Scanlon June 2007 E-zine

Greetings!

Groups of people working together to innovate and continuously improve are the heart of successful organizations. In this E-Zine we offer our members and friends the opportunity to study and tour 3M, one of the most innovative companies in the world. Join us in Minneapolis as we learn from this great company and great inventors like Art Fry, the creator of Post-It notes.

We congratulate Watermark for becoming among the 100 Best Places to Work in Washington, State. Learn about their latest accomplishments.

Max DePree has taught us that the future is turned on the lathe of the past. In this issue we are extremely pleased to bring to you an interview with Mrs. Mary Lou Meehan...Joe Scanlon's daughter. Mrs. Meehan shares knowledge about how hard and dangerous Joe Scanlon's work was and what it was like to grow up in the house of this amazing man.

Finally, we share our latest efforts to bring the Scanlon message to more people. Paul Davis, our President, was interviewed on the Dan Mulhern show. You can download the interview from the Scanlon website as our latest podcast.

Scanlon Tours Kick Off Year Of Innovation With 3-M First Stop In August

The first "stop" on The Scanlon Leadership Network Innovation Tours being offered over the next several months is the 3M Corporation in St. Paul, MN, ranked in the top 10 most innovative companies in the world according to Business Week. It is set for August and will be followed by visits in September to Motorola in Chicago and 'Measuring What Matters' at the November Baltimore Tour.

The tours kick off the Network's year of programming about Innovation and will culminate in the Annual Conference next May in Dearborn, Michigan, the cradle of US innovation and location of the first production assembly line created by Henry Ford. The Conference will be totally dedicated to Innovation and Scanlon.

Motorola is the originator of Six Sigma, a continuous improvement program blessed and adopted by many corporations with great success, most notably GE during the tenure of Jack Welch. Six Sigma is currently being challenged as passé and counter-productive to innovation.

3M had great financial success over a four-year period with the introduction of Six Sigma by former CEO James McNerney, who has since moved on to become the CEO of Boeing Aircraft in Seattle. Although Wall Street loved 3M's financial results during McNerney's years at the helm, an evaluation of Six Sigma by top level insiders and industry experts concluded that how Six Sigma is viewed and implemented can stifle the creativity and culture needed for innovation.

"It is clear that McNerney drew upon his experience at GE to design and implement Six Sigma with strategies and goals that drove the execution," said Dwane Baumgardner, former CEO of Magna Donnelly Corporation and currently President of the Scanlon Foundation. "What he didn't appear to have," said Baumgardner "was a policy for innovation. He did not have an Executive Champion or any of the other elements. He also did not follow the Scanlon Principles, especially the Identity Principle which would have alerted him to the potential problem. His view of Six Sigma as the key to becoming lean was also very limited and ended up being viewed more as a fad rather than a tool to truly become lean which should be more of an enduring or timeless principle."

Praveen Gupta, President of Accelper Consulting, a pioneer of Six Sigma at Motorola and the author of several books including Six Sigma Business Scorecard and Business Innovation in the 21st Century says, "We have seen many powerful tools misapplied over the years, ignoring their intent and criticized. With all recently reported Six Sigma failures, there appears to be one common cause: leadership that has been trained in the GE way of Six Sigma."

When Gupta asked Jack Welch a question about Six Sigma at a conference in Washington two years ago it was clear that GE viewed Six Sigma as a statistical tool to reduce variability. "This is quite a limited and dreary application of Six Sigma," Gupta said. "I was a part of the original team at Motorola when Six Sigma was implemented and its basic intent was to quickly improve with employee participation. Employees were asked to set stretch goals, go beyond their comfort zones, and think critically to develop innovative solutions for dramatic improvement."

The current 3M CEO, George Buckley, is on record as trying to manage continuous improvement and innovation because they are both critical to the future success of 3M - or for that matter to every business organization. 3M needs to maintain financial discipline and continuous improvements in its operations and at the same time rebuild the creative culture that made it a globally recognized innovator for decades.

"The timing of our visit to 3M could not be better," said Paul Davis, President of the Scanlon Leadership Network. "We will be visiting the company at a time when they are struggling to balance the two diverse cultures." (For more information about 3M's balancing act with innovation and continuous improvement see the Business Week article: At 3M, A Struggle Between Efficiency and Creativity in the Scanlon blog at: http://www.scanlonleadershipnetwork.blogspot.com/.)

The first Tour will include one or more 3M facilities that have been leaders in innovation practices including the Innovation Center which very few outsiders get to see. Tour participants will get to see multi- dimensional audio and visual information exchanges with panel discussions and an opportunity for questions and answers. Among the key presenters are Andrew J. Ouderkirk, PhD, a 3M corporate scientist, principal inventor and project leader of the ground breaking 3M innovation of Multilayer Optical Film technology within 3M's light management platform and Art Fry, retired Corporate Scientist who invented the Post-it note. Fry is legendary in the innovation community. (See the following article for information about the 3M tour schedule and other presenters.)

