An Analysis of 3M, the Innovation Company. Roshan Bhagat

Transcription

1 An Analysis of 3M, the Innovation Company Roshan Bhagat

2 1 The Post-It Note, Scotch Tape, and Filtrete are brands most Americans, as well as people around the world, are familiar with. Whether people realize it or not, many use these products daily. The company behind these and a multitude of other well-known successful products and brands is 3M. Originally known as the Minnesota Mining and Manufacturing Company, 3M was established in 1902 and is headquartered in St. Paul, Minnesota. 3M has long been termed the Innovation Company, and studies in innovation and new product development nearly always examine or reference 3M because of their unparalleled ability to create and sustain successful new products and technologies year in and year out. The following case study analysis will attempt to show that 3M is in this enviable position because of sound management and a corporate culture that is infused with innovation, creativity and freedom. I. PROBLEM STATEMENT A central theme that arises out of the 3M case study is the question of how a company becomes innovative. A further question posits in what ways and how 3M differentiates itself from other companies. II. SUMMARY & ANALYSIS OF THE FACTS The case emphasizes that 3M is not necessarily the most efficient, successful, or innovative company in existence. There are a wide range of factors that go into making a company innovative such as management, culture, and commitment to innovating, and it can be reasoned that there are companies who excel greater in those areas than 3M. What does set 3M apart from other successful companies, though, and justifies their status as the innovating machine, is the complete permeation of creativity and innovation throughout the whole organization and the harmonious balance they have been able to achieve between creativity and efficiency.

3 2 Balance of creativity and efficiency is central to 3M s 15 percent rule, which allows scientists and research engineers to spend 15 percent of their working hours on projects they consider to be of potential interest and benefit to the company. This is an unwritten rule at 3M, but is deeply engrained into the working culture. Being a product based company, 3M invests a considerable amount of time and fund into research, but they still recognize the importance of freedom for personal research and the benefits this freedom can bring to the company. The 15 percent rule produced one of the most successful discoveries in the company s history and a product that is nearly on every desk, Post-It Notes. The 15 percent rule is not a formal, written policy for 3M employees or managers; it is a philosophy under which the company operates. A former 3M executive once stated, The message is more important than the figures. He meant that allowing 15% of work time for personal research projects is not nearly as important as the message this corporate policy sends to the organization. It is a message that reinforces personal creativity and growth and helps tie the individual to the success of innovation at the company. That number could be higher to allow for more personal projects, but that figure would mean nothing if the company did not truly value and promote creativity and personal freedom for projects like 3M does. In the end, the researcher may or may not be allocating 15% of their time to personal research, but having the ability and encouragement to allocate just 1% is the most important thing for 3M. Creative people want to be creative and 3M has done an incredible job of turning that creativity into innovation and success. In addition to the 15 percent rule, there are a number of other 3M policies and objectives that drive new products and technologies to foster innovation. One of the principal business objectives for brand managers at the company is to achieve 25 percent of sales from newly

4 3 developed products. This policy creates a clear goal for brand managers and recognizes the importance of new products and innovation to the company. Performance of brand managers is partly evaluated based on this objective so managers are forced to focus on new product sales. 3M recently raised this number to 30 percent and introduced a new goal for managers to bring in 10 percent of sales from products that were released in the past year. These objectives are incredibly demanding and require careful planning by company executives each year, but the objectives have helped the company continue to innovate and create new products. There are other companies who may have similar policies in place for brand managers, but only a few have been able to implement this as effectively as 3M to deliver desired results. III. ALTERNATIVES It is true that 3M s success is largely due to the significance given to science and technology. As explained with the 15 percent rule, 3M grants its users the freedom to explore ideas by allowing research scientists to conduct projects of their own choosing. When scientists are given this freedom they are not stuck in a box with just a few dimensions to work with, they are allowed to expand their horizons and go deep into areas that may enhance the firm s efficiency and profitability. 3M invests over $1 billion into R&D because it values what this research can bring into the company. The company prides itself for its innovation and emphasizes the need for such spending on R&D. But amidst the success from science and technology, a bigger success comes from the corporate culture. The corporate culture creates the atmosphere and generates the tone from operations to the execution of projects. The culture not only impacts the performance of workers, but also impacts areas such as the office layout, structure and modes of communication. Some companies approach this liberally, whereas other companies approach it conservatively. The effects of both

