Monday, July 23, 2012

3M Embraces Open Innovation

What so you think happened to a company that began by mining stone from quarries for use in grinding wheels over a century ago? Would you believe that same company today has over 76,000 employees, 55,000 products, and operations in more than 70 countries? Over the past century 3M has created a vast array of amazing products that are now household names. For example, any other company would have long discarded an adhesive that did not perform its job of sticking things together and would have recycled its yellow scrap paper; however 3M took those two ingredients and created Post-It notes.

But even 3M is not immune to challenges in making sure that it continues to be an innovation leader. For years 3M prided itself on at least 33 percent of its sales from products released in the past five years. Today, 3M struggles to keep that level at 25 percent.
Just over a decade ago, 3M tried to fix the problem by hiring James McNerney of GE fame as the new CEO on December 5, 2000. Not surprisingly, the biggest change he introduced was with GE's Six Sigma program with the goal of decreasing production defects and increasing efficiency. Wall Street loved his changes as 3M's lackluster stock jolted back to life and McNerney won accolades for bringing discipline to an organization that had become inefficient and sluggish.

Sadly, innovation at 3M, however, did not come back. I document the case study in my book, Living in the Innovation Age (See the side box - When Good Metrics Go Bad).

Well, 3M has since abandoned its rigorous Six Sigma based approach to innovation in favor of one based on openness and collaboration. Principle #4, Innovation Seeks to be Free, in my book discussed two mainstream techniques that are based on such openness, transparency, and collaboration. 3M's approach is based on what is referred to as Open Innovation, in which ideas are encouraged from everyone and everywhere, inside and outside the organization. Fred J. Palensky, Chief Technology Officer at 3M, recently discussed 3M's Open Innovation initiatives in an interview in Strategy+Business magazine where he provided an example of an entirely new kind of sandpaper that came about as a result of Open Innovation. The mineral technology came from the abrasives division, some of the shape technology came from optical systems, coating technologies came from the tape division, and mathematical modeling and fracture analysis came from the corporate research center. Altogether, the abrasives division used seven different technologies to create the product, only two of which came from the division itself, which is a testament to the power of Open Innovation. Of course, Open Innovation is only truly possible in the presence of a highly collaborative culture and innovation-focused leadership. I discuss both of these concepts in Chapter 7 of my book.

The Bottom Line - 3M owes its success to innovation. Yet, just a few years ago, it was struggling in this very core competency. Experts agree that the drop in innovation was not surprising. Efficiency programs such as Six Sigma are designed to reduce variation and eliminate defects. But these types of initiatives can have an adverse effect on creativity and innovation, both of which thrive in an environment where failure and risk taking are tolerated, encouraged, and even celebrated. Not surprisingly, 3M’s current CEO cut back many of McNerney's innovation initiatives and in fact, has gone in an opposite direction of Open Innovation, which is actually much better suited to 3M's innovation culture.

No comments:

Post a Comment