and energy, saying that they're now building out into consumer products, healthcare, and safety. "The way we build our businesses is often in the way that the evolution is going in developing countries, starting with infrastructure, going to manufacturing, after that safeties improving, then retail, and the end, healthcare is coming," said Thulin. "We you look upon our portfolio in terms of the five business groups, this is absolutely perfect for us in terms of being able to capitalize on the growth coming in China as they build out the domestic business." Thulin took over 3M in the early part of 2012. He commented on 3M's very strong balance sheet, saying that it's a good position to be in, especially when you're coming in as a new CEO. He went on to say that their "prime strategy is organic growth," meaning that their capitol is first allocated towards organic growth. After that, capitol is directed towards complimentary acquisitions, then their pension obligations, and finally dividend payouts. He said two front-end processes determine whether or not a product hits the shelves, those are consumer insights, and the other being the before mentioned costumer-inspired innovation. "Innovation is the central plan, and I'm a strong believer that research and development is what's driving return for investors, so that is where you really differentiate yourself versus your competition," said Thulin. "We classify products in three different classes. A class three is something where we replace ourselves, so basically cannibalization…We have to do that in order for no one else to do it, so it's a very important piece of our business model. Class four is where we introduce new products to current channels for costumers, and then class five is disruptive technologies, meaning new technologies to new markets. That is where additional investment will go." Thulin said these are all key to their longterm plans. "You need to be relevant in each category you claim, so that's why we have a broad portfolio in every business we obtain," said Thulin.