Case-Study: 3M – Culture and Innovation

3M3M is an American multinational conglomerate well-known for its innovative products, ranging from everyday ones such as the Post-it note and Scotch tape, to more sophisticated ones such as the first electronic stethoscope. Long before Google made this practice popular, 3M let its researchers use up to 15% of their time to pursue their own ideas. It lets peers award each other annual Genesis Grants, amounting to as much as $100,000, to company scientists for crazy research projects.

However, in 2007, BusinessWeek asked whether efficiency was stifling creativity at 3M through the introduction of Six Sigma, a system that was meant to rigorously measure so as to reduce waste, inefficiencies, and variation. The R&D function at 3M, which was used widely to operate, found that they had to submit their processes to a sped-up and systematized process that was more predictable and incremental. The results were noticeable. In 2004, 3M was ranked No. 1 on Boston Consulting Group’s Most Innovative Companies list. It dropped to No. 2 in 2005, to No. 3 in 2006, and down to No. 7 in 2007.  “It’s really tough to schedule invention,” said Craig Oster, a veteran 3M mechanical engineer.

In 2010 CNN penned an article, “3M’s innovation revival,” which profiled the switch in culture that they went through from Six Sigma to a much more open, free and long-term-focused culture. The percentage of 3M’s revenue from products introduced in the past five years is back to 30%.

In 2009, it brought in $23.1 billion in revenue and $3.2 billion in net income, placing 3M at No. 106 on the Fortune 500. It has also recovered nicely from the recession. Sales grew 21% and net income 43% in the first half of 2010. The stock? Up about 20% in the past 12 months. The company’s shares have consistently outperformed the S&P 500 and other conglomerates, including GE. Says then- CEO George Buckley: “The magic is back. It is an absolute joy to behold.”

HOW analysis

3M’s journey is a classic example of how the organizational model of “informed acquiescence,” which is driven by predictable procedures and rules, achieves efficiency at the expense of human innovation. 3M gave its researchers freedom from short-term pressure and deadlines, which opened up new vistas of innovation and improved financial performance as well. This example is in accordance with the findings of our Freedom Report, a statistical study of over 800 companies, which shows that high-freedom companies are 20 times more likely to experience high levels of innovation than their counterparts.

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