Efficiency and Innovation

Recently BusinessWeek came out with a very nice article talking about efficiency and innovation. The article discussed at length on the organizational culture at 3M. It immediately caught my attention as I had done fair amount of research on this company while completing technology management specialization for my MBA. 3M is indeed an amazing company which successfully created innovative products as masking tape, Thinsulate and the Post-It note.

The article wanders around James McNerney’s leadership style at GE and 3M. Motorola originated the concept of Six Sigma in 1986, which was adapted by many companies in 90s including GE. GE is well known for its commitment on quality, after all GE exits from a business if it is not No. 1 or No. 2 in that sector. McNerney embraced Six Sigma along with everyone at GE, but made the mistake to carry it forward to 3M.

GE is known for implementing efficiency in the workforce and removing defects on the production line; however, the culture at 3M is very different, where the company is all about innovation, risk taking, and tolerance for failure. Employees at 3M had the option to work on their pet projects, something that Google believes in currently.

Things changed at 3M after McNerney took charge as CEO; he made many radical changes such as slashing budget for R&D, letting go older employees, and emphasis on return on investment. Wall Street cheered the new focus on profitability, but the enthusiasm faded away soon after, as the company could not bring any ground-breaking product to the market, something 3M was known for. After all, innovation and efficiency does not go hand in hand. McNerney eventually left for a bigger opportunity at Boeing. In the meantime, Gorge Buckley, an old timer at 3M took over as CEO, trying to do the damage control by his predecessor.

In my mind, what is needed is a good balance of risk and control. We have to see how Buckley strikes this balance and brings back 3M’s old glory.