As part of Booz & Company’s annual study of the innovation strategies of the world’s highest-spending companies on R&D, the firm conducted a survey that asked senior innovation executives to vote for the world’s most innovative company. (See “The Global Innovation 1000: How the Top Innovators Keep Winning,” by Barry Jaruzelski and Kevin Dehoff, s+b, Winter 2010.) The third most frequently cited innovation leader was 3M, right behind Apple and Google. That came as no surprise, given 3M’s track record of developing smart, successful new products.
3M’s ability to keep churning out new innovations is very much dependent on the company’s long-standing commitment to open innovation, both internal and external. We recently spoke with Fred J. Palensky, 3M’s chief technology officer, who discussed the many ways his company creates and develops ideas through open innovation, and explained why its highly collaborative culture and innovation leadership are essential to the process.
S+B: Can you describe how 3M’s open innovation processes are organized?
PALENSKY: The reason 3M is what it is today — a company that has developed organically across consumer, electronic, transportation, industrial, safety, security and display, and electronic markets — is our shared, leveraged technology and innovation model. We assume that technologies and technological capabilities have no boundaries or barriers. Any product or manufacturing technology is available to any business in any industry in any geography around the world.
As the company’s senior technology executive, I’m responsible for the corporate research laboratories. I represent the entire technical community at 3M, which includes about 10,000 R&D people in 73 labs around the world. About 15 to 20 percent of those people work in corporate research, which is responsible for developing, transmitting, and supporting technologies throughout the company. I also head up the corporate technical operations committee, or CTOC, which ensures the development, health, sustainability, and transmission of 3M’s tech capabilities across all the businesses, geographies, and industries in which we operate.
We have 63 full-scale operating businesses in dozens of industries in more than 70 countries around the world. Each one of those businesses conducts its own research, while maintaining connections with all the other R&D operations throughout the company.
S+B: What enables the cross-pollination of ideas?
PALENSKY: We believe that no one business has everything it needs to conduct business in its marketplace without leveraging the rest of the company. So every single technical employee in the company has dual citizenship — they’re part of a particular business, lab, or country, and part of the 3M global technical community. We don’t restrict people from moving from one business to another, from one industry to another, or across country boundaries. Most of the people who run the businesses, the country offices, and the labs have been in five or six or 10 different parts of the company before. They’ve grown up inside the 3M culture. I myself have been at 3M for 34 years, and I’ve had 14 different jobs in five different industries and three different countries. I like to think of it as a movement of people and ideas that’s not mandated but officially endorsed.
S+B: 3M also has an active external open innovation program. Can you describe it?
PALENSKY: Our corporate labs are continually bringing in new employees and technologies from universities and other sources. And we collaborate closely with customers. We have 30 customer technology centers around the world, where our technical and marketing employees meet with customers and expose them to the full range of 3M technology platforms. We ask them what their technical issues, problems, and opportunities are, and whether any of 3M’s many different technologies can help them. The constant technical interaction is critical in creating new innovations.
S+B: Can you discuss a specific product that arose out of 3M’s open innovation process?
PALENSKY: Really, all of them. To take one example, we just introduced an entirely new kind of sandpaper — shaped, fine-grained, self-sharpening, structured abrasives. 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.
S+B: What role does culture play in sustaining open innovation at 3M?
PALENSKY: I think our success is driven much more by culture than it is by structure or organization. We’ve been practicing open innovation at 3M throughout our history. The company started out making sandpaper, and our salesmen sold our products to all kinds of people. When they visited auto-body shops, they watched workers struggle to paint fine lines and borders. So the salesmen went back to the office and talked about the problem. That was the beginning of our masking tape business. That’s the culture that has sustained us ever since.
But we also actively support that culture. All of our technical people at the corporate labs dedicate about 15 percent of their efforts toward programs, interactions, learning, and teaching in areas outside their particular responsibilities. In addition to the various programs we’re developing at the corporate labs, we are working on more than 300 joint programs with various divisions and businesses. So, in addition to their corporate responsibilities, everyone is also a member of a team that is working alongside division members in either technology transfer or new product development projects.
All of this creates a community of collaboration, and it ensures that everybody has some skin in the innovation game. And because our senior leaders have grown up in this culture, they continue to nurture and protect this highly collaborative, enterprising environment. Cultures are unique and extraordinarily difficult to duplicate. And it takes a real effort to sustain them.
- Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J., and is the global leader of the firm’s innovation practice. He has spent more than 20 years working with high-tech and industrial clients on corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
- Richard Holman is a principal with Booz & Company based in Florham Park, N.J. He is a leader of the firm’s global innovation practice, specializing in fields with highly engineered products, such as aerospace, industrial, and high tech.
- Edward Baker, former editor of CIO Insight magazine, is a contributing editor to strategy+business.
- This interview was originally published as part of “Casting a Wide Net: Building the Capabilities for Open Innovation,” by Jaruzelski and Holman, Ivey Business Journal, March/April 2011.
Innovation, ideas and solutions for a modern world
This Case Study investigates how 3M has developed a culture of innovation that drives new product development throughout its global operations. It examines the process of innovation at 3M and investigates how the company’s workplace culture and management strategies encourage and support staff to be active members of its entrepreneurial culture.
As a result of reading this Case Study students should be able to:
- Discuss the role and importance of innovation and product development at 3M
- Describe how 3M supports a culture of innovation.
- Evaluate the success of 3Ms entrepreneurial culture including the relationship between 3M Australia and DFAT
3M is a global diversified materials science company and a powerful, diverse and integrated enterprise.
What is innovation?
3M prides itself on being a customer-focused organisation.
Developing a culture of innovation
One of the most celebrated aspects of 3M’s entrepreneurial workplace culture is the 15 percent rule that encourages employees to explore and work together to generate ideas.
Creating innovative applications
The Australian passport is the most widely held identity document used in the Australian community.
3M has emerged as a global leader in providing practical solutions and is home to some of the world’s most recognisable brands.
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3M is a global diversified materials science company and a powerful, diverse and integrated enterprise. Although 3M identifies its core competency simply as “applying coatings to backings”, the company’s operations extend far beyond this. 3M, famous for its consumer brands such as Scotch® Tape and Post-it® Notes, also creates thousands of industrial products used by manufacturers and service providers to create their own products.
From its beginnings in 1902 as Minnesota Mining and Manufacturing, 3M has grown to achieve sales revenue of $US25.3 billion and an operating income of $US3.5 billion in 2008. The company has over 79,000 employees with approximately 13 percent employed directly as technical staff. As a truly global presence, 3M services almost 200 national markets, and operates subsidiary companies, such as 3M Australia, in more than 60 countries. Almost 64 percent of 3M’s entire sales revenue originates from international operationsWith a vision “to be the most innovative enterprise and preferred supplier in the markets we serve”, 3M prides itself on its history of innovation – reinforced through its brand promise, “practical and ingenious solutions that help customers succeed”. Key values underpinning 3M’s continual success include its commitment to: • Satisfy our customers with superior quality and value • Provide investors with an attractive return through sustained, high quality growth • Respect our social and physical environments • Be a company employees are proud to be part of. 3M has 45 core technology platforms ranging from adhesives, biotechnology and films through to nanotechnology, optoelectronics and wound management. The 60,000 products developed through these technology platforms satisfy consumer needs in six marketfocused businesses.New product development and innovation are the cornerstones of 3M’s continued success. According to the Australian Bureau of Statistics, innovation is: “The process of introducing new or significantly improved goods or services and/or implementing new or significantly improved processes”. 3M celebrates its long history of innovation by turning innovators into company legends. In 1925, Dick Drew famously visited a customer’s auto production plant and discovered that the growing demand for two-tone cars meant that workers needed a solution to create cleaner paint lines. After some research, and testing, a new product – masking tape – was born. Product development occurs when investment in research and development leads to new and innovative products. This usually involves phases such as idea generation, testing, engineering, prototype creation, commercialisation, manufacturing and marketing. It can take many years for a product to reach the market and product development also represents significant capital investment; hence 3M uses the term, ‘patient money’.
3M adds 500 innovative new products every year to its 60,000+ productline. Many of these products are ground-breaking, newly-invented products, unique in the marketplace and protected by patents.
3M's six businesses
- Consumer and Office: Adhesives and wovens such as Scotch® brand, Scotch-Brite®, Post-it ® and more.
- Display and Graphics: Films for electronic displays, touch screens, reflective materials for highway safety and more.
- Electro and Communications: Electrical tapes, copper and fibre-optic cabling and more.
