A soft turning in the begining of the 21st Century - Six Sigma is not a difficult transition

Interview with Inge G. Thulin, 3M Vice-President, responsable for all Europe and Middle East

3M was founded in June 1902. 100 years afterwards it is one of a few examples of a hall of famous living companies in Arie de Geus' concept. In this interview with the swedish Inge G. Thulin, VP of 3M, responsable for all Europe and Middle East, we try to understand its key advantages and the new era after a "stranger" (coming from outside, from GE's Jack Welch culture) was invited to the leadership.

Interview by Jorge Nascimento Rodrigues, editor of www.gurusonline.tv
© 2002

3M Key ideas

- Giving customers what they need, whether these products be based on articulated or unarticulated needs
- Normal company R&D plans prevail with product development
- 20 percent of its R&D budget is spent in its 14 technology centers. They focus on longer term technological developments for new markets that can take five to 10 years that division labs cannot
- Networking and communications are important to knowledge management
- Use of a knowledge management data base to prioritize data, manage projects and allocate resources - all with the intention of improving organic growth
- It can create a technology for use in one product area, and then find ways to use it in a completely new, non-related area
- Markets of the future: nanotechnology, organic electronics, biotechnology, advanced polymers and radio frequency identification
- It expects innovation to occur at every location, by every individual and in every market. It's not exclusive to 3M headquarters
- Products developed for a current market occur faster than for a new market
- Research programs are prioritized into three tiers: tier one - top ten for the market center; tier two - next impactful programs; and tier three - other research projects

What's the main secret of longevity of 3M - the 15% rule? The obsoletization of "old" products? the conglomerate of diverse competences in a single company? the so low turnover of 3M people?

The secret? Giving customers products they need, whether those products be based on articulated needs or unarticulated needs. It's important to recognize the difference. Articulated needs come directly from the customer; unarticulated needs are based on technologies 3M has developed and recognizes potential applications in the marketplace. Innovation needs to balance between markets we serve today and new markets. Giving customers what they need is key to 3M's longevity.

3M new products came, in average, more from the 15% personal pursue of new ideas and from Genesis Grants, OR from the normal company development plans?

New products come from both sources, but primarily through company strategic plans. 3M talks about products developed under the 15 percent rule, because it's interesting and unique to 3M. But normal company plans prevail with product development.

And, in average, 3M new products came from random happy accidents OR from normal company planning?

Products come mainly from company planning or planned innovation, i.e., market-directed innovation.

CASE STUDY: A "SON" OF THE TECH FORUM - the 3M Multilayer Oprical Film

How 3M implements knowledge management in a so vast company?

Both networking and communications are important to knowledge management. An example is Tech Forum. This formal program enables scientists to get together regularly to exchange ideas. Tech Forum events allow the R&D community to keep up to date on 3M research in other labs; learn about new discoveries; interact with colleagues; and transfer knowledge. One example of this is the creation of 3M(tm) Multilayer Optical Film, whereby a scientist with expertise in laser physics connected with another scientist at Tech Forum, who was expert in multi-structuring. Today, that product is used in diverse markets, ranging from computer display screens to automobile windshields. Besides Tech Forum, 3M uses a knowledge management data base to prioritize data, manage projects and allocate resources - all with the intention of improving organic growth.

CASE STUDY: MICROREPLICATION TECHNOLOGY - FROM LIGHT MANAGEMENT TO SANDPAPER AND BIOMEDICAL APP

What's the distinctive feature of a company with more than 50000 products in a so diverse matrix of fields and markets?

3M is differentiated by the fact that it can create a technology for use in one product area, and then find ways to use it in a completely new, non-related area. An example of this is microreplication. This light management technology was first used in overhead projectors and in highway traffic signs. Today, microreplication is used to control the surface of sandpaper, and also in microfluidics for biomedical applications.

What are the emergent new markets for 3M strategy in a 5 years time horizon?

One must understand 3M is in almost every market today - its vast technology base applies to many markets. Opportunities for the future lie with nanotechnology, organic electronics, biotechnology, advanced polymers and radio frequency identification.

As we know management style, history and company culture are important to consider when we "import" concepts and tools from other management experiences. What kind of special adjustments were necessary to apply Six Sigma methodology to 3M?

