George W. Buckley Chairman, President and Chief Executive Officer

An Emerging Strategy for Growth

George W. Buckley
Chairman, President and Chief Executive Officer

3M Investor Meeting 2006 © 3M 2006 All Rights Reserved

Topics We Will Address Today

Demystifying 3M and understanding the workings of the
1
“3M Lattice”

Describing 3M’s strategy for growth while maintaining
2
premium margins

Explaining the origins of further incremental margin
3
growth at 3M

Strategic Management of 3M’s Portfolio
4


3M’s Summary Strategy

20%+
Drill into the core. Move towards
12 -15%
scale where markets are large
8%+ and
Move towards higher relative share growing
in smaller markets
Heavy up on globalization
Technology remains part of who
we are
Earnings Investment
Organic Sales
Careful tradeoffs of share and Growth Returns
Growth
growth to maintain value creation
momentum Technology lattice protects the downsides
and ensures upsides
Building on brands, technology, Investment through the economic cycles
people, service & distribution Driving growth as a way of doing business


Portfolio Priorities
Portfolio By Activity 15%+
10%+
18%+
8%+
13%+
8%+ and
growing
2
1
Health Industrial
Safety
1
Care Hi-Tech

By Technology
Growing International Adjacencies
the Core Growth 15%+
15%+
13%+
Foundation Principles
1 1 2
Growing the core; filling white spaces
Becoming vital to customers

Nano- Track & Electronics
Building broad platforms for our technologies
technologies Trace & Software
Taking careful and logical adjacency steps


What 3M Businesses Should
Look Like in 5 Years
Large Markets
In every market we will maintain strong
technological superiority Businesses with scale

Businesses getting scale
Smaller Markets

Businesses with relative share

Businesses getting relative share

Experimental And Niche

Grow, close or sell
Niche Share Scale Non
Core
Invent & experiment


Building Scale And Relative Share In Our Core

Relative Share or
Scale or Getting Scale Targeting Relative Share Sub-Scale

Scotch® branded Industrial Pharmaceuticals
Dentistry
and Office Tapes
Touch systems
Orthodontics
Abrasives
Precision Optics
Office supplies
Automotive after-market
Visual displays
Roofing granules
Optical Films
Lighting
Commercial Graphics
Face masks & respirators
Electrical Connectors
Adhesives
Medical tapes and drapes
RFID
Post-It® Notes
Traffic Signage


Understanding 3M’s History and Culture

3M’s history is rooted in an “invent and experiment” approach
called “make a little, sell a little” where markets were built by
bootstrapping. This produced the following outcomes for 3M:
– World class materials science and surface chemistry capability was built
over many years
– Markets were often entered only after privileged IP positions were built
– Scale was not considered important
– Demand and capacity were often underestimated
– 3M focused on making “risk free” capital investments by using highly
flexible machine tools capable of making many products in plants that
served multiple businesses.
– Cross business use of central technologies was encouraged that led to
3M’s participation in many high-margin niche areas


Understanding 3M’s History and Culture

A high degree of conservatism became the norm
The “make a little sell a little” approach led to an incremental
approach to capacity and strategic planning
– Complex supply chains evolved quite naturally, with extrusion
processes at one plant, coating in another plant and final conversion at
yet another
– Individual plants were run with superb efficiency, but interconnecting
logistics were often complicated and costly
– Higher inventory and WIP compensated for the complex supply chains
– Chronic underinvestment in core capacity led to many upside sales
growth opportunities being missed
3M’s inward focus brought margin benefits but often hindered
growth and good long-range planning


What Emerged From Our History

A highly capable scientific, engineering and manufacturing
company with deeply conservative values, participating in
many successful niche markets
Underinvestment in core markets that made readily available
growth hard to capture
Incredible inter-segment technology sharing, where new
markets were continually built via a virtual “adjacency machine”
Hugely capable (and generally unknown) world-class
manufacturing
Modest and unassuming management
Underdeveloped strategic planning capability


We Can Address Growth By Being More Systematic
Understand our competencies
Identify the Basis of Differentiation
Resultant Economic advantage
Define The
Pose a view of the future
Play in near adjacencies only Core
Sequencing adjacency moves Business
Watch for discontinuities

Achieve
Create A Long
Full Potential
Term Addition
In The Core
Path

Get Scale
Gain relative share
Relative low cost
Identify
Decision criteria Customer importance
Systematic processes Truly Adjacent Always maintain
Distance from the core technological advantage
Markets
Organizational links


