After a several year funk, they’re back. They being 3M. Their core business model for decades has famously been to out-innovate their competitors. (The headline on their website is “Innovative Technology for a Changing World.”) They pioneered the idea of giving their people up to 15% of their time to work on things of interest to them. The key metric for this business model is revenue from new products (defined as introduced in the last five years) at least equal to 30% of total revenue. It dropped to 21% by 2005.
In an earlier post I discussed the root causes of this performance problem. (I also discussed some of the misconceptions of 6-Sigma in that post as well.) Under their new President, George Buckley, they have returned to hitting the 30% metric. To underscore the commitment to the business model, R&D investment held steady during the “great recession.”
Buckley appears to recognize that 6-Sigma is not the right tool to improve the performance of the front-end of the innovation process and has removed its use from the R&D labs. And 3M has a decidedly different view of “innovation” than many other companies that have innovation as their core business driver. 3M is not about inventing the next breakthrough. It’s about inventing hundreds of incremental or significant products.
Other than the disconnect during the McNerney years (which did have the upside of whipping the company back into shape), this business model has worked for them for decades.
Is your business model robust and right for today’s market, and can you execute against it?