Six Sigma is not foreign to the company. It's about continuous improvement. Our technical people embrace data and processes - already familiar to R&D. Six Sigma is not a difficult transition. Functioning at a team level on special programs was an easy and necessary evolution. 3M employees adopted it quickly, because it's fact-based and logical.

How 3M see the development of strategic 3M Centers of Innovation for instance in Europe? 3M intends to follow the traditional multinational strategy OR values knowledge from other 3M locations outside the hq?

3M expects innovation to occur at every location, by every individual and in every market. It's not exclusive to 3M headquarters. Locations may do work differently -- modify a product to meet customer needs locally, but international locations also develop new products and technology. Satellite technology centers for adhesives, displays and nonwovens already exist in Europe and Japan. Technologies developed at these locations will move into product development in the U.S.

How long does it take for an innovation to become a commercially available product or service?

This depends on the market. Articulated innovation is faster than unarticulated innovation. Products developed for a current market occur faster than for a new market. A pharmaceutical product, like Tambocor, took nearly 20 years to commercialize. Consumer products take much less time.

What is 3M's guideline on time spent on research?

3M spends 20 percent of its R&D budget in its 14 technology centers. They focus on longer term technological developments for new markets that can take five to 10 years that division labs cannot. Even when a revolutionary technology is created, the company continues to refine and develop it. For example, a backbone of 3M - adhesives - used in Scotch cellophane and masking tapes, evolved to VHB tape - a high-tack, heavy-duty adhesive tape used to replace rivets in automobiles and aircraft.

How many research programmes are being started up each year?

There are many research program. With 14 technology centers and a hundred people doing research in each one, research programs are prioritized into tier one - top ten for the market center; tier two - next impactful programs; and tier three - other research projects.

If there are differences in time spent for research, how are they being defined? With other words: what factors determine that a certain project gets X research budget and Y research time?

Through our knowledge management systems, we analyze data and identify top tier one projects for each market center. Tier two projects are the next most important; these can possibly move into tier one status. Other research is classified as tier three. Business units prioritize their best growth opportunities. Jointly the executive vice presidents and general managers in each market center select the top ones.

How 3M see the development of strategic 3M Centers of Innovation for instance in Europe? 3M intends to follow the traditional multinational strategy OR values knowledge from other 3M locations outside the hq?

We operate 3M subsidiaries in over 60 countries and sell our products in more than 200. We have laboratories in 31 countries outside the U.S. and have approximately 2,600 employees engaged in technical service, product modification and product development. In Neuss, Germany, we have added a new European Customer Technical Center, home to more than 400 professionals working directly with customers for design and training. We also operate manufacturing and converting operations at nearly 90 sites around the world.

How 3M evaluates the fact that for example for the last 5 years 3M stock price had risen only 35% while the S&P 500 increased 60% ?

In the past years the high tech markets heavily influenced the trend of the stock markets. Since 2001, when the new economy hype disappeared, 3M started to outperform the S&P. additional to this, recent events with big companies like ENRON and TYCO have created a lot of scrutiny around big companies on a global basis. Investors now in search for sustainability have rediscovered 3M thanks to its credibility and the initiatives that have been launched.

Interview June 2002

EXTERNAL VOICES

3M is an American multinational but not a typical one

a short essay by Peter Cohan

Peter S. Cohan & Associates
Two Turner Ridge Road
Marlborough, MA 01752
E-mail: peter@petercohan.com
Http://petercohan.com

3M started out in 1902 making sandpaper and today makes 50,000 products including Scotch tape, Post-it Notes, Scotchgard fabric protectors, respirators, optical films, insulation, drugs, and fuel cells. 2001 revenues totaled $16 billion.

Much of 3M's culture comes from its former President and Chairman of the Board William L. McKnight. According to McKnight, "As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those poeple to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way.
"Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs.
"Management that is destructively critical when mistakes are made kills initiative. And it's essential that we have many people with initiative if we are to continue to grow."