Defining 3M’s Core

3M’s fundamental core competency is applying coatings to backings
– Both the coatings and the backings are traditionally developed inside 3M
– Backings may be woven or non-woven fabrics, paper, cloth, plastics or metal
– Coatings are adhesives, abrasives, medicines, nano particles or imprinted optical
patterns

It does this in a highly precise manufacturing approach that involves the
large scale unwinding, winding and splitting of tapes
Incredible manufacturing capability and know how is the hidden
and unsung hero of 3M and a significant barrier to entry



3M sometimes sells its coatings and backings separately,
configured as other products, such as face masks, Thinsulate
thermal and acoustic insulation and roofing granules
Cubitron™ Roofing
Respirator
Ceramic Grain Granules

This same precision machining and materials science
capabilities have also been applied in market adjacencies such
as dentistry



In applying coatings, 3M developed world class competencies
in modifying the shapes and patterns of surface coatings
(called micro-replication) that alters the fundamental behavior
of a product
Fuel Cell MEA
Cubitron Trizact Abrasive
VIKUITI™ BEF

This micro-manufacturing competency, leveraged across
many markets into nanotechnology makes 3M so hard to beat
Reinvention of the materials science space over the next few years
with nanotechnology is one source of the next wave of growth


Defining 3M’s Core: Other Core Competencies

In developing the previous “backings and coatings” competencies,
broad know-how in adjacent technologies was built, viz
– Micro-replication of surface patterns
– Optics and light management
– Nanotechnology
– Ceramics and adhesives
And 3M extended this adjacent knowledge across multiple markets
in less obvious applications such as
– Post-it® notes (the adhesive is “micro-replicated’)
– Adhesives (on which 3M’s dentistry competency is based)
So 3M is, at its heart, an invention and manufacturing company
Its major strength is in solving and delivering unique solutions for
OEM and mass channel customers


3M’s Technologies Extend Into Multiple Markets
3M Technology Platforms Markets

Adhesives Architecture & Const.
Abrasives Auto. & Aerospace
Ceramics Electronics Manuf.
Electronic packaging Graphic arts
Micro replication Health care
Optics Home and Leisure
Specialty materials Industrial OEM
Non-woven Materials Consumer & Office
Polymer melting Safety & Security
Telecoms and Utilities


But Here’s What The Lattice Really Covers;
3M’s Other 32 Technology Platforms…

Rf
Ad Am Bi Reclosable
Adhesives Advanced Biotech
Fasteners
Materials

Ab Dd Mr Pe Rp
Abrasives Drug Micro- Predictive Radiation
Engineering
Delivery replication Processing
& Modeling

Ac Dm Nt Nm Pm Sm
Acoustics Display Nano Nonwoven Polymer Specialty
Melt
Materials Technology Materials Materials
Processing

As Do Fi Fs Is Md Mi Pc Po Su
Application Dental & Films Filtration, Integrated Medical Microbial Precision Porous Surface
Systems
Software Orthodontic Separation, Data Detection Coating Materials & Modification
Materials Purification Design Mgmt & Control Membrane
s

Ce Ep Fl Im Lm Me Mo Pd Pr Wo
Ceramics Electronic Fluoro- Imaging Light Metal Molding Particle & Process Wound
Packaging materials Mgmt Matrix Dispersion Design & Mgmt
Composites Processing Control

Vp
Cp Fc Fo Ip Pp
Precision Vacuum
Chemical Flexible Fiber Inks &
Processing
Power Converting Optics Pigments Processing
Sources & Packaging


Demystifying 3M: It is not a Conglomerate

In understanding 3M, it is important to realize the company is not a
conglomerate with siloed independent business units
3M is a unique model of a technology and manufacturing “adjacency
lattice” that shares basic technologies and manufacturing processes
across multiple businesses, markets & product lines
– Almost all of 3M’s basic businesses are connected to each other in
this way, from water filtration to Scotch brand tape
In network theory, the power of a network (or lattice) is proportional
to the square of the number of users.* It is this lattice that makes 3M
so powerful and enduring as an industrial competitor
But ….the lattice can also make 3M difficult to organize for optimal
growth
* Robert M etcalfe, Inventor of the Ethernet


How The 3M Invention Machine
Goes To Market

Materials Science Surface Chemistry

Backings Coatings Abrasives
Extrusions
Adhesives
Woven
Oxides
Non woven
Medicines
Plastics
Roll to Roll Tape Petri Broth
Metals
Optical Patterns
and Cut Out Manf.