"This will give participants a better understanding of many aspects of innovation including the processes that support innovation leading to product innovation, understanding innovation at a global level, overcoming internal barriers to innovation, measurement systems for innovation and incentive systems for learning," said Wayne Lindholm President of Manufacturing Advisors, Inc., a consulting firm that assists companies in implementing Scanlon processes and business improvements. "We should also be able to better understand the three key elements of innovation: knowledge, play and imagination," said Lindholm.

Lindholm and Kimberly Johnson, Senior Consultant at Milestone Consulting Group will serve as local facilitators of the Scanlon 3M tour. Both Lindholm and Johnson, who retired from 3M after more than 20 years with the company, are still deeply connected to the 3M culture and will share their expertise with tour participants by creating a best-practice insight on the topic of innovation. The group will also get to see an innovative support network called "GRIT" (Grass Roots Innovation Team) their history at 3M and the value it can bring to any business.

"While anyone can benefit from participating in this Tour, our design team is focused on individuals actively working in creative and innovative processes of their businesses," said Lindholm. "This includes inventors, engineers, designers and leaders at all levels working to encourage innovation in their businesses."

The conference and banquet events will be held in the 3M Tartan Park Club House and Retreat Center located a few miles from 3M Global Headquarters.

"There is a great deal of interest in innovation," said Davis, "so make your reservations as soon as possible." For more information about the Innovation Tours contact the Scanlon Network office at 517-332- 8927.
To download the Registration Form as a pdf file...

3M Innovators Ouderkirk, Fry Among Key Presenters

Andrew J. Ouderkirk, PhD and Art Fry are among the key presenters at the Scanlon Leadership Network Innovation Tour at 3M August 7-9.

Dr. Ouderkirk is the 3M scientist, principal inventor, and project team leader of the multilayered optical films that coat liquid-crystal display screens. Art Fry is the retired 3M scientist who invented the ubiquitous Post-it Notes.

Other key presenters include Alex Cirillo, 3M Vice President of Community Affairs, and Dave Braun retired Corporate Scientist of the Occupational Health & Safety Division. Dave was also the founder of the 3M Grass Roots Innovation Team (GRIT) network. Additional speakers will be named later.

The Tour will kick off Tuesday evening, August 7 with a social mixer and learning in a fun environment at the nationally renowned Science Museum of Minnesota located on the banks of the Mississippi River in downtown St. Paul.

The first full day of the event, Wednesday, August 8 will be held at the 3M Tartan Park Golf Club and conference center. Participants will learn how 3M supports and drives the process of innovation. 3M scientists, engineers and creative minds will share their knowledge of innovation at the hands-on level.

In his presentation Dr. Ouderkirk, who has been issued more than 100 patents, will share his unique insight in leading development teams at 3M. Art Fry, who is considered the keeper of the innovative spirit inside and outside 3M, will share his insight on the process of innovation and overcoming barriers.

In addition to his current position of VP of Community Affairs at 3M, Alex Cirillo's previous positions included VP of the company's Commercial Graphics Division and President of 3M Canada. He has been a supporter of creativity and innovation since starting his 3M career as a scientist. Cirillo will share an inspirational message that supports the foundation of innovation and leadership.

Dave Braun, retired 3M Corporate Scientist, will explain how his passion for innovation and knowledge sharing led to the creation of GRIT.

A panel discussion with 3M GRIT members will let participants hear first-hand how 3M promotes creativity and innovation at the grass-roots, informal level.

H.C. Shin, 3M Executive VP of Industrial Markets will sponsor a tour of 3M's new Innovative Center for the last day of the Tour. This two-hour event will feature the Vision Dome Theater multi-media presentation and the "World of Innovation" hands-on room where Knowledge, Play and Innovation come together at 3M.

For reservations and more information about the 3M Tour contact the Scanlon Network office now at 517- 332-8927, or read about it in the Events section of the Network web site at www.scanlonleader.org.
To connect to the Network web site....

Seattle Credit Union Ranked Amongst Best Places to Work

Scanlon member Watermark Credit Union of Seattle, WA has been ranked among the 100 best places to work in the state by Washington CEO magazine and one of the top 55 places to work in the Puget Sound region by Seattle Business Monthly.

"This is a great honor because we are dedicated to providing our employees with a positive work environment. We accept this recognition as part of our journey and not a destination. Watermark feels that this is just the beginning and there is a lot of potential to be reached," said Sabrina Stabbert, VP Human Resources/Operations.

Stabbert said Watermark's EPIC Scanlon Plan and the Deming philosophy have been important stepping- stones needed in obtaining milestones such as this recognition