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For the past two years, 3M Corp. has been giving back freedom and decision-making to its researchers following four years of Six Sigma mania under former CEO and Chairman W. James McNerney Jr. Six Sigma is a data-driven methodology and associated toolset for eliminating process defects. Its design component is known as Design for Six Sigma.

“We got a little tool happy (under McNerney),” says 3M Research Chief Larry Wendling, staff vice president, 3M Corp. Research Labs.

While 3M emerged financially stronger from the McNerney era, many long-time 3M researchers, engineers and scientists chafed under the strictures of Six Sigma. Critics argue that excessive metrics, steps, measurements and Six Sigma’s intense focus on reducing variability water down the discovery process. Under Six Sigma, the free-wheeling nature of brainstorming and the serendipitous side of discovery is stifled. Proponents contend such methodologies’ rules keep researchers on track and accountable for producing. Striking the right balance between the application of Six Sigma and unencumbered research is often seen as key.

What makes 3M different from other companies that struggle with how much to reign in researchers and scientists is its size ($24B) and that it relies heavily on continuously commercializing such a diverse set of new technologies. McNerney’s critics at 3M were thrilled to see him take the Boeing CEO job in 2005. McNerney’s impact on 3M’s longstanding culture of innovation is chronicled in a June 11, 2007 article in BusinessWeek magazine.

Under McNerney’s successor, 3M CEO George Buckley has de-emphasized Six Sigma in R&D. At the same time, R&D spending in 2007 has been increased by 11 percent over 2006. “3M is a technology company so it’s essential that we keep investing in and creating new technology and product platforms,” Buckley reaffirmed in October. After all, 3M is the company that brought us Post-It Notes, Thinsulate, Scotchgard and Scotch Tape. What’s more, consumers are generally unaware that many complex and sophisticated innovations come out of 3M in areas as diverse as digital dentistry to “Confirm Laminate” that makes it easier to detect counterfeit passports.

“George is throttling back in the laboratory and in R&D. At the same time, he’s a very strong proponent of lean Six Sigma in manufacturing and our supply chain,” according to Wendling. “Six Sigma has a place, but more in what I’d call transactional activities as opposed to basic research and product development. The key is to selectively use what makes sense in R&D, but not let Six Sigma become the end. For instance, we use (Six Sigma) design of experiments routinely in basic research,” Wendling says. Wendling, who celebrated his 30th year with 3M in September, reports to Dr. Fred J. Palensky, executive vice president, Research and Development and 3M’s chief technology officer (CTO).

Experts agree the blanket approach to Six Sigma is generally not a good idea — at least at a company like 3M.

“These TQM (Total Quality Management) and class of methodologies that are anchored on reducing variability are inversely associated with what we call exploratory innovation. Methodologies help incremental innovation. The more you apply them in R&D, the less effective they are on exploratory innovation,” says Michael Tushman, a professor at Harvard Business School. “There is a place for Six Sigma, but for targeted pieces of the innovation portfolio.”

3M researchers still use elements of a Six Sigma toolset called DMAIC, which stands for design, measure, analyze, improve and control. Since 2000, 58,000 projects at 3M have used some element of DMAIC and more than 55,000 3M employees have achieved the minimum level “Green Belt” training, according to a 3M spokeswoman. An alphabet soup of variants similar to DMAIC have been adopted by other companies.

“DMAIC works, but within boundaries. At its simplest, the assumptions as to cause/effect and repeatability that lies behind the various process methods including Six Sigma mean they only work in fairly ordered situations (manufacturing, order processing, etc). Move outside of that and they are doomed to fail,” says David Snowden, founder and chief scientific officer at Cognitive Edge, a consulting firm in the U.K.

Academics and consultants will forever debate the merits and drawbacks of Six Sigma in R&D, but the methodology can be all but transparent to customers. Phil Overholt, a Dept. of Energy program manager, worked with 3M on the company’s new composite aluminum power transmission technology that reduces heat causing conventional power lines to sag.

“They tended toward the ideal, were extremely thorough in their methods and did their homework. They stayed on schedule and that is not always done,” says Overholt.

Ron Atkinson, board chairman of the American Society for Quality, is a strong proponent of Design for Six Sigma. Atkinson, a mechanical and industrial engineer, is also an executive with an auto maker.
“I usually find that once (companies) understand it, Six Sigma aligns very well with engineering methodology. Six Sigma makes sure projects relate right back to the strategic plan of the company,” says Atkinson. Is paralysis by analysis a concern? “(Project) champions can counteract that. They make sure you do not sit on the design phase forever. And there’s nothing to say you have to finish one step before you start the next.” He believes pure research does not lend itself to Six Sigma, but is more the stuff of universities and federally funded projects.