Final Product Configuration

OEM Mass
Channel Channel

Product And Technology Migration At 3M;
Microreplication Technology
Micro-channel Fluid High flow
Structured
1983 cooling Transport Filter
Surface MATERIALS
Optical ISO Structured
Filter
porous Surface Sensor
Technology
Center ELECTRONICS
Electrical Connectors
Formed Stem Web Control Smart
ADHESIVES
Micro Comply
Tape TAC Adhesives
Cube corner Reclosable
Griplets
Diamond Structured
Fasteners
Prism
ABRASIVES
Shaped Trizact
Grade Surface
Reflectivity
Particles Abrasives
Sheeting Abrasives
Glare-free
Lane Markers
REFLECTIVE
Overhead Fluorescent
Wide Angle
Projector DGS DG3
Programmed MATERIALS
DGS
Lens Conspicuity
Optics for Signs

Scotchlite Internally Light
Lens
DGS Lit Signs Pole
Film
ILLUMINATION
Total Lighted Lighted
Traffic
Internal Guidance Lane
Signal Optical
Reflection Tube Marker
Lighting
Film
LED Light Mixing
Brightness LCD
Linear Enhancement Film FLG
FILM
Solar Film Light Control
Concen-
Day X-ray Notched Large-Diameter
trator
lighting Scan Fiber Optical Fiber
Ov erhead
Low-profile
Radial Multi focal
Proj ector
LENSES
Overhead
Solar Interocular Micro lenses
Lens
Projector
Concentrator Lens

1964 1970 1980 1990 2000

The Role Of Technology and Innovation at 3M

As well as our history, it is the engine of our future growth
We believe that one of the keys to sustainable success is unfettered
and well-directed innovation
– But it’s not only about monetary volume, it’s also about direction
– Shared technology model essentially unique
– The 15% rule is alive and well
We’ll be searching for disruptive technologies as well as logical
developments and extensions to invent new futures for our products
We’ll increasingly prospect for “just out of the garage” technology
developments key to building our core
The heart and soul of 3M’s approach will remain technological
differentiation and application across multiple lines of business
We’ll add “digital” oriented competencies over time


The World’s Most Innovative Companies 2005

Asia Europe North America Global
1. Apple 1. Apple 1. Apple 1. Apple
2. Google 2. Google 2. Google 2. Google
3. Nokia 3. P & G
3. 3M 3. 3M
4. Samsung 4. Microsoft 4. Toyota
4. 3M
5. Microsoft 5. Toyota 5. Microsoft
5. 3M
6. IBM 6. Toyota 6. GE 6. General Electric
7. GE 7. Virgin 7. Starbucks 7. Proctor & Gamble
8. Toyota 8. BMW 8. Microsoft 8. Nokia
9. Nokia 9. GE 9. IBM 9. Starbucks
10. Infosys 10. eBay 10. Dell 10. IBM
11. Virgin 11. IKEA 11. Wal-Mart 11. Virgin
12. P&G 12. RyanAir 12. IDEO 12. Samsung
12. Dell 12. Sony 12. Target 13. Sony
14. Sony 14. Intel 14. Samsung 14. Dell
15. Intel 15. Porsche 15. Southwest 15. IDEO

Source: “The World’s Most innovative Companies”, Business Week, April 24, 2006


Innovation Is Not Just About Process,
It’s Also About Imagination and People
Inspired Growth
Aspirational Long
Minded Leaders
Term Organic Growth
Growth Minded
→ 10% Inventors

Imagination Technology
X
≈3-4%

Commercial
Customers X
Excellence
GDP
3M
Great Products
Clear Goal of > 2X GDP
Globalization

Growth

Some Breakthrough 3M Products

3M Confirm Laminate with
Dual Brightness
Floating Image
Enhancing Films Advanced Composite
Conductor

3M Trizact
Abrasives

Littmann® Electronic
Stethoscope with A mbient Post-it Picture Paper
Noise Reduction Flexible Circuit


3M Patent Portfolio
100,000
Approaching 100,000
90,000
R
AG
Pending & Issued Patents

