Integrating Strategy Innovation Into 3M
3M’s challenge was to raise the bar for innovation. They were experts at incremental innovation and incremental growth, yet what they wanted was not incremental growth, but breakthrough. 3M approached us and Bill Coyne, Chief Technology Officer, retained us to move the Pacing Program to Pacing Plus, and design the architecture for the Pacing Plus process.
Leading into our work with Bill Coyne, we conducted a cultural assessment of 3M’s practice of innovation.
The integration of strategy innovation into a corporation must begin with a management mandate. Because senior leadership is responsible for the corporate strategy, they must initiate anything that helps feed the process of strategy creation. In addition, senior management has the ultimate responsibility for the corporate infrastructure. Changes in the infrastructure that will be required for strategy innovation must have the proactive and visible support of the senior management group.
What form should this ‘‘management mandate’’ take? We believe that management should not mandate a process for strategy innovation, but should mandate the desired output.
Employees in many corporations have been inundated with processes over the last several decades. In an effort to streamline operations and increase the bottom line, management has mandated quality control, reengineering, Six Sigma, and many other internal processes. The goal for strategy innovation is not to have employees implementing a new process. The goal should be focusing on an output—a portfolio of viable new growth opportunities for the company.
Therefore, we recommend that the management mandate be for a specified outcome of a strategy innovation process. We most admire how the management mandate was carried out at 3M under the leadership of CEO Desi DeSimone and Chief Technology Officer Bill Coyne. When Coyne became CTO of R&D for 3M in the mid 1990s, he began looking for ways to raise the level of innovation in the company. As he talked with people across the business units and laboratories of 3M, he discovered that there were many exciting new technologies that were languishing in the labs because higher priorities were being placed on a large number of lower-risk line extension products.
Although 3M had successfully evolved an innovation culture that was aggressively proactive and not constrained by a corporate ‘‘immune system,’’ still it required fine-tuning to increase the emphasis on the non-incremental to breakthrough opportunities. Coyne explained,
Knowing that the depreciation rate of technologies was increasing, Coyne searched for a way to stimulate the development and introduction of these technologies to the marketplace.
Building off a previous program already in place, Coyne created what he called Pacing Plus programs throughout 3M. Pacing Plus was an attempt to find one or two products or new business platforms in each business unit that were strong enough to make a significant impact on the market. Specifically, Pacing Plus programs were defined by the following characteristics:
- Capable of ‘‘changing the basis of competition’’ in a market
- Projected to generate $100+ million in revenues
- Global in scope
- Able to leverage a proprietary 3M technology and would change the basis of competition
Proposals for Pacing Plus programs poured in and were given a strict review to determine if they were of Pacing Plus caliber. Not all the business units were able to identify one or two programs to meet the corporate goal and were instructed by management to go back and ‘‘try harder.’’ Those that qualified were then provided with corporate resources to support them. Coyne designated nearly 20 percent of the total corporate R&D budget to helping business units develop and get these Pacing Plus programs to market. In addition, they would get priority allocation of resources from the corporation for engineering tech center support. With this assist, business units were able to develop their higher-volume, higher- risk programs to help break the cycle of reliance on incremental line extensions to meet yearly growth targets. Without this support, the business units were reluctant to support these programs because of the longer time lines and greater risk to the company.
One of the first Pacing Plus programs to reach the market in 1996 was Dual Brightness Enhancement film, which increases the brightness of LCD screens in laptops and other electronic displays. A year later, the 3M Pharmaceuticals Division introduced Aldara, an immune response modifier in cream form for the treatment of genital warts. In 1998, CEO and board chair Desi DeSimone announced that ‘‘Pacing Plus programs have the potential to reach over $6 billion of annual sales at maturity.’’ Although current 3M CEO Jim McNerney is using a different approach to innovation, his corporate R&D commitment to the development of innovative new technologies at the business unit level increased from 20 percent to 30 percent. While the form of strategy innovation initiatives will change, as the market needs change, 3M’s management mandate for innovation will continue.
In addition to stating the desired output of strategy innovation, the management mandate should include a tangible infrastructure change, clear accountability for results, an impassioned appeal, and the identification of a strategic frontier.