For years, the measure of successful innovation at 3M was the percentage of products in the marketplace that were new or less than 5 years old. Indeed, the BusinessWeek article claimed the percentage of 3M’s new products in the marketplace had slipped from one-third to a quarter of its total. That metric, according to Wendling, is not a true gauge of success; hence, the company’s decision to abandon it seven years ago (or not make it public anymore).

“We have chosen not to share the percentage of new products externally because it’s too complex and people will take it and interpret in their own fashion. The proper metrics for new products really depends on what industry and business you’re in. If you’re in the electronics business where products have a very short lifecycle, you probably need 100 percent new products every three years. But if you’re in the pharmaceutical industry where it takes 10 or 15 years to develop a new product, you have a totally different metric. Think about the diversity of 3M’s business and just adding these things up and coming up with number really isn’t a very good metric. That’s why we went away from that metric,” says Wendling.

Then how does 3M measure the conversion of products developed in the lab into marketplace hits? The answer more than suggests McNerney’s emphasis on top and bottom-line left a deep impression on today’s 3Mers.

“For us, the true metric is: Are we growing at the rate we need to be growing and are new products making their contribution to that growth? In the end, that’s all that counts. I could have these 40 percent (new products) every four years and if the company isn’t growing and meeting our growth targets, my metric is very hollow. The important thing is the company is growing in its top line revenue according to plan and is the new product component making its contribution.”

(For the most recent quarter, 3M’s top and bottom lines grew 5.5 and 7.4 percent respectively. By any measure, 3M is healthy with two of its five main units reporting double-digit growth. Growing at 21 percent, Health Care is the star performer. Display and Graphics was the laggard at 2 percent.)

Wendling is careful to emphasize that research at 3M is aimed at creating commercial products and solving customer problems. For example, Wendling has 700 researchers in his group, but is reluctant to say they focus purely on basic research. “I would not characterize (them) as blue sky (researchers) because they really are connected to the business.” His researchers develop technologies that can be used commercially in 3M’s six businesses each of which has a top R&D executive responsible for product development.

“There’s R&D and I’m R. A very important metric is technology developed in my lab being transferred to new product introduction programs and operating units,” he says. “You develop technology in the process of development, but fundamentally (the R&D executive’s job) is to develop products. The problem is if you put R under the direct control of the businesses, R becomes D. That’s why organizationally, we leave it apart. We all come together under this Corporate Technical Operations Committee (CTOC). You might think these guys would be all over me to do the present type stuff. No. They understand if you invest your hard dollar in the technologies of the present, your future is going to look very much like the present.”

The CTOC is comprised of each unit’s top R&D executive, Wendling and 3M CTO Fred Palensky. They make sure 3M technologies are shared across the company while getting input from the businesses. “It’s constant push and pull,” says Wendling.

3M’s growth and profitability had slowed in the late 1990s which was the reason McNerney was brought in. In 1999, the share price ranged between $40 and $50. Today, it’s about double that.

“McNerney was brought in to improve the operating efficiency and financial return of this company. That’s why they hired the man. Jim did a super job, reflected in our earnings and the stock price, quite frankly. The way Jim did it was to immerse the company in Six Sigma,” says Wendling. “It had not become the end, but he was using it very aggressively to accomplish financial returns.”

Indeed, Six Sigma has been deployed at highly successful companies such as General Electric, Johnson & Johnson, Bank of America and Starwood Corp. There again, it wasn’t enough to prevent Motorola, where Six Sigma was created, from going through a stretch of tough years when its wide lead in the mobile phone marketplace was lost.

Does this suggest Six Sigma in R&D could be a passing fad? That depends on who you talk to. There’s general agreement that freedom in basic or pure research is preferable while Six Sigma works best in incremental innovation when there’s an expressed commercial goal.

Paul Michaelis, a retired engineering physicist and technical manager for 43 years at the former AT&T Bell Labs, says one key is experience in several technical disciplines. But he adds that there are very smart engineers and scientists who do not possess the innovation gene.

“My take on the innovative process is that the most important component is the people; the process can be formalized, scatterbrained or what you choose. These people should have backgrounds in multiple disciplines and the ability to think “outside the box.” I met and interviewed many highly intelligent and well-educated people who, while good at problem solving, were not capable of being innovative. In my opinion, innovative capability can only be nurtured; seldom, if ever, created.”

Of course it boils down to people, agrees Jim Todhunter, chief technology officer at Invention Machine Corp. in Boston. But that’s not to say they can’t be channeled in a positive direction.

“People can be assisted greatly by processes, communication and infrastructure when these things are coordinated properly. In any organization a positive shift in the effectiveness of its people can have a huge impact on its results.” The review of Six Sigma’s impact on 3M’s financial results would have to be positive. On its longstanding culture of innovation? That depends on who you talk to.