C
80,000 %
3.5
1
70,000
60,000
R
C AG
50,000
2%
11.
40,000
30,000
20,000
10,000
0
00

01

02

03

04

05

06

07

08

09

10

11
20

20

20

20

20

20

20

20

20

20

20

20
US Pending & Issued OUS Pending & Issued


3M BRICP Patent Filings

Approaching 1000 in 2006
900

800 China Brazil India Russia Poland
700

600

500

400

300

200

100

0
2002 2003 2004 2005 2006 Projected


3M Will Lead The 21st Century
Materials Science Revolution

Material
Nanotechnology
Substitution (i.e.,
Metal to Plastics)
Rapid
Expansion of
Manufacturing
Adper™
Adhesive
Named Top Ten
Nanotech
Product

1950s - 60s 1970s – 80s 2000 ->


3M, Becoming the World’s Nanotechnology Giant

What is it?; The application of micro-manufacturing and micro-
assembly of products in sizes less than 1000 nanometers
3M has more than $1 Billion in sales from nano products
– And the broadest patent portfolio in the world
The next wave of the breakthroughs will come from nanotechnology
3M has applications in many fields;
– Self assembling molecules in medical applications
– Optical applications
– Adhesives and abrasives
– Fuel cells
– 3M Surface Modified Ceramic Nanoparticles for LCD TV screens
New applications are being discovered every day


New Applications of Nanotechnology; Fuel Cells
What is a Fuel Cell?

Oxygen from
the air
Hydrogen Heat

Electricity

Water
Fuel Cell
Stored Hydrogen

The ultimate potential is generation of off-grid electricity from hydrogen
produced from completely renewable, widely dispersed energy sources.


Nanostructured Thin Film Catalysts for Fuel Cells

50 square km field of new wheat,
4quot; tall, 2quot; apart
12,355 Acres

Shrink it down by factor
of 100,000

1 Nanostructured
= Whisker for Each
Blade of Wheat
50 cm2 MEA
~ 4 billion whiskers/cm2


3M Fuel Cell Membrane Manufacturing Lines

• Input material from CCM line &
GDL process
• Robotic assembly process
• Precision cut
• Sequenced assembly
• Bonded under heat & pressure
• Automated gasket dispensing
• Curing

Alpha Line Pi Line

Menomonie, Wisconsin


Another Nanotechnology Success
BEF (Brightness Enhancing film) Optical Film Solutions

Digital Still Camera
PDA

LCD Panel
Main LCD for Mobile Phone
Thin BEF
Thin BEF
Light guide plate
ESR
Sub-LCD for Mobile Phone
Structure of Backlight


New Functionalities Enabled by
Multilayer Optical Films
Color without colorants 99.5%
98.5 - 99.5% reflective
Mirrors Highest efficiency mirror
without known
metal Multiple bounce for light
transport and redirection

Light without heat

Polarization without
absorption

Reflective polarizer for LCD
brightness enhancement


Advancing 3M’s Growth


The Four Principal Elements
Of Growth We’ll Use
Strategic
Thrust

Grow the Current Complementary Build New International
Core Business Acquisitions Business via EBOs Growth

Defend and extend the Follows core Adjacency Mega Trends BRICP
core strategy Seeded by small M&A Eastern Europe
Build scale Supports Electronics and software Western Europe
adjacencies
Build relative share Facilitated by grouping Japan
Mostly tuck-ins
Emphasize localization RFID/Wireless/GPS Australasia
Baby bear strategy
Disruptive technologies Minerals extraction Growth
Build long term everywhere
Oil & Gas
competency Food safety
Border crossing & security
Consumer Electronics


Growing The Current Core Business

Grow the
Current Core
Invent a
Extend The Core New Future
Build key customer partnerships
Customization as tool
Constant reinvention; drill down Imagine, dream and invent
Build first where we’re strong Localization and differentiation Beat competitors to the future
Get scale & build relative share Plan for cannibalization
Fill in the product “white spaces” Licensing as a route
Build Broad Long
Become important to customers
Avoid NIH syndrome
Term Competencies
Use dual branding
International product localization
Local acquisitions
Private labeling
Develop broad based long-term capabilities
Acquire supporting core technology with quality brands
Build volume and scale


Core Strategy
Grow the Current Core

Becoming more intimate with our customers

Build first where we are strong Grow the
Invent a
Current Core
New Future
Constant reinvention in the Current Core
(Light Pipes → BEF → DBEF→ APF)
Build even stronger key customer Growing The Current Core Business
partnerships
Grow the
Customize for customers Current Core
Invent a
Build key customer pa rtnerships

