Pushing Past Post-Its
By allowing his top scientists to peek over the horizon, 3M's Larry Wendling helped turn a century-old giant into a nanotech pioneer.
By Daniel Del Re

(Business 2.0) – A little over five years ago, several top executives at 3M called together their senior managers in R&D to show them the not-so-rosy writing on the wall. The company's annual revenues were stalled, and the new-product pipeline was inefficient and unpredictable. Groups of researchers had become too fragmented to develop ideas that led to breakthroughs or blockbusters. In short, innovation at the century-old American icon needed a reorg. Soon thereafter, newly hired CEO James McNerney--a Jack Welch protégé who had been a finalist for the top job at GE--tapped Larry Wendling, the vice president in charge of 3M's central R&D lab, to rev up the company's invention machine.

In the ensuing months, Wendling and others led an R&D overhaul that most blue-chip companies would have resisted. But after stripping what he calls "technologies of the present"--like the adhesives used in old-line products such as Post-It notes and Scotch tape--from central R&D's top priorities and reorganizing his researchers around fast-growth technologies of the future, Wendling has helped turn his operation into the envy of the industry. Product development cycles have shrunk from an average of four years down to two and a half, operating profits are up 23 percent, and R&D spending as a percentage of sales--a key bang-for-your-buck barometer--last year hit an all-time low of 5.7 percent.

Perhaps the biggest surprise is that the products driving 3M's growth are coming from the one scientific discipline--nanotechnology--that has proven the hardest for so many other companies to get out of the lab. The company that invented Scotchgard when a scientist spilled chemicals on her tennis shoe is now pulling in more than $500 million in sales of nanotech-based products like ultrabright cell-phone displays, natural-looking dental fillings, and superconductive power cables. In just four years, 3M has become the world's biggest nanotech materials manufacturer, controlling more than a third of the current market and leaving conglomerates like DuPont and Sigma-Aldrich and high-flying startups like Nanosphere and Nanosys in the nano dust.

So what's 3M's secret to monetizing the research? Some credit goes to its Six Sigma sophistication and streamlined commercialization processes--not to mention a $1 billion R&D budget--but Wendling thinks it has much more to do with shifting people and priorities around than with rearranging molecules. "The best way to transfer ideas," he says, "is to transfer people."

Break With the Past

Revamping 3M's R&D meant changing an organizational philosophy that had ruled the company for decades. In 1981, 3M began spinning off individual research departments from central R&D and established technology centers with separate facilities for experimentation, all in an effort to get closer to target markets. By 2003 the company had 12 research units scattered across its 425-acre campus in St. Paul, Minn.

The system worked well in launching families of products from existing product lines, Wendling says, but eventually scientists got too narrowly focused on their assigned markets and had little incentive to look beyond them. "We had mini-alignments with our old markets," he says. Between 1976 and 2002, researchers at IBM and Xerox filed more than 2,000 nanotech applications, while 3M filed only about 750. Says Wendling, "We were losing our edge in pioneering science."

Staffing, too, had slowed down invention. With sparse communication between research groups, 3M kept hiring the types of scientists who had proven valuable in the past, like polymer chemists and materials specialists. They helped the company keep its edge in established markets such as adhesives but didn't do much toward forging ahead in nanotech, biotech, and other pioneering fields.

But the biggest stumbling block, Wendling found, was that the 6,500-employee R&D organization had become so fragmented that scientists and engineers didn't have a uniform process for getting their breakthroughs into markets outside 3M's areas of expertise. "We didn't know what needed to be done to get a particular technology from a development group onto a commercialization track," says Bill Schultz, a top 3M scientist who's been with the company since 1968.

Marketing Research

The first step was to assign the majority of 3M's scientists--who had previously been managed in a central division--to the company's seven major business units. Those left in central R&D were freed up to work on breakthrough research in new markets projected to grow 10 percent or more each year. While nanotech research, for example, had been ongoing at 3M since the mid-1980s, scientists were suddenly pushed to develop and finalize plans for marketable products. Wendling was even given a staff of eight full-time marketers whose job was to help the scientists think futuristically about products. "When I tell my colleagues outside 3M that I have marketers working for me, they salivate," Wendling says.

Next, Wendling required his top researchers to identify at an earlier stage in R&D the marketable products their work could yield. Among the first to answer the call was Andy Ouderkirk, a physical chemist who had tinkered for years with nanotech-based materials. Among other ideas, Ouderkirk created a plan to develop and market a film of reflective material that would boost brightness and clarity in LCD screens for cell phones, laptops, and TVs.

Wendling made sure his scientists were mingling with potential customers just as early in the process. Ouderkirk brought in reps from major LCD manufacturers to help him understand how his reflective film would perform at different temperatures, voltages, and viewing angles--all critical factors in deciding how and where more R&D dollars should be spent. By 2005, Ouderkirk had 14 products ready to sell under a new 3M brand called Vikuiti, nano-enhanced films not just for laptops and cell phones but also for camcorders, rear-projection televisions, and air traffic control systems.

To get an invention to the finish line, Ouderkirk and other central R&D researchers work with one of the business units (and its researchers) to find a market for the product. Under the new system, Schultz says, "we can be pretty selective in choosing which units to partner with. Finding a business unit that knows its market makes us more confident. Nothing is more frustrating than to do good tech development and not have your product commercialized for business reasons."

That might fill a lot of middle-level managers with envy, but so far Wendling has no reason to change course. "Most scientists are naturally motivated to find uses for their breakthroughs," he says. "Once you've applied science and produced something you can get your hands on, you look for every opportunity to do it again."