5 4 approaches can be observed. For example, Best Buy took a liberal approach when it implemented the concept of no mandatory meetings and no schedules in its culture. At Best Buy s corporate headquarters in Minneapolis, one can witness workers leave in the afternoon to go to the cinemas and return back later in the evening. At a traditional company, this could lead to warnings or the possibility of termination. Yet, workers adopted this method and productivity increased at an astounding 35 percent. Workers were given the freedom to execute during times that were convenient to them - this impacted the firm positively because people who worked with flexible schedules were able to focus more and increase performance. During emergency or crisis situations, schedules were carried out differently. ( Google also has a unique corporate culture. If you enter any Google office around the world, you will find some common elements: bicycles for efficient travel between meetings, massage chairs, healthy meals, gyms, break rooms packed with a variety of snacks and drinks to keep Googlers going, etc. Google executives are convinced that if workers are given their essential necessities they function better. It is common for workers to bring their laundry and have it done during breaks or off-times. This demonstrates the relief of common household chores that can be taken care of right at the office. When these worries are taken off of a worker s head they can focus more on the tasks at hand. ( Similarly, 3M has a unique corporate culture that revolves around innovation. The web site states: Who we are: 3M is fundamentally a science-based company. We produce thousands of imaginative products, and we re a leader in scores of markets from health care and highway safety to office products and abrasives and adhesives. Our success begins with our ability to

6 5 apply our technologies often in combination to an endless array of real-world customer needs. Of course, all of this is made possible by the people of 3M and their singular commitment to make life easier and better for people around the world. The culture set around innovation is top down. This goes through the blood of every employee at 3M, and when this mentality is not within everyone, it creates issues. When James McNerney was selected as 3M s CEO, he was the first outsider to lead the company in its 100-year history. McNerney came from GE, a company with a culture that revolved around efficiency. Coming from this background, he had many executives at 3M trained as black belts in Six Sigma. Due to pressures of efficiency, workers had to produce more new products faster and this led to 3M being ranked number one. Despite this success, workers were not able to expand on their creativity because of efficiency pressures. After a few years, McNerney went off to take the CEO position at Boeing. The new CEO, George Buckley recognized the negative impact that McNerney had on the company s creativity. Buckley states, "Perhaps one of the mistakes that we made as a company it is one of the dangers of Six Sigma is that when you value sameness more than you value creativity, I think you potentially undermine the heart and soul of a company like 3M." The corporate culture was totally changed during those few years. Art Fry, who discovered the Post-It Note, confirms this fact by saying, "What's remarkable is how fast a culture can be torn apart. [McNerney] didn't kill it, because he wasn't here long enough, but if he had been here much longer, I think he could have." ( This clash of corporate culture created a dilemma for 3M. Despite being an innovative company and having the freedom to explore new ideas and creations, it was evident how the

7 6 management culture can affect the entire organization. A company can have the smartest people and the greatest players on their team, but it is the culture that makes or breaks a corporation. IV. RECOMMENDATIONS/SOLUTIONS 3M has undoubtedly and successfully created a harmonious balance between creativity and efficiency. Every organization and culture is different, and in order for a company to succeed, there must be a strong link between culture and management that promotes creativity, individual freedom, and innovation. The emphasis on culture set around innovation at 3M is from top-down. When new management principles brought by McNerney were put into place at 3M, the culture drifted away from creativity to efficiency. This changed the entire scope of the company because the culture is what drives the company, and in terms of a family, the culture is what makes a house a home. At 3M, employees feel at home when they are given the freedom to be creative and are able to apply that talent back to the company. 3M should continue to execute this strategy because it has set them apart from many competitors. The culture they have created has stuck to all employees at 3M and it has been passed down year after year. Even after 100 years of operations, business analysts continue to witness the success at 3M.