What strikes me about 3M is its ability to retain support for innovation despite its size and history. A story from 1916 helps illustrate the value that 3M places on disciplined financial management, listening to customers, and developing solutions to their problems.
It was 10 a.m. on August 11, 1916. 3M executives were gathered to hear 3M president Edgar B. Ober. "Gentlemen, this is the day we've been waiting for, the day some of us wondered would ever come. We're out of debt, and the future looks good. Business has more than doubled in the past two years, and for the first time, we'll have enough left after expenses to pay a dividend."
The credit for this turnaround, a struggle since the company was formed in 1902, was due in large part to a product that was an extension of 3M's original interests in abrasives. Launched in 1914, a new abrasive cloth was made with aluminum oxide, and branded Three-M-ite. Three-M-ite did a better job of cutting metal than natural mineral. The automotive and machine tool industries were Three-M-ite's biggest buyers until America's entry into World War I, when large quantities of sandpaper were needed to build automobiles and other vehicles used in the war effort.
The 3M product would be even more successful when, quite by accident, plant superintendent Orson Hull drew the sheet of abrasive cloth over the sharp corner of an iron bar and broke down the adhesive backing in a way that made the sheet more flexible. Now production workers could get at otherwise inaccessible places on car parts they were sanding. Curved metal surfaces could be sanded with greater efficiency.

The key to 3M's longevity has been its ability to repeat this pattern of taking advantage of happy accidents to develop products that meet big needs and therefore lead to new revenue and profits.
3M rule of 15% for personal research.

A belief in encouraging experiments and discovery has fostered the innovative products and technologies for which 3M is known. 3M has many programs that encourage employees, including the 15 percent rule, which allows employees to spend part of their work time exploring experiments.

In addition, technical employees can apply for 3M Genesis Grants, which provide corporate money for innovative projects that are not funded through standard channels.

Shigeyoshi Ishii's new adhesive is one of many examples of products that emerge from 3M's culture of innovation.
"I had one dream when I joined 3M in 1987," explained Ishii, senior chemist, Electronic & Electronic Handling & Production Products Division, Sumitomo 3M. "That was to develop a new product that would have a major sales impact. That desire has always guided my work."
Six years later, his opportunity arose. Semiconductor-package manufacturers told Ishii that they were searching for a low-cost adhesive that could reliably bond organic substrates to inorganic materials such as metal and silicon.
Using self-directed time, Ishii began developing an adhesive with superior flexibility, heat resistance and out-gassing characteristics along with high-performance bonding. He overcame many challenges including the need for specialized laboratory facilities. "I had to coordinate my research needs with the equipment availability at a vendor and a public technology center. It was difficult but the work got done."
Ishii also credited the support of his fellow 3Mers throughout the years of research. "I drew on the advice and assistance of a number of 3M specialists. No one turned me down-they all made time for my project. I had all the encouragement I needed to pursue my innovation."
Ishii's unique semiconductor package adhesives have had the market impact he dreamed of when he joined 3M. They also helped their inventor receive the 2000 3M Innovator Award.
According to Ishii, innovators need to take a hands-on approach to research. "Past experiments offer important information," he allowed. "But you shouldn't rely on other people's data when that data is critical to determining the validity of your own new idea. The first step in true innovation is to plan your own experiments and confirm your own outlook. That's when you are in the strongest position to convince your colleagues to support your work."

At the core of 3M's 15% rule is an important insight into creative people - they thrive on a blend of time spent musing on a problem by themselves along with the need for help and recognition from colleagues whom they respect. 3M's ability to drive innovation over 100 years reflects its ability to attract such people and create an environment in which they can thrive.

Over its history, 3M's ability to profit from happy accidents has led it into a broad range of industries. As a result, 3M enjoys market leadership in many of the segments. Its current organization structure enables 3M to focus its new product development for specific markets while sharing corporate resources in a fashion that enhances 3M's efficiency without sacrificing the delivery of services to the operating units. 3M applies these capabilities to markets in 60 countries and it earns half its revenues outside the U.S.

