Trent Blinkman International Business Process Execution Manager An Overview of BEP / Hoshin Kanri 3M International Operations Business Execution Process (BEP) $35B INNOVATION POWERHOUSE Driven by 3M International Approximately 15 minutes © 3M All Rights Reserved.Confidential

2 Steve Jobs’ Perspective...  Businessweek, 1998 – “That’s been one of my mantras: focus and simplicity … Simple can be harder than complex. You have to work to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”  Businessweek, 2004 – “It comes from saying ‘no’ to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying ‘no’ that you can concentrate on the things that are really important.”

3 $35B INNOVATION POWERHOUSE Driven by 3M International Our “True North” Strategy Remains in Place Strategic Thrust Grow the Current Core Business Build New Businesses Complementary Acquisitions International Growth The Five Building Blocks Marketing Excellence Regionally Optimized Supply Chain Strategic Investment in High-Growth Spaces MarketingExcellenceMarketingExcellenceEngagedWorld-ClassTalentEngagedWorld-ClassTalent Accelerated R&D Capabilities & Localization © 3M All Rights Reserved.Confidential

4 3M International Strategic Framework $35B INNOVATION POWERHOUSE Driven by 3M International Implemented with the Highest Levels of Compliance & Integrity BRIC Accelerate Penetration & Localization in BRIC Developed Economies Drive Innovation to Win in Developed Economies Developing Economies Build Strength in High Priority Developing Economies M International Vision $35B Innovation Powerhouse: Winning Locally; Connecting Globally Winning Strategies Optimize Local/Regional Manufacturing & Supply Chain Drive Growth through Local & Global R&D Revolutionize Commercialization & Go To Market through Marketing Excellence Win the War On Talent & Build a Diverse and Engaged Workforce Create Space through Operational Excellence for Strategic Investments

5 The Five Building Blocks Strategic Investment in High-Growth Spaces Engaged World-Class Talent Marketing Excellence Regionally Optimized Supply Chain Accelerated R&D Capabilities & Localization (1)Construct Optimized Manufacturing Footprint (2)Construct Optimized Distribution Footprint (3)Standardize Plant Strategic Review Process (4)Forward Looking Capex Process (5)Expand Center of Excellence Penetration (1)Leverage Hoshin Kanri & LSS (2) Implement COGS 5X5 (3) Drive Service Expectations By Channel Model (4) SAP Implementation (1)Process to Insure 3M Ethics & Culture Penetration (2)Talent Acquisition & Retention (3)Global Leadership Development (4)Training & Development Implement Winning Execution Rhythm Establish Regionally Optimized Footprint Build & Retain World Class Team The Five Building Blocks Marketing Excellence Regionally Optimized Supply Chain Strategic Investment in High-Growth Spaces Strategic Investment in High-Growth Spaces MarketingExcellenceMarketingExcellenceEngagedWorld-ClassTalentEngagedWorld-ClassTalent Accelerated R&D Capabilities & Localization $35B INNOVATION POWERHOUSE Driven by 3M International BEP Drives Execution © 3M All Rights Reserved.Confidential

6 What is “Hoshin Kanri”?  Hoshin Kanri Defined: “compass” and “management”, respectively.  Hoshin Kanri Objective: Linking the employees of all levels to the long-term vision, direction, targets, and plans of the management team. It is designed to have people work on the “right” things... © 3M All Rights Reserved.Confidential

7 What is the Business Execution Process (BEP) at 3M?  One of the ways that Hoshin Kanri is applied at 3M  Rooted in FOUR simple steps:  Plan  Do  Check  Adjust (“Act”)  Consistency and simplicity of the model and recognize how it unifies cross-functional teams around common goals.  Drives Prioritized Focus and Execution © 3M All Rights Reserved.Confidential

8 Hoshin Kanri Tools Plan Do Check Adjust (or “Act”) Mgm’t Action Plan X-Matrix A3 A3 A3 A3 Bowler

9 BEP Process Map with Tools 1. Strat. Direction (Business & Market Opportunities) 2. Develop Operational & Specific Action Plans 4. Measure Progress to Targets 5. Solve Problems & Improve System Hoshin Kanri 3. Deploy Op. & Action Plans Plan Check AdjustA3 X-Matrix Bowler Mgm’t Action Plan Do

10 X-Matrix Connects the relationship of two sections. 1. Long-Term Strategic Objectives Define the 3-5 year Objectives What is or will be our competitive advantage? 2. Annual Strategic Objectives Areas of focus / improvement for the coming year. Building blocks to 3-5 year strategic objectives. Industry, market, competition, new product opportunity & analysis driven 3. Top-Level Improvement Priorities Key initiatives to accomplish the Annual Strategic Objectives. Actions based (Improve, Reduce, Grow, etc.) 4. Targets to Improve Metrics to track performance. From X (current) to Y (target). These become A3’s so these statements are the “What”; The A3 will define the HOW, WHO, and WHEN.

11 From X-Matrix to A3 Each Target moves to its own A3 A3 A3 A3 A3

12 Telling the Story with the A3: Action Plan Execution, Results, and Adjustments 1 Current performance Where are we, Where are we going? 2 What Worked & didn’t? What have we learned? 3 What’s the High Level Plan? Opportunities / Barriers 4 Action Plan Who, when, how much 5 Act / Adjust if Off Plan Actions to obtain Target

13 From X-Matrix to Bowler All Targets move directly into a single bowler Track Against Plan by month Traffic Lights What is a Bowler? It is the CHECK Step in the process

14 Periodic Review The periodic review is the most important and distinguishing factor in BEP. It answers the questions “Are we on course?” and “Do we need to make adjustments?”

15 Periodic Review This is typically done monthly, in a “War Room” The key steps in the review process are: ▫ Identify what is Red & Anticipate what will be ▫ A3 Owners DISCUSS their “Adjust” plans in the “Management Action Plan” tool  Analyze the deviation – Actual vs. Expected  Describe the corrective actions  Define WHO will do WHAT by WHEN  Identify the expected results of the adjustments Discuss “RED” items with “How Can WE Help” mindset Agree upon the Actions and Refine the A3 / Action Plans

16 Management Action Plan “Reds” from Bowler to Mgmt Action Plan tool Root Cause & Corrective Action if Metric is “Off Target” Mgm’t Action Plan

17 1 What’s the Gap to Plan? 2 What Really Happened? Get HARD Data. No Guessing 3 Develop Specific, Actions (ST & LT) 4 WHO owns the ACTION? 5 Completion Date Expected Outcome Changes the discussion from the “Reasons why” to the “Recovery Plan”

18 Why BEP Works...  It SIMPLIFIES the Complex Execution Environment  Achieved by PRIORITIZATION  Focus on the “Vital Few”  BEP cascades objectives down the management hierarchy  It helps convey a vision and build engagement across the organization  Its primary benefit is to focus activity on the key things necessary for success  It Saves Time!!

3M International Operations Business Execution Process (BEP) $35B INNOVATION POWERHOUSE Driven by 3M International