Abrasion & Adhesion
Innovation at 3M
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Now accepting keynotes for 23Q4-24Q2
Every year, I create three main presentations. For 2023, they are:
Delusions of determinism: Why planning for success leads to failure
Regression toward the meme: Why modern leadership continues to fall into old traps
Under pressure: Retail in a new financial era
If you want to book me for your event, workshop, or corporate speaking slot, just send me an email. To make sure I am available, however, please do so at your earliest convenience; my schedule is filling up fast - and I will be raising my prices at the end of the year.
More information can be found here.
A couple of updates before we go-go
The cardboard mansion lingers. Although our builders are done with what one might call phase one of the kitchen construction project, it is still lacking lamps, a countertop, a tap, a cooker hood, the kitchen table, chairs, and more. Additionally, there are a number of pieces of furniture and whatnot that are meant for the hallway. All of these things, minus the countertop (to be measured/fitted today), have to be stored somewhere. Our living room, for example. And media room. And downstairs bathroom. And upstairs bathroom. And upstairs sauna. And everywhere where there
iswas available space.As mentioned last week, the webinar will take place on Thursday October 26, at 10am CET. We will discuss some of the eye-opening findings of the new book and, for the first time ever, reveal its name. If you want to join, you must reach out before the event via this email, so that we may send you the link to it.
Many of you have already done so, which is lovely to see. Both Steve and I are very much looking forward to hearing your thoughts on what we have to say.
Moving on.
The sticky case of 3M
How process kills innovation
Let me begin, if I may, with a caveat. Case studies are dramatically overrated. More often than not, they amount to little more than wild guesswork by some outside observer sans actual insight into the inner workings of the company in question. Post hoc, they authoritatively determine that what happened was either a) good because of something that they sell, or b) bad because of a lack of something that they sell. It is, of course, self-serving to the point of silliness.
But even when used in more serious terms, such as for educational purposes, case studies lack an acknowledgement of context. Given the complex nature of organizations and markets, the same strategy, even if implemented by the same company, is unlikely to achieve the same results; the context would be different.
Far more valuable, therefore, is if one is able to discern any emergent patterns that hold over a randomized set of subjects (so as to avoid survivor bias in the data). Consequently, even though we are going to look at one firm in particular, most of the conclusions that we draw will (as will become evident) be ones that represent a larger sample.
So. With that throat clearing over yet firmly kept in mind, let us have a look at today’s object of analysis.
For the longest time, 3M was considered a shining beacon of innovation. Seemingly endless column inches were devoted to explaining what companies could learn from its strategy, tactics, philosophies, and culture. From management to mindset, if you wanted to find it, there it was. A classic example of the halo effect in action.
The truth, however, was much simpler. A quick look at the company’s history tells us what the primary reason was: a willingness to create numerous revenue streams, success in doing so, and resilience as a result.
When the business was founded in the early 1900s, its original focus was to mine corundum, a crystalline form of aluminium oxide. It is immensely hard – able to scratch almost any other mineral – and thus frequently used as an abrasive on sandpaper. Alas, it quickly turned out that the mine’s holdings were of anorthosite, a geologically interesting but ultimately commercially useless rock. The company thus moved to Duluth, shifted to other materials, and began researching and producing sandpaper products.
Their second effort turned out to be significantly more successful, and soon, 3M needed to move again (this time to St Paul) in order to facilitate expansion. They began manufacturing other abrasive products, eventually moving into adhesives, creating Scotch tape, Scotch-Brite, and so forth.
That this was a case of what some would call diversification thus appears rather obvious. There was no plan to “focus on mining” or “sacrifice everything else in favor of sandpaper” even though it was lucrative. Instead, 3M experimented with a large number of products under a coherent overall approach. That is to say, they did not try everything under the sun, but what made sense to them under their strategic umbrella.
What is open to significantly more interpretation is how the firm got to that point and why they chose the approach that they did. While it certainly appears as if management emphasized R&D and encouraged experimentation more or less from day one, there is no way for me (or most anyone else) to know.
What we can tell, however, is what happened when leadership (loudly and proudly) began implementing new processes designed to increase efficiency.
Efficiency at the cost of effectiveness
When James McNerney was appointed CEO of 3M (joining from GE), he immediately began to implement Six Sigma, a set of process improvement techniques that Dave Snowden once called “business process re-engineering with the worst aspects of American bible-belt cultism added on for good measure”. While deliberately acerbic, he has a point; one would be hard-pressed to argue that it is anything but Taylorism 3.0.
At the core of Six Sigma are:
continuous efforts to “achieve stable and predictable process results” (e.g., by reducing process variation),
definition of processes so as to enable measurement, analysis, improvement, and control, and
a demand of commitment from the entire organization (though top-level management especially) if “sustained quality improvement” is to be achieved.
If your alarm bells are going off, you have been paying attention. Very little in Six Sigma’s philosophy is coherent with what we know about complexity (though clearly consistent with what we know about snake oil). The results were predictable: fewer insights, a diminished ability to adapt, and a sharp decline in innovation.
In 2005, four years after joining the company, McNerney (was) moved on to Boeing where he again implemented Six Sigma - and the 737 Max scandal followed. 3M abandoned the practice in all but core manufacturing. But while things at first began to look up, some of the damaging concepts turned out to linger in management. Today, researchers are encouraged to pursue incremental improvements to existing products rather than novel ideas. As Rob Kieschke, a former research director who left the company last year, said: “if you start forcing people to eliminate risk, then all you end up doing is what has been done before or what everyone else is doing”. Robert Asmus, a former 3M healthcare scientist and member of the Carlton Society, the company’s highest honor for science and engineering, shared the sentiment: “Senior management has deluded themselves into thinking they can pick winners and losers, when in reality we need to generate more products so we can get into test markets to see what works”.
Of course, these are anecdotes by ex-employees, but echoes of their voices are very commonly heard in organizations that struggle with innovation; there are sparks, but no oxygen to sustain them.
The pattern has also been remarkably consistent over relevant history. Whenever firms implement processes designed to control manufacturing or remove anything the purpose of which is neither explicit nor quantifiable, manager satisfaction increases (predictable performance carries a stronger allure than superior performance) but corporate effectiveness decreases.
Part of the reason lies in that one loses requisite inefficiency (discussed in September 22nd’s premium section); even if one improves the performance of individual parts, one worsens total system output. But [parallel safe-to-fail] experimentation is also how we obtain an understanding of the uncertain and complex corporate reality in which we act. We prod the system, collect feedback, learn, and adapt.
When managers attempt to determine, before the event, what is best and therefore ought to be done, it only serves to set the company up for inevitable failure. We see it time and again, from small venture to big business. And we know why.
Jules Goddard once wrote that strategy is the rare and precious skill of staying one step ahead of the need to be efficient. At least for the moment, 3M appears to be one step behind.
Until next week, have the loveliest of weekends.
Onwards and upwards,
JP
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