- Health Care: Medical, surgical, pharmaceutical and dental products and more.
- Industrial and Transportation: Abrasives, specialty adhesives and tapes, as well as automotive, aerospace and marine industrial products and more.
- Safety, Security and Protection Services: Respiratory protection systems, anti-counterfeiting security films, cleaning products and more.
What is innovation?
3M prides itself on being a customer-focused organisation. “We understand our customers’ expectations and make sure that we exceed their expectations…Loyal customers stay with you, are more receptive to new products and recommend you to others.”
The customer-focused organisation is an important part of continuous improvement and Total Quality Management (TQM). A TQM organisation consists of a number of interdependent internal stakeholders or customers. These individuals, groups, departments and units supply to, and rely on, another individual, group, department or unit within that same organisation. These internal customers combine to improve quality throughout all processes and create better quality output for the end-users; the external customers. This philosophy of 3M applies equally to internal customers, demonstrated through the interdependence of its 45 technology platforms and diverse global operations; as well as to external customers.
Each of the three broad categories of innovation applies to 3M.
1. Innovation in goods and services occurs when new and improved goods and services are developed or where new uses are found for existing goods or services. 2. Innovation in operational processes occurs when organisations implement significant positive change in their methods of production of goods and/or services. 3M describes the four fundamental reasons driving innovation as; personal satisfaction, competitiveness, growth and survival. New products are the lifeblood of 3M and the company builds innovation into all of its operations. 3M’s innovation is the deliberate product, “…of a complex set of principles and practices which support and encourage the coupling of technology and creativity to satisfy customer needs.” It is also no accident that 3M, a company driven by cuttingedge technological innovation, believes that successful innovation is in reality accomplished by its people. 3M’s senior management empowers employees to work with determination and imagination to create innovative solutions. Customers are consulted so that they can provide input and feedback to the process of innovation and product development. This commitment to inclusive leadership resulted in 3M ranking No. 1 on Chief Executive magazine’s 2008’s Best Companies for Leaders list. A further strength of 3M’s organisational structure is that 3,000 of their 10,000+ technical employees are located outside the USA. These technical employees work in research-based laboratories in 34 countries or in Customer Technology Centres in 30 countries. The result is a highly-skilled global workforce uniquely positioned to create proactive solutions in response to specific customer needs. This localisation of innovation is demonstrated through 3M’s diverse research and development centres; optical manufacture and testing in Poland, electronics in Japan, water filtration in India and dental products in the UK and other markets. 3M provide locally-based product development resulting in customised solutions that subsequently result in global replication through the entire company.
To support innovation, 3M allocates 6-7 percent of its entire sales revenue ($1.4b in 2008) to research and development. This heavy investment also means that staff can devote 15 percent of their work time to self-directed projects. It is no surprise that the company was ranked World’s 4th Best R&D Company in 2007.
Developing a culture of innovation
One of the most celebrated aspects of 3M’s entrepreneurial workplace culture is the 15 percent rule that encourages employees to explore and work together to generate ideas. Product development is driven by the cross-fertilisation of ideas and new technologies shared across the entire company. “Products belong to divisions, but technologies and ideas belong to the company.” 3M has developed six principles of innovation to support this culture.
