Ahead of the curve

After 15 years at the helm of 3M's operation in China, Kenneth Yu's favorite activity after work is walking along the Shanghai Bund and looking at the old Shanghai Mansion.

Twenty-four years ago, in a small office on the 14th floor of the Shanghai Mansion, 3M's China Corporation was officially established. Yu clearly recalls those days when it was just a small group with seven employees, and only involved in trading.

"It was only six years after China started its reform and opening up experiment in 1978," the managing director of today's 3M China tells China Business Weekly in a recent interview in his Shanghai office.

"That was in our early phase. Many people were uncertain whether it would be successful. So we were just trying and waiting for the business opportunities."

Yu adds that the lack of a professional local leader stalled the company's market exploration work in China at the time.

But the small 3M China still holds special significance for both the company and Shanghai municipality.

It was the first wholly owned foreign-funded enterprise registered in Shanghai. Since then, the city has grown into a major economic hub famous for the large number of China headquarters for foreign companies.

And 3M China has grown into the third largest overseas subsidiary of the US-based diversified technology company with 5,000 employees. Over the past 24 years, the company has invested over $600 million in China, establishing 12 branches, eight manufacturing bases, 22 regional offices, three technical centers and one R&D center in different regions of China.

It has also developed from the single trading business to seven large manufacturing teams covering the chemical industry, electronics industry, telecommunications, medical treatment, traffic, security and consumer markets.

"We had a lot more success than we had expected. 3M China is expected to be the biggest overseas subsidiary outside the US in the coming years. Over the past decade, the company has grown at an annual rate of over 20 to 30 percent on average," Yu says.

Yu emphasizes that the turning point came in 1993. At that time, 3M put a big bet on Yu, appointing him as the head of 3M China in the hope that his experience in the local market could boost its China sales.

The first thing Yu did was to travel to China's main cities exploring the different market demands.

"What inspired me most was the difficulty of telecommunications," Yu says. "Without open telecommunications it is impossible to achieve the goal of economic reform and opening up."

In addition, he learned that the cost of installing a phone was more than 4,000 yuan at that time (the average salary for urban workers was around 300 to 400 yuan then).

So Yu made one of the brightest decisions investing in China's telecommunications industry in late 1993.

"Advanced technology can help boost the output of the telecommunication facilities, which can reduce installation costs and make phones affordable for residents' homes," Yu explains.

The action, which came ahead of all the domestic telecommunications industry manufacturers, generated great success for 3M China, and also accelerated the speed of China's new era. And under Yu's leadership, after five years 3M China had more than $100 million in sales revenue in 1998.

Next Yu thought that highway construction might be the country's next major development goal, so 3M invested in manufacturing traffic and road signs.

The auto, electronics, and household appliance industries were next and step by step, 3M has been expanding its business supplying more than 60,000 products to China, as well developing advanced technologies.

"3M China has been growing together with the Chinese economy. By operating in China for over 24 years, I have witnessed its fast development, especially since the 1990s," Yu says.

However, 3M's success lies more on the ability to forecast the various market trends, Yu points out. "A key value of 3M is meeting our customers' needs. And we have to exceed their expectations."

3M China has also realized that its business success would be better by concentrating on serving the Chinese market, he says.

The 1990s also brought more competitors to China, Yu says, so 3M met the challenge in 1994 by establishing its first technical service center in Beijing to teach customers how to use 3M's various products and use their input for further research and product development.

"We are working here, exploring the domestic business opportunities and providing products to meet the local market demands," Yu adds.

Last year, the company invested $40 million to establish a research and development (R&D) center in Caohejing New Technology Park in Shanghai. It's 3M's fourth largest R&D center and all the researchers in the Shanghai R&D center are Chinese.

"It manifests the fact that China has become 3M's most significant market and the company hopes to keep pace with the country's booming economy and support the country's development goals," says an engineer in the R&D center.

While China's recent move to make energy conservation and pollution control top priorities on the national agenda, Yu is proud that 3M China was the first company to install energy-saving thermal oxidation furnaces in 1993. "Energy saving is one of 3M's core requirements worldwide, so we have to do it in China."

The manager admits that there is one green opportunity 3M didn't explore, though he says that will change.

"As a leading diversified technology provider, 3M has the advanced technology to better protect the environment. We need to do a better job of sharing our expertise and experience with local companies, working in partnership to help achieve China's energy savings and emissions control goals," Yu says. "I will make an effort to do this in the coming years."

(China Daily 10/06/2008 page6)