He is innovation's very inspiration. For, 62-year-old Livio D. DeSimone is the CEO of the $16-billion Minnesota Mining & Manufacturing Co. (better-known as 3M), arguably, the world's most inventive corporation. Most CEOs would have been content with letting 3M be. But not DeSimone. Ever since he took over in 1991, his only goal has been to raise the standards of 3M's creativity. As a result, 30 per cent of 3M's sales now comes from products developed in the last four years. Recently in Bangalore to celebrate the 10th anniversary of the Rs 89.10-crore Birla 3M--in which the American transnational has a 76 per cent equity stake--DeSimone was confident of growing much faster in this country in future. In an exclusive conversation with BT's Dilip Maitra, he describes how ideas still drive a 96-year-old organisation.

Welcome to India, Mr DeSimone. 3M is said to be one of the most innovative companies in the world. How exactly do you measure innovation?

There is no perfect, or complete, measurement of innovation in our organisation. But we do use a series of measures. One of them is to aim for 30 per cent of global sales every year from products introduced in the past four years. We also measure the number of patents that our innovators bag. In 1997, for instance, 3M's products got 578 patents in the US, which earned us the ninth rank. We introduce 500 products every year--or around 10 per week.

You rely on hot teams to develop innovative products. At times, you have 30-40 teams working simultaneously in the company. Most organisations find it difficult to manage even 3-4. How do you cope with so many teams at the same time?

We do not manage them. The more the innovation, the less the regimentation. The only regimentation is the philosophy of renewal: growth by innovation. There are different ways of encouraging people. For instance, we tell our people that they can use their time to develop ideas that may not be connected with their responsibilities. If such ideas require funding, they can approach the board and say: "Look, I have a bright idea, but my stupid boss does not understand it. Can you give me some money to prove that it is a good idea?"

3M is full of stories of people's ideas succeeding despite opposition from the bosses. I, myself, have opposed ideas which, later, turned out to be successful products. We expect people to spend 15 per cent of their time on developing products that aren't directly linked to routine work. One of our most successful products, Post-It, is the result of the 15 per cent effort. So, it is a combination of (management) backing and imagination that germinates into ideas. Once we are convinced that an idea has the potential to become successful in the marketplace, we start managing the process of product-development. Such projects require the correct mass of resources and a clearly-defined time-frame. Managing both time and money is important.

...First, for an idea to be selected, it had to be basically new; 3M only wanted to select innovative ideas. Second, it had to meet a demonstrable human need; to solve a real problem. Innovation that didn't turn into products and processes that someone somewhere will find useful would be of no interest to 3M. Interestingly, however, 3M did not select innovations based strictly on market-size. With mottoes like Make A Little, Sell A Little and Take Small Steps, 3M understood that big things often evolve from little things. But since you can't tell ahead of time which little things will turn into big things, you have to try lots of little things, keep the ones that work, and discard the ones that don't...

James C. Collins & Jerry I. Porras, Built To Last, 1994

Some projects are always more important than others. So, how does 3M prioritise?

If an idea has the potential to become a $100-million business--and change the basis of competition in that sector--we call it Pacing Plus. It is a label that has priority access to the organisation's resources. In technology, for instance, a Pacing Plus idea can get support from 3M's 36 technology-platforms. Since Pacing Plus programmes account for a third of 3M's incremental revenues, they are its growth-engines.

Strangely enough, when you took over as its CEO in 1991, 3M was in desperate need of fuel to grow. Sales had been stagnant, but the company turned around in less than four years. How did you manage this?

3M was not stagnating, but its growth was slow. So, we first looked at our slowest-growing product-segments. They accounted for 20 per cent of our sales. Although their growth was in tune with that of our competitors, they were a drag on our resources. So, we spun them off into separate companies. The next important step: raising the standards of business to accelerate growth

You changed 3M's 25-and-5 standard--whereby 25 per cent of sales should come from products introduced in the last 5 years--to a 30-and-4 standard, whereby 30 per cent of sales should come from products launched in the last 4 years...

Standards ensure that a major proportion of your turnover comes from new products. That, in turn, makes people realise that innovation is the driving-force. The new standard signifies 3M's objective of not only attaining a higher rate of growth, but also achieving it faster. In essence, it sets a goal for the future.

