Guest Post by James J. Kline (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
Introduction
In 2015, innovation was added to the Baldrige Excellence Framework. While there is no doubt that innovation is important for an organization’s survival, a fundamental question is: How much does a quality improvement process, which is encouraged by the Baldrige Excellence Framework, contribute to innovation? While there is no simple answer to this question, some indication can be seen in an examination of the focus of the quality improvement process and what happens to a company, with a reputation for innovation, when a quality improvement process is implemented.
Such a company is Minnesota Mining and Manufacturing (3 M). And, a June 11, 2007 article in Business Week, entitled: “3M’s Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture”, argued that Six Sigma inhibited 3M’s ability to innovate. This piece discusses the 3M experience and the relationship between Six Sigma and Innovation.
Innovation at 3M
3M started in 1902 drilling for minerals. In 1916 3M created its research laboratory. Since that time, the succession of new products coming out of its research efforts has been remarkable. Among them are: Masking Tape, Scotch Tape, Emery Cloth, Disposable Facemasks and Respiratory protections products, Scotch Guard, and Post-it notes. By 1990 more than 30 percent of 3M’s sales came from products developed within the last five years. By 2000 the percentage was 35%. This was higher than the company’s goal of 30%. With this goal in mind, 3M researchers are allowed to spend 15% of their time pursuing research on new ideas and products.
In 2001 the 3M Board of Directors hired James McNerney. McNerney was hired to turn 3M around. Its stock price was down and it was believed to be overstaffed. McNerney cut the workforce by 11%. He reduced capital expenditures by 22% and increased operating margins from 17% in 2001 to 23% in 2005. He also introduced Six Sigma. Thousands of employees were trained as Black and Green Belts. When McNerney left for Boeing, stock price was up, as were revenues and profits had increased by 22% a year. However, the percentage of new products developed in the last five years had dropped to twenty-one and much of the new product revenue came from a single category, optical films. George Buckley, McNerney’s successor, maintained Six Sigma in the processing plants, but eliminated it for the research department. Did Six Sigma smother the innovation culture of 3M as the article claimed, or is there another explanation? To determine this one needs to examine what innovation is and the focus of quality improvement processes such as Six Sigma.
Innovation
The Baldrige Award defines innovation as: “Making meaningful change to improve products, processes, or organizational effectiveness and create new value for stakeholders. … Innovation could include fundamental changes in an organization’s structure or business model to accomplish work more effectively.”
At 3M, Six Sigma helped improve production processes and contributed to the bottom line. However, it also seems to have retarded research and development on new and possible break through products. This reflects the different between the emphasis of Six Sigma and the environment which contributes to new product breakthrough.
Process Improvement versus Break Through Innovation
Six Sigma emphasizes incremental, but continual process improvements through Kaizen events and team work. The focus is on the location where work is being done. Processes are controlled through the use of statistical methods which seek to minimize variations in the production processes and waste. This does not mean Six Sigma has not contributed to innovations. In fact, the Toyota Production System, on which it is based, changed, through just in time inventory control and team involvement, manufacturing processes worldwide. Further, employees are encouraged to submit ideas for improvement. However, the incremental nature and the focus on improving production methods and eliminating waste may inhibit new product development or break through innovations.
Tim Cook the CEO of Apple notes that if there was a formula for innovation every company would buy it. Rosabeth Kanter in the book Innovation says: “A universal characteristics of innovative companies is an open culture. A culture that reaches out to relationships in all directions: across functions and departments internally, and with every potentially beneficial external connections.” (page 4) This openness allows researchers to explore new ideas without regard to possible failure. Failure could be considered a waste, since such efforts consume time and resources, with no appreciable outcome. Further, while research and development are structured, the intellectual process of coming up with ideas for a new product is more haphazard. Thus, the culture needed to facilitate innovation may conflict with an approach which seeks to control process variations and eliminate waste, even when employees are encouraged to submit ideas for improvement and the underlying philosophy is continual improvement.
Conclusion
With the addition of innovation to the Baldrige Excellence Framework, the analysis of an organization’s performance excellence becomes more complex. The 3M experience indicates that Six Sigma contributed to process improvement and revenue enhancement. However, because of the focus on process control and the elimination of waste it may conflict with the more haphazard intellectual process associated with new product development and break through innovations.
References
Kanter, Rosabeth Moss, John Kao and Fred Weisema, 1997, Innovation: Breakthrough Ideas at 3M, DuPont, GE, Pfizer, and Rubbermaid, Harper Press, New York, NY
Gunther, Marc, Marilyn Adamo and Betsy Feldman, 2010, “3M’s Innovation Revival”, Fortune, Sept 27, Vol 162, Issue 5, pp. 73-76.
Bio:
James Kline is a Senior Member of ASQ, a Six Sigma Green Belt, a Manager of Quality/Organizational Excellence and a Certified Enterprise Risk Manager. He has over ten year’s supervisory and managerial experience. He has consulted on economic, quality and workforce development issues. He has also published numerous articles related to quality in government and risk analysis.
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