Build a Vision Effective leadership means that employees understand the importance of achieving 3M’s vision. Innovation is a cornerstone of 3M’s self-image and the company prides itself on a culture of success stories by celebrating the achievement of its people. The importance of innovation is communicated and reinforced which replicates success. Foresight It is vital to, “…anticipate the structure of the future before it arrives.” 3M can solve articulated needs, whereby the customer knows and communicates what they need; as well as unarticulated needs, whereby 3M proactively provides a solution for a problem that the customers don’t yet realise they have! Going beyond 3M sets goals to challenge their people to strive for significant improvements. One objective is to generate 30 percent of all sales from new products introduced in the past four years. However 3M’s commitment to stretching goals is demonstrated through an additional objective; to cut the time for new products to reach the market by a further 50 percent. Empowerment Back in the 1940s McKnight said, “Hire good people and leave them alone”, and this philosophy is still paramount. 3M’s management believes that employees need freedom to achieve their goals. Empowered employees are given both responsibility and accountability for key tasks. The company trusts employees, provides direction, support and resources, with minimal interference. This collaborative management style is effective when dealing with intrinsically motivated and highly-qualified professionals. Communication 3M feels that successful people need to work with others. Management communicates the vision, employees communicate opportunities to management – the dialogue extends into multiple channels throughout the organisation. 3M use technical forums, trade fairs and conferences to encourage networking and ideas sharing. Staff use part of their 15 percent self-managed time to help people from other areas. Networking occurs internally across platforms and externally through customer feedback and joint ventures. Staff can be transferred locally and globally and apply their particular expertise on projects. This adds value by sharing both expertise and the experience of 3M’s diverse global culture. Rewards and recognition 3M believes that the most effective type of reward is recognition through technical and corporate awards and promotions. 3M’s celebrated Innovator Award is given to individuals who use their 15 percent self-directed work time to develop a new product or technology. The highly prestigious Circle of Technical Excellence honours extra effort, motivation and creativity. 3M have a dual career structure that maintains parity between technical and corporate staff. Outstanding technical employees can be promoted into positions such as Corporate Scientist or they can move into management with the same opportunities for salary, benefits and otherprivileges. This encourages topperformers to stay with the company.
Creating innovative applications
The Australian passport is the most widely held identity document used in the Australian community. Over many decades the Australian Government, through the Department of Foreign Affairs and Trade (DFAT) has built a reputation for producing high quality, innovative passports that are recognised as being amongst the most secure in the world.
Since the early 1980s 3M has worked collaboratively with DFAT to deliver a series of unique laminates that secure the data page against fraudulent alteration. The data page contains the holder’s personal details, signature and facial image. To manufacture security laminates, 3M leverages a range of core technologies and processes including adhesives, vapour coat processing, optics, moulding and specialty materials. In the early 1980s, the practice was to adhere a photograph of the passport holder to the data page and cover it with a security laminate. While best practice at the time, it was open to the risk of fraudulent photo substitution. DFAT, in partnership with 3M, innovatively applied advances in digital printing technology to issue a passport with a colour facial image and signature digitally printed into the passport, a world first in passports. This evolution occurred over three phases, Dawn I, Dawn II and Dawn III. Dawn I was designed to create a passport with a laser printed machine readable zone (MRZ) and was successfully introduced in 1985. It was the first passport in the world to achieve 100 percent reading accuracy in the MRZ and set a new standard. A patent was lodged on behalf of the Australian government to cover what became known as ‘reverse imaging technology’ and 3M were engaged to commercialise the technology. Dawn II used the reverse imaging technology to directly image a black and white photograph into the reverse side of the laminate, a world first for DFAT and 3M. Dawn III built on the technology developed in the preceding phases of the project and culminated in the first passport with the holder’s facial image and signature digitally printed in full colour being issued on the 4th May 1994. The 3M laminate also contained new covert security features including images of the Australian Coat of Arms, which were visible under coaxial light, and three stylised kangaroos securing the signature label and a corner of the facial image. These innovations were another world first for DFAT and 3M and significantly reduced the security risk of photo substitution and data alteration. In 2003, the next generation of 3M laminate allowed DFAT to add the first ‘floating image technology’ seen on passports. Lasers were used during manufacture to create images of kangaroos and emus within the laminate that appear to ‘float’ above and sink below the surface as the page is viewed from different angles. In 2009, the 3M laminate was redesigned and enhanced to incorporate a continuous Australian wave pattern visible only under UV light. Today, this is one of the key features used by border control authorities to validate the integrity of the passport.
3M has emerged as a global leader in providing practical solutions and is home to some of the world’s most recognisable brands.
Although a technologically-oriented company, 3M feels that its success stems from the quality of its people. 3M has a diverse global workforce of naturally inquisitive and highly-trained technical specialists that is supported throughout the entire corporation by a progressive and people-centred management philosophy. 3M delights both in reinforcing the principles laid down by some of its key early executives and also celebrating the ongoing success of its current staff. With a continual emphasis on innovation and product development 3M is committed to finding solutions for its diverse group of customers. Management is also committed to encouraging and supporting staff in their pursuit of excellence. The company attributes much of its success to the 15 percent rule which allows staff to search for proactive solutions for difficult problems. For a company whose core competency might be described as ‘making things stick’, 3M has developed an innovative entrepreneurial workplace culture that its stakeholders seem more than happy to be stuck with.