– Solving their needs as well as ours Customization as tool
Consta nt reinvention; drill down Imagine, dream and invent
Build first where we’ re strong Localization and differenti ati on Beat competitors to the future
Get scal e & build relati ve share
– Drilling into the niche and capturing new Plan for cannibal izati on
Fill in the product “white spaces” Li ce nsi ng as a route
Build Broad Long
Avoid NIH syndrome
product segments Use dual branding Term Competencies
Inte rnational product local izati on
Local acquisitions
Private label ing

Localization of production Develop broad based l ong-term capabi lities
Acquire supporting core technology w ith quality bran ds

– Factories, businesses, product 3M Inve stor Meeti ng 20 06 © 3M 20 06 All Righ ts Re ser ved

converting


Core Strategy
Extend the Core – Build Scale and Relative Share

Significant new volume exists in the core. Lack of product breadth
often weakens our customer influence

Extend the core to build scale and grow
Invent a
Extend
relative share
New Future
The Core
Fill in the product “white spaces” and
become more important to our customers
Growing The Current Core Business
Defend created markets against new
entrants Grow the
Current Core
Invent a
Use dual branding in the upper middle Extend The Core New Future
Bu ild key custome r partnerships
Custo mi zation as tool
market Constant reinvention; drill down Imagi ne, dream an d i nvent
Bui ld first wh ere we’ re stro ng Localization and differe nti ati on Bea t competi tors to the future
Get scale & b uild relative sh are
Pl an for cannibal izati on
Fill i n the product “white spaces”
Emphasize product localization; use Licensing as a rou te
B uild Broad Long
Become importa nt to customers
Avoi d NIH syndrome
Term Competencies
U se dua l b ra nding

a mixture of brands & local acquisitions International product l ocalization
L ocal acquisitions
Private labeli ng Develo p broad based lon g-term capabili ti es
Acquire supporti ng co re technolog y with quality b ran ds
Thoughtfully extend private labeling Build volume and scale

Accurate capacity planning 3M Investor Meeti ng 2 006 © 3M 20 06 A Rig hts Res erv ed
ll


Core Strategy
Using Differentiated Brands and Technology to Grow Our Market
Industrial Consumer
Use principal
brands and
differentiated
technology
or features
Diamond Grade™

Use
Secondary
Brands /
Technologies
High Intensity Grade

Selective private
labeling or
manufacturing JVs to
support partnership
customers
Engineering Grade


Core Strategy
Vigorously Focus On Inventing A New Future

All markets wax and wane; we want to be there when it waxes
and reinvent it before it wanes

While developing and growing the existing Invent a
market, plan for cannibalization by inventing New Future
a new future
Use our technological prowess to invent the Growing The Current Core Business
natural substitute technology
To aid speed we’ll: Grow the
Current Core
Invent a
– Strategic licensing of technology Extend The Core New Future
Build key customer pa rtnerships
Customization as tool

– Investment in small technology companies Consta nt reinvention; drill down Imagine, dream and invent
Build first where we’ re strong Localization and differenti ati on Beat competitors to the future
Get scal e & build relati ve share Plan for cannibal izati on
– Greater University support and liaison Fill in the product “white spaces” Li ce nsi ng as a route
Build Broad Long
Become important to customers Avoid NIH syndrome
Use dual branding Term Competencies
– Use imagination and invention extensively Inte rnational product local izati on
Local acquisitions
Private label ing

Avoid the NIH Syndrome Develop broad based l ong-term capabi lities
Acquire supporting core technology w ith quality bran ds

Beat our competitors to our future 3M Inve stor Meeti ng 20 06 © 3M 20 06 All Righ ts Re ser ved


Core Strategy
Build Broad Long Term Basic Competencies

Long term market power can be enhanced by long term
strengthening of the core and near adjacencies

Build deep, broad and consumer-friendly Build Broad
competitive advantage in our core Long Term
Competencies
markets
Quality acquisitions and internal
development Growing The Current Core Business

