Few Try 3M’s 3 Rs of Idea Development
Livio DiSimone, who runs America’s most successful diversified industrial innovator, sounds more sympathetic than smug when he discusses why corporate giants seem unable to cultivate innovation within their workplaces.
“For a company, all of a sudden, to change its ingrained character because it says it wants to be innovative . . . is tough,” says the chairman of 3M Corp. “When you’ve just laid off 30,000 people and then tell those left that you now want everyone to become more innovative . . . well, I don’t think people will be listening to you in a pro-innovation mode. People have to believe that the things you do promote an innovative company.”
For all the Fortune 500’s pronouncements that innovation is essential to global competitiveness, inaction speaks louder than words. Fewer companies than in the past are seeking 3M’s counsel about managing innovation, DiSimone acknowledges. It’s not that these companies are inherently lazy or stupid, or even that 3M’s style is unique, DiSimone says. The cultural barriers to change, he adds, are just too high.
Perhaps. But what’s really going on here? 3M, based in Minneapolis, is a $13-billion-a-year global competitor with a decades-long tradition of successful innovation. It markets more than 50,000 products, ranging from Scotch tape to Post-It Notes to microporous filters to semiconductor lasers to health care equipment, and is superbly positioned in both consumer and industrial markets. Despite being a “Midwestern” company, nearly three of four senior managers have significant international experience and nearly half of its revenue comes from overseas. In fact, 3M has long had a blue chip record of financial growth and performance.
The company is one of a handful of triple-A rated industrial corporations in America. Its $24-billion market capitalization makes it one of the 20 most valuable public corporations in America. And the company is one of the few singled out in the best-selling book “In Search of Excellence” as being arguably stronger today than it was a decade ago. So where are its imitators?
While America’s high-profile companies have made lemming-like leaps onto the Total Quality Management bandwagon and the Customer Service express, practically no major company has sought to emulate 3M’s superb innovation management programs.
Why? Is it because 3M’s system is so complex? Or that 3M’s people are just more creative? Not at all. It’s because 3M actually believes in the value of creating an internal free market for innovation; most American companies do not.
“We prefer bottom-up innovation, so we allow what seems like a lot of leakage in our system,” says DiSimone, a native of Montreal. “Actually, it’s not a lot--but not a lot goes a long way in shaping how people feel. . . . We give guidelines, but you don’t throw your brains out the window because they’re there.”
In truth, 3M’s innovation infrastructure is remarkably elegant and simple. In practice, it’s far less complex than the “new product development programs” and formal “research and development review processes” that infest most large companies. Where most companies try to plan for and dictate innovation, 3M’s system is designed to let it evolve naturally. A few simple rules create a healthy innovation environment.
For example, managers are told that new products are expected to account for at least 25% of their division’s revenue every five years. What’s more, researchers and technical people are encouraged to spend up to 15% of their time on projects that they’re personally interested in. Most importantly, there is no single source of innovation funding at 3M. If your idea is rejected by one part of the company, you’re free to peddle it to another.
The interplay of these guidelines creates what is essentially an internal market for innovation. Turn down too many ideas and your division doesn’t meet 3M’s new product criterion. Fund too many new projects and you drain resources from the core business.
Similarly, company entrepreneurs must decide whether to risk their reputations on new business ideas or simply try to innovate within an existing business. With more than 80 years of experience in fostering innovation, 3M now has dozens of core businesses.
“It’s really a balance issue,” DiSimone says. “We want to get financial results by doing the non-obvious, but we also want to retain the vitality of the core business.”
To be sure, 3M insists that innovative ventures meet certain financial standards. But DiSimone stresses that innovation and finance are treated as equals: One is not the servant of the other.
Of course, there’s no sure way of knowing if 3M’s corporate culture has enabled innovation to flourish at the company, or whether market forces have played a bigger role in shaping 3M’s culture.
Regardless, it’s surprising that most top managers seem more comfortable imposing “quality” on their workplaces than encouraging marketplaces for innovation. It’s particularly surprising given that recent history--and 3M’s experiences--seems to show that free markets tend to outperform the other kind.
