Case Study an Analysis of 3m - the Innovation Company

Case study An analysis of 3M, the innovation company

Introduction

Any review of the literature on new product development and innovation management will uncover numerous references to 3M. The organisation is synonymous with innovation and has been described as 'a smooth running innovation machine' (Mitchell, 1989). Year after year 3M is celebrated in the Fortune 500 rankings as the 'most respected company' and the 'most innovative company'. Management gurus from Peter Drucker to Tom Peters continually refer to the company as a shining example of an innovative company. This case study takes a look at the company behind some of the most famous brands in the marketplace, including Post-it® Notes. It examines the company's heritage and shows how it has arrived at this enviable position. Furthermore, the case study attempts to clarify what it is that makes 3M stand out from other organisations.

Background

Originally known as the Minnesota Mining and Manufacturing Company, with its headquarters in St Paul, Minnesota, 3M was established in 1902 to mine abrasive minerals for the production of a single product, sandpaper. From these inauspicious beginnings, the company has grown organically, concentrating on the internal development of new products in a variety of different industries. The latest review of the company's position reveals that it manufactures over 60,000 products, has operations in 61 countries, employs 75,000 people and has achieved an average year-on-year growth in sales of 10 per cent (see Figure 16.10). Its products include Scotch adhesive tapes, fibre-optic connectors, abrasives, adhesives, floppy disks, aerosol inhalers, medical diagnostic products and Post-it Notes.

3M gave the world 'wet or dry' abrasives, which did so much to reduce the incidence of respiratory disease in the 1920s. It invented self-adhesive tape in 1925, light-reflective materials in the 1940s and pioneered magnetic recording and photocopying. This heritage established the technology from which many of its products are still derived. To reinforce this impressive performance, 3M is consistently ranked among the top 10 of America's most admired companies in the US journal Fortune, in its annual review of the top 500 companies in the United States. 3M is a large and unusually diverse company.

The 3M approach to innovation

Figure 16.10 3M sales over the past five years

Source: Compiled from data from 3M Corp (2007). Financial results from 3M international web page: www.3m.com.

Many writers, academics and business leaders have argued that the key to successful innovation is good management (Henderson, 1994). Arguably, this is precisely what 3M has mastered. A closer inspection, however, will reveal that the company has combined a variety of management techniques, such as good communications and the setting of clear objectives with a company culture built on more than 90 years of nurturing ideas and fostering creativity. It uses a combination of structured research and individual freedom to explore ideas by allowing research scientists to spend 15 per cent of their time conducting projects of their own choosing. It is a unique combination of activities that is, by definition, difficult to replicate. They are described in this case study under the following headings:

* 1 Company heritage and culture

* 2 The demand for innovation

* 3 Freedom for creativity

* 4 Tolerating failure

* 5 Autonomy and small businesses

* 6 High profile for science and technology

* 7 Communication and technology transfer

Company heritage and culture

Through a combination of formal and informal processes, the company has developed a culture devoted to creating new products and building new businesses. This is partly based on the simple idea of hiring good people and trusting them. Indeed, this is the first goal that is stated in 3M's formal principles of management: 'the promotion of entrepreneurship and the insistence upon freedom in the workplace to pursue innovative ideas' (Osborn, 1988: 18).

The demand for innovation

While the sales performance in Figure 16.10 is impressive, it conceals an important statistic; that is, 30 per cent of the company's sales come from products that are less than 4 years old. Indeed, this is a business objective that every 3M business manager has to try to achieve. What this means is that these business managers are under pressure to ensure that not only do they develop new products but that these new products will eventually represent 30 per cent of the business's sales. This objective has been effectively communicated throughout the organisation and is now ingrained within the management style and part of the culture of the company. Hence, the search for new ideas is part of daily activities.

Senior managers from other large manufacturing companies would rightly argue that a similar percentage of sales within their own companies comes from products less than 4 years old. However, the difference between 3M and other organisations is that 3M has developed this approach over many years and has worked hard to ensure that developing new products is much higher on the agenda in management meetings than at other companies. Moreover, the success of the approach is due to the continual reinforcement of the objective. Indeed, the performance of individual business managers is partly judged on whether they are able to achieve the objective.

The 30 per cent objective was first introduced in the 1980s when 25 per cent of sales had to come from products less than 4 years old. This was altered in 1992 to 30 per cent. 3M has recently added another goal, which is to ensure that 10 per cent of sales come from products that have been in the market for only one year.

Freedom for creativity

Scientists and engineers are given time to work on projects and ideas that they consider to be of potential interest to the company and 15 per cent of an individual's work week time may be dedicated to such activities. This is not exclusive to 3M and is common practice in most large R&D laboratories. None the less, it is an effective method of providing room for creativity and another way of showing that the organisation