Any acquisitions will be premium Grow the
Current Core

brands that deepen our technology Invent a
Bui ld key customer partnerships
Customizati on as tool

bench, provide new applications and Constant rei nvention; dril l down Imagine, dream and invent
Build first where we’re strong Localization and differentiation Beat competitors to the future
Get scale & buil d relative share
channel access for 3M Plan for cannibalization
Fi ll in the product “white spaces” Li censing as a route
Build Broad Long
Avoid NIH syndrome
Use dua l branding Term Com petencies
Filling in the logical complementary core International product localizati on
Local acquisiti ons
Pri vate labeling

extensions, & providing new platforms
Develop broad based long-term capabil iti es
Acqui re supporti ng core technology wi th quality brands
Bui ld vol ume and scale

for growth 3M Investo r Meeting 2006 © 3M 20 06 All Righ ts Re ser ved


Acquisitions and Divestitures

Over time we’ll divest or close those businesses where;
– We cannot, over time, build scale or good relative share, or
– We cannot differentiate through technology, or
– The base technology is at “end of life” and cannot be refreshed, or
– The risk profile suggests another owner could extract more
value than 3M
The majority of acquisitions will be EPS accretive or neutral in
year 1 and EVA accretive by the end of year 3
They will closely reflect and support our strategic plan
We’re prepared to sacrifice some % margin for additional growth
provided net shareholder value creation is positive. We expect
returns to remain high
Strategic
Thrust

Grow the Current Build New International
Complementary
Acquisitions
Core Business Business via EBOs Growth


Growth Acquisitions - Screening Criteria
Strategic
Thrust

Grow the Current Build New International
Complementary
Acquisitions
Core Business Business via EBOs Growth

High Growth
Market
Screen Operating
Metrics & Fit
Select Healthcare Screen
Valuation
segments
Inorganic and
Safety & Double digit growth
Size
Growth Protection Potential for margin
Opportunities improvement
Track & Trace
Potential
Energy Ability to leverage Mostly Mid-size
across current Targets
rather than
Display &
customers transformational
Graphics
Integration with Early EPS
Consumer
current 3M accretion
innovation
processes


EBO Adjacencies

“EBOs” are Emerging Business Opportunities used to drive faster growth
Concept
– Enhanced focus on emerging business opportunities with high growth
– Concept used where capability exists with ready adjacencies but no
current focus
Attributes
Collect all related activities into a
single entity
Initial EBO Candidates
Initial EBO Candidates
“Housed” in a Segment
1 Filtration
Filtration
Leader reports directly to the EVP
Track & Trace
2
Track & Trace Acquisitions and additional
resources provide support
Energy & minerals extraction
3
Energy & minerals extraction
Growth and speed are the focus
Food Safety
Food Safety
4

Strategic
Thrust



EBO Adjacencies: Filtration

What is the scale of the opportunity?
($MM) 2006E 2009E CAGR
$5,500 $7,300 10%
Market
What are our assets?
People
Technical 212
Marketing & Sales 400
What business are we in?
Business Development 12
Fluid Processing - cleaner, safer fluids:
Manufacturing / Other 1700
reduce operating costs
Healthcare Market - depth filtration media Total 2,324
Water Filtration - bacteria reduction
137
Patents
Manufacturing Capability
What products do we have?
Membrane materials & processing
Membrane cartridges, antimicrobial media

CUNO is a strong player with industrial fluid processing customers


Filtration EBO: A Critical Capability for 21st Century
Healthcare & Industrial Production
Appliance
Direct
manufacturers
marketers
Appliance OEMs
Plumbing
w holesalers Kitchen &
Residential Bath
Retailers
Water Water
Restaurants Specialists
Food Post mix
Service drink
Coffee
service
Paints /
General
Coatings
Industrial Packaging
Chemicals
Fluid Wafer
Processing Oil & Gas Handling

Components
Electronics

Depth Membrane
Filtration TFF /
Health Chromato- Systems
graphy
Care
Pharma
Bioprocess
Biologics
Filtration Sheets

Filter Aids
Food &
Beverage Filter
TFF /
Systems

EBO Adjacencies: Track & Trace
($MM) 2006E 2009E CAGR
$9,300 $35,000 100%
Market
What business are we in? What are our assets?
Automated tracking of critical assets and People
products
Technical 94
Benefits include: Asset utilization, cycle time
reduction, working capital reduction & product Marketing & Sales 56
security Business Development 14
What products do we have? Manufacturing / Other 12
Library Total 176
-3M™ One-Tag RFID System
Office/Legal
80
Patents
-3M™ RFID Tracking Solutions: File Location
Communications / Utilities What other assets do we need?
-3M Dynatel™ Location and Marking Products
GPS, wireless, other electronics and
-Telecom Access Control – CMD Germany
software capability
Supply Chain Execution
-HighJump™ Software

Specific applications for high value asset management solutions

Track And Trace Has Broad Based Opportunities

Existing and Potential Solution Spaces

Improve and
Advantage Me!

