INSIDE INNOVATION -- IN DEPTH
By Brian Hindo
At 3M, A Struggle between Efficiency and Creativity
How CEO George Buckley is managing the yin and yang of discipline and imagination Not too many years ago, the temple of management was General Electric (GE ). Former CEO Jack Welch was the high priest, and his disciples spread the word to executive suites throughout the land. One of his most highly regarded followers, James McNerney, was quickly snatched up by 3M after falling short in the closely watched race to succeed Welch. 3M's board considered McNerney a huge prize, and the company's stock jumped nearly 20% in the days after Dec. 5, 2000, when his selection as CEO was announced. The mere mention of his name made everyone richer. McNerney was the first outsider to lead the insular St. Paul (Minn.) company in its 100-year history. He had barely stepped off the plane before he announced he would change the DNA of the place. His playbook was vintage GE. McNerney axed 8,000 workers (about 11% of the workforce), intensified the performance-review process, and tightened the purse strings at a company that had become a profligate spender. He also imported GE's vaunted Six Sigma program—a series of management techniques designed to decrease production defects and increase efficiency. Thousands of staffers became trained as Six Sigma "black belts." The plan appeared to work: McNerney jolted 3M's moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish. Then, four and a half years after arriving, McNerney abruptly left for a bigger opportunity, the top job at Boeing (BA ). Now his successors face a challenging question: whether the relentless emphasis on efficiency had made 3M a less creative company. That's a vitally important issue for a company whose very identity is built on innovation. After all, 3M is the birthplace of masking tape, Thinsulate, and the Post-it note. It is the invention machine whose methods were consecrated in the influential 1994 bestseller Built to Last by Jim Collins and Jerry I. Porras. But those old hits have become distant memories. It has been a long time since the debut of 3M's last game-changing technology: the multilayered optical films that coat liquid-crystal display screens. At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter. Those results are not coincidental. Efficiency programs such as Six Sigma are designed to identify problems in work processes—and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company's culture, as they did at 3M, creativity can easily get squelched. After all, a breakthrough innovation is something that challenges existing procedures and norms. "Invention is by its very nature a disorderly process," says current CEO George Buckley, who has dialed back many of McNerney's initiatives. "You can't put a Six Sigma process into that area and say, well, I'm getting behind on invention, so I'm going to schedule myself for three good ideas on Wednesday and two on Friday. That's not how creativity works." McNerney declined to comment for this story. PROUD CREATIVE CULTURE The tension that Buckley is trying to manage—between innovation and efficiency—is one that's bedeviling CEOs everywhere. There is no doubt that the application of lean and mean work processes at thousands of companies, often through programs with obscure-sounding names such as ISO 9000 and Total Quality Management, has been one of the most important business trends of past decades. But as once-bloated U.S. manufacturers have shaped up and become profitable global competitors, the onus shifts to growth and innovation, especially in today's idea-based, design-obsessed economy. While process excellence demands...