The 3M conundrum – Why?

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The 3M conundrum – Why?

I have been receiving input from across the globe concerning 3M’s decision to close its parking division after only about 18 months in the business. The comments go from :

3M never wanted the parking business in the first place, it ‘came along’ when they bought FS Tech and its toll road and lpr businesses.  It’s like you bought a new suit and the store threw in a tie. You didn’t want the tie, but it was part of the deal. The tie wasn’t your taste but you took it home, hung in the the closet for a few months, then threw it out.

To

There are discrete but effective barriers to entry for new entrants to the parking industry. The barriers come in various forms but one of the key barriers for new entrants is the challenges around overcoming long standing relationships, entrenched work practices and small appetites for risk. “Risk” can also be characterized as “change”. These attributes in tandem with long gestation periods for decision making and even longer tender preparation, processing and evaluation time lines results in lengthy time lapses between investments. The sector is characterized by multiple vendors most of whom are small to medium business enterprises operating in niche market segments and within select geographical boundaries.

Its within this context that 3M confronted its challenges. 3M has a well- earned reputation across the world as an innovator. It’s innovative culture has enabled the company to feed a plethora of new innovation through its global channels to markets as efficiently and as effectively as any company in the world. Its traditional modus operandi is to sell its products through wholesalers and retailers and agitate consumer demand through marketing and advertising directly to the consumer. It derives high margins in part through global volume and in part because it generates demand for new products in market sectors where there is little or no competition. 3M have generally been very well rewarded for its “first to market” initiatives.

I suspect 3M’s decision to exit the sector was driven by the realization that whilst innovation is regarded within the parking industry, there are insufficient rewards and incentives to apply the full force of the “3M innovation machine” to the dis-aggregated parking industry.

I believe reality is somewhere in between. I have no idea how decisions are made in companies the size of 3M but my guess is that considerable study goes into the process. This takes time. Even if they didn’t want the parking division in the beginning, companies like 3M don’t just make quick decisions.  They study, they review, they attempt, and then they close.

If one looks back with 20/20 hindsight, you can see that their marketing wasn’t focused on parking, but on 3M. They featured ‘bar codes’ and the 89,000 people who work at 3M. Yes, we use bar codes in parking, but we use a lot more, too. It looks like 3M didn’t really talk to the industry, or if they did, they didn’t appear to be listening.

When I toured their facility in San Antonio and compared it was what I saw at Amano/McGann, Scheidt and Bachmann, Designa, TIBA, Hub, and Skidata, I should have realized that they weren’t in this for the long haul. They took a large room, sat some parking equipment in various stages of completion, and talked about the “3M way”, six sigma, and how they were converting everything to the 3M manufacturing process. That may be unfair, particularly since they had just moved the plant from Illinois, but still…

Frankly I thought they would raise the prices considerably and be able to maintain a higher pricing level since they were “3M” and would provide world class training and support to the systems they sold.

Their dealers, who had ridden the Federal APD airplane nearly into the ground, were ecstatic. 3M did what they do best.  They showed them their huge facility in Minneapolis, toured them in G5s and then brought in the heavy guns when they toured San Antonio. Whereas all the companies I mentioned above welcomed pictures and provided meetings with CEOs and plant managers, the leaders at the 3M meetings were high level VP’s who had flown in from Minneapolis. My camera was required to be left in the car.

Looking back today, it seems that all the activity was not done in depth. There was excellent PR, beautiful two story booths at trade shows, concerned managers who promised fixes to FAPD traditional problems, but did the fixes really ever come?  You will have to ask a member of the Parc Group about that.

3M did what was necessary but at the same time kept an eye on the bottom line. They didn’t really want the parking division but took it anyway. Then they kept a close eye on it. When it didn’t perform as well as other divisions, they make the only decision a company like 3M can make.

In the short term, this will be difficult for dealers and end users. In the long term, maybe not so much. The companies I listed above provide quality products and have been for decades. They are committed to the market and to their customers. It will be short term pain for long term gain.

JVH

 

Picture of John Van Horn

John Van Horn

3 Responses

  1. It stinks for those who have FAPD systems. These systems are neither cheap nor simple to replace and in an industry where the typical warranty is 1-2 years, 3M’s promise to honor those warranties doesn’t mean much.

    I wonder if they are going to focus their LPR technology away from parking and either ditch the parking industry altogether or give it cursory attention. It’s too bad; why wouldn’t they put the PARCS division up for sale? Oh well.

  2. Hello John,

    Well written short on the 3M and ultimately FAPD’s demise with supported rationale as to “why” their efforts may have fallen short.
    I noticed that WPS was absent from the list of “recognized” national vendors. Especially in consideration of the the reference to intelligent bar code based systems and innovation.
    History shows that they were pioneers with little regard to “change” within the industry by offering alternative concepts in PARCS solutions. A few that come to mind are:
    – The first European technology company with to open direct office in North America successfully
    – Very FIRST intelligent bar code company (created in 1988 with a Windows platform!) Internationally and in the U.S.
    – Innovative to be the first company to introduce credit card in/credit card out (1999)
    – Embedded 2-way video with the PARCS system (Parkvision, 2003)
    – Fully integrated vehicle charging systems to PARCS (2010)
    I think they deserve some mention after successfully branding bar-code and commissioning PARCS systems the past 20 years in Canada and the USA
    Just my opinion 🙂

    1. Hi Derek — Guess I just forgot all about you. Maybe you should stop hiding you candle under a bucket.:) I’ll drop by the next time I’m in Toronto or you can give me a call when you are in LA. I’m in the book. JVH

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