How Am I? • Location-based serv ices
• Supply chain optimization
• Competitive “superiority”
Sensor Networks
Where Am I? in Order Fulfillment
• Sensors
– Supply chain
• Temp
• Tracking Software
Who Am I? – Distribution
• Vibration
• RFID Network
• Humidity
• Wireless Location
• RFID Tag
• Light
• RTLS
• Bar Code
• Contaminants
• GPS
• Database
• Road Tolling


Example Opportunities in the
RFID and GPS Space
Tr ack and Trace Needs RFID and GPS Capability

RFID
+
Container Monitoring
1
GPS

2 Food Supply Chain
41
Innovation

3 Medical Specimen Tracking
RFID +GPS
RFID +GPS
Track and Trace
Track and Trace 4 Yard and Warehouse Management

5 Oil, Gas and Minerals Extraction

6 Ground Vehicle Asset Tracking


Perhaps the Largest
Single Growth Opportunity
Hike
Personal Outdoor
Navigation
Ski Vehicle
Security
Fish
Target ID
Battlefield
Automotive
Mngmt
Fish
Animals
Consumer Farms
Asset
Military Warehouse
Agriculture
Mngmt
Navigation
Surveying Asset
GPS
Library
Information Industrial Track
RFID
Records
UHFID
Government
Containers
Transport Medical Patients
Railway
Security Packages
Signals
Pathology
Vehicle Records
Security
Road Toll Border
Passports Assets
Crossing
Asset ID cards
Track
Runway Transplants
Pets
Mgmt Children

Criminals

Adjacency EBOs: Power Transmission

($MM) 2006E 2009E CAGR
$19,000 $24,550 7%
Market
What are our assets?
People
What business are we in?
Technical 8
High performance overhead cables to
Marketing & Sales 2
increase transmission capacity by 2-3X
using existing towers and infrastructure Business Development 1
Cost competitive, quick solution, no visual
Total
change to line, no permitting because it use 11
existing rights of way

26
What products do we have? Patents
Family of high performance high
temperature ACCR conductors that can
replace any of the overhead line
conductors in use today

Multiple test lines with utilities; lower manufacturing costs is the key


The Opportunity of International Growth

International growth rates 2X – 3X US
61% of 3M sales are outside the
United States today, ≈ 70% in 2011
Focus is on BRICP; double investments there
China growing ≈ 35% CAGR, expecting
circa $1Bn sales in 2006
India growing at 40%+
Double digit growth rates in E. Europe and LA
W. Europe grows faster on localization strategies
Acquire local brands and manufacturing as well as
organic expansion Strategic
Thrust



Capital Expenditure in BRICP Countries

$300 $280
BRICP Capital Investment
$240
$250
$217
$200
$166
$150
$98
$100
$64
$34 $34
$50

$0
2002 2003 2004 2005 2006 2007 2008 2009

Increased Capital Expenditures to BRICP drives OUS growth


Building Emerging Country Capacity; End 2006

RUSSIA
● 237 Employees
POLAND
● 1 Plant
● 652 employees

● 2 Plants

CHINA
INDIA ● 2,070 Employees
● 722 Employees ● 6 Plants
BRAZIL ● 2 Plants
● 2,943 Employees

● 3 Plants


International Growth
Investing in Higher GDP - Growth Economies

2003 2006E 2011E

US
APAC
APAC APAC
30%
US
25% 29%
35%
US 38%
46%

EM EA
22%
LAC
EMEA
LAC
LAC
EMEA
25% 9%
7% 8%
26%

*GDP is w eighted average of 3M sales by region


Operational Excellence


Our Foundational Beliefs on Competitiveness
6σ & Lean
Global sourcing
We compete on six competitive Cost Factory costs
platforms Taxes

Low cost is the ultimate Protect the Primary
Brands
Secondary for local
competitive deadly weapon
Scale and relative share are Secure the best
Distribution
Secure the broadest
vital for efficiency and competitiveness
Follow the customer value chain Nanotechnology
Technology Electronics & Software
Pristine service and brands can
overcome price in some markets Speed to market
Service OTIF
We can compete best in the core, Quality

but the core evolves dynamically Inspire and guide
People
Develop leadership
Continuing education