3M's competencies are focused around six markets:
· Industrial Markets: Industrial products include coated and non-woven abrasives, adhesives, pressure-sensitive tapes, and specialty products;
· Transportation, Graphics and Safety Markets: This segment provides reflective sheeting, high-performance graphics, respirators, automotive components, security products and optical films;
· Health Care Markets: Major product categories include medical and surgical supplies, infection prevention, microbiology, health information systems, pharmaceuticals, drug delivery systems, dental and orthodontic products, and mechanical and tape closures for disposable diapers;
· Consumer and Office Markets: Major consumer and office products include Scotch brand tapes; Post-it brand Note products, such as flags, memo pads, labels, Pop-up notes and dispensers; home care products, energy control products; nonwoven abrasive materials for floor maintenance and commercial cleaning; floor matting; and home improvement products, and filters for furnaces and air conditioners;
· Electro and Communications Markets: This segment serves the electronics, telecommunications and electrical markets. Major electronic and electrical products include packaging and interconnection devices; insulating materials, including pressure-sensitive tapes and resins; and related items; and
· Specialty Material Markets: Major specialty materials include protective materials for furniture and fabrics; firefighting agents; tubes and gaskets in engines; engineering fluids; and high-performance fluids used in the manufacture of computer chips, and for electronic cooling and lubricating of computer hard disk drives.

3M invited for the first time an outsider for CEO.

The arrival of 3M's current CEO, Jim McNerney, from GE must have come as quite a shock to 3M employees. As McNerney often repeats, there is only one of him and 75,000 3M employees so he must tread carefully in his efforts to change the culture. Undoubtedly McNerney was brought in to improve 3M's performance when it was clear that 3M had not developed a leader who would be capable of delivering the results that its shareholders expected. For example, for the five years preceding McNerney's tenure, 3M's stock price had risen 35% while the S&P 500 had increased 60%.

From GE, McNerney has brought the ability to manage corporate-wide initiatives that help invigorate employees and improve corporate performance. Under McNerney's direction 3M launched five initiatives in 2001 that contributed to 3M's bottom line:
· 3M's Indirect-Cost Control initiative saved over $500 million compared with 2000. 3M expects another $150 million of savings from this initiative in 2002;
· 3M's Sourcing initiative saved over $100 million in 2001, with another $150 million expected in 2002;
· eProductivity, where 3M believes it has a significant digitization opportunity, and expects $50 million of benefits in 2002;
· 3M Acceleration, where R&D resources are reallocated to larger, more global projects; and
· Six Sigma, which focuses on higher growth, lower costs and greater cash flow, and from which 3M expects over $200 million of operating income benefits in 2002.

Most large companies have a hard time spurring innovation and surviving for 100 years. Although it is possible to describe the principles that companies like 3M use to spur innovation, other companies find it very difficult to put the principles into action. Nevertheless, 3M is a great global example of what other companies can aspire to accomplish. Whether its new CEO can refine 3M's way of operating and improve its financial performance over the next 15 years remains to be seen. He seems to be off to a good start.

Innovation is the normal way of life at 3M

a view from an historian, James (Jim) W. Cortada

Author of business history books, Director, CSP Programs, Sales Operations, IBM Corporation
3113 West Beltline Highway, Madison, WI 53713
E-mail: jwcorta@us.ibm.com

There are several factors that make 3M a living company. First, it has created a management process and culture that permits innovation to occ ur and be rewarded at all level of the organization. Second, it has recognized that innovation (new products) is the future of the company and therefore continues to kill old products, improve others, and bring to market additional ones. It has built processes and capabilities around each of these points.

Innovation comes from several sources. Existing product managers are required to improve or replace existing products so they work methodically to do that, and are held accountable. People are given time and can apply for resources to pursue new ideas that are either in or outside of the normal product development plans. Their failures are not punished, their successes are celebrated. This has been going on now for so many years that people find innovation the normal way of life at 3M. 3M's financial success in the marketplace has also made it possible to afford the cost s of innovation.

3M has long practiced what many call Knowledge Management, which includes sharing of information, having IT infrastructure to communicate, house, and share data; communities of practice who work and collaborate together on research and product development. I suspect that is what is going on here.

The challenges are the same as they have always had. Products become commodities and therefore threaten profits, which is one major reason why creating new products is so important at 3M. Coming up with new products that rely on a rapidly changing body of scientific knowledge about adhesives remains a relentless pressure on what over time has become a very high-tech company that relies on scientific and engineering capabilities.

Moving from a craft style of innovation development to a more organized industrial-model approach that is systematized will remain a challenge, as it does for its competitors and others in such industries as pharmaceuticals and software.