Being innovative is not enough in a highly-competitive marketplace. How you tackle imitation, and safeguard proprietary technology is also important...

Our first line of defence is to make the best product, and offer the best service to our customer. Second, most of our products are protected by patents. Third, we spend a lot of money adding new features to our products. Post-It, for instance, now has 20 patents even though the original patent on that product has expired. Fourth, we use technologies that cannot be duplicated easily. And, finally, to safeguard some technologies, we may not even patent some of our products.

Innovation is the outcome of an organisational culture. What kind of internal systems have you evolved to foster creativity at 3M?

Our beliefs are embedded in our philosophy: failure is not fatal. Innovations are simply chance breakthroughs. And when you take a chance, there is always the possibility of a failure. Both recognition and reward do not, necessarily, translate into bonuses. For 3M's scientists, recognition is important. Sometimes, it is the individual who gets the recognition; generally, it is a group of researchers that is recognised for its pioneering work. 3M also has a system of recognition by peers. And then, there is also our very own Noble Society (a 3M club of innovators).

...In a recent 3M survey, employees asked management to "allow us to get excited about where we are going," and to provide evidence of management's confidence and excitement about 3M's future. We believe that casting our plans for the future as compelling stories can help us do just that. The ultimate success of our plans depends on how effectively we inspire the people who make those plans happen... A well-written narrative strategy that shows a difficult situation and an innovative solution leading to improved marketshare can be galvanising--and is certainly more engaging than a bulleted mandate to "increase marketshare by 5 per cent"

G. Shaw, R. Brown, & P. Bromiley, Strategic Stories, HBR, May-June, 1998

As an innovative organisation, how do you treat failure?

We have a fairly high failure-rate in an innovative environment like ours. For every two successful products, we have one failure. However, at 3M, we do not look at failures as mere failures. They are a part of the learning experience. Every failure is just one step forward in perfecting a successful product.

What is the rate of mortality of your products in the marketplace?

The life of a product varies from segment to segment. In healthcare, for instance, a product can last for 15 years. In other segments, products may just have a four- or five-year lifespan. Industrial products, generally, have a longer lifespan than consumer products. One example of a long lifespan: sandpapers, which have been around for the past 60 years. Although the way they were manufactured has changed, their usage hasn't. We, however, wouldn't have been in business had we continued manufacturing them as we did 50 years ago. Sometimes, we drop products from our portfolio. If a product loses its usefulness, customers do not want it any more, and you cannot make money out of it. It becomes painfully obvious that the product has to die.

...Consider 3M's giant Austin (Texas) electronics operation. In deference to the market's new pace, 3M has slashed product-development cycles in the last few years to a couple of months. 3M sells a product all right--a cable, a connector, whatever. But 3M marketers told me in 1990 that they really "sell a process"--a process that allows 3M to create a customised solution to a customer's needs more effectively (faster, more cleverly) than a competitor can...

Tom Peters, Liberation Management, 1992

Although 3M sells its products worldwide, developing countries account for only a small percentage of its international sales. Why?

Although Latin America is a developing region, 10 per cent of our international sales come from that area. The US, Europe, and Japan account for nearly 80 per cent of 3M's international sales. In certain cases, our products sell more in the developed markets than in the developing markets. One important reason is that we have a large number of industrial products in our portfolio, and affluent countries are highly industrialised. But we look at the issue from a different perspective: we compare our turnover to a country's Gross Domestic Product (gdp).

For instance, our sales as a percentage of gdp are the highest in the US--far higher than in Japan or Europe. This is partly because the US has higher purchasing-power. But, in Latin America, sales as a percentage of gdp are as much as in Europe. We encourage our companies to adapt products to the markets they serve. On most occasions, we adjust technology to the needs of the local consumer. When a foreign company adjusts, or modifies, products to suit the local market, we call them Pathfinder Products. In India, Birla 3M introduced 14 Pathfinder Products in 1997--a big number even by our standards.

Your operations in this country remain small despite your decade-long presence here. Are you planning to increase the pace of growth?

India is growing at a very fast rate, and the potential is huge. We are relatively new here, but we have reached the critical mass stage. We are building new capacities, and are investing in people. I am certain that we will grow at a much faster rate in future in this country.

Thank you.

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