Keeping Our Commitment
To Operational Excellence

Our commitment to operational excellence and Six Sigma
remains strong
Put process in where it belongs… and ignore it where
it doesn’t
Six Sigma is evolving to also include “Lean” methods, beginning
first in manufacturing
Operational excellence focus will be expanded to cover
procurement and logistics
– Offers large opportunities for margin expansion & sales growth
Initiatives will be driven into the fabric of 3M’s culture


Moving The Supply Chain Closer
to The Customer Is A Priority
Plant 2
Finished
Plant 3
Plant 1
Goods
Shortening
Plant 4
Supply
Raw Materials Chains

Plant 5
Plant 6

Master FG Inventory
Production
Schedule Reducing
Cycle Times

10 Days

Time
220 Days


History Of Flags - Manufacturing

CMA

Automated Assembly
Jumbo Gannicott Master Pad
12” Master Roll converting
and Pack-out
Production Converting
into Lefts and Rights

Amery, WI U.S./O.U.S.
*Split Flag Asmby Distribution
MN
*2” Prtd Asmby Hutchinson, MN
Custom Printing
*Hldy Tags Asmby •Jumbo Coating & Printing
Milwaukee, WI
•Slitting
*2” Prtg (Index)
Minneapolis, MN
*Leaderstrips •All Assembly
*1”, 2” Printed
*Holiday Tags Hartford City, IN
*Quality Flags *Matte Coating

Nevada, MO
*LAB, Adh, Color Greenville, SC
Lolita, TX
*Slitting *Polyester Jumbo
BOPP Jumbo
*1” Assembly
*2” Assembly

U.S./O.U.S.
Distribution
1988-1996 2006
WIP/RM’s: 100 days WIP/RM’s: <20 days
Cycle time: 95+ days Cycle time: <15 days


And Here’s What Happens To Cost
When You Do It

Non-Material Unit6Cost / 6 8 3 - 4 A B
8 3-4 U n i t C o st B r e a k d o w n

Flags
$ 0 .9 0

$ 100%
0 .8 0
O Costrelement a g i n g
th e P a c k 1
$ 0 .7 0
In Cost c t
d i re element 2
75%
$ 0 .6 0
H Cost D o w n L a b e l
o l d element 3
$ 0 .5 0
L o g o element 4
Cost L a b e l
50%
$ 0 .4 0
D Cost element 5
isp e n s e r
P a d element 6
Cost
$ 0 .3 0

M Cost element 7
25% a c h in e
$ 0 .2 0
L a b o relement 8
Cost
$ 0 .1 0

$ 00%0
.0

ac k
TD
0

1

2

3

4

rd
200

200

200

200

200

gca
5- Y

2P
Lon
200


ECB Service Improvements Drive Growth
95% 25%

20%

% On-Time & In-Full

YOY Sales Growth
90%
Step-Change 15%

Improvement 10%
85%
in Service and 5%

Sales 0%
80%
(5%)

(10%)
75%
(15%)

70% (20%)
ECB Service ECB Sales Growth
Jan ’03 Mar ’06

► Approximately 1/3 of business recovery due to improved service
► Improved fill rate 2000 bps from a low of 75% in Dec ’03 to a high of 95% in Aug ’05
► Consistently achieving 90% or better
► Customers are recognizing better service with loyalty

Critical business differentiator that powers growth

Manufacturing Footprint

We’re going where the customers are going
Where we have scale, or can get scale, manufacturing will be done
in single focus plants in high volumes close to the customer base
– Shorten supply chains, improve order on-time-in-full (OTIF) and drive out
WIP and FG
– Over time, more supply chains will be designed for Make To Order supply

“X-Factors” are increasingly with us and, while unpredictable in
detail and nature, are probably a feature of life going forward
Plants will be highly automated and designed with a small amount
of surge capacity


Sourcing: Price vs Inflation

Asian sourcing up 30 % over 2004
Net Impact ($MM)

Local sourcing developed before
500
local manufacturing
316
264 110
209
300
68
Operating sourcing offices in
100

Eastern Europe, China and Latin
-100

America
-300
'02 '03 '04 '05 '06
Global business process driving
Net Cost Savings Pricing

down back office costs
Reverse auctions for
Pricing initially difficult in 2004
commodities showing great
Added value made positive pricing
promise
power better in ’05
Negative price still expected to be a
Legal entity and tax structures
factor in ‘06
important
Great Progress, More To Do

George W. Buckley Chairman, President and Chief Executive Officer

George W. Buckley Chairman, President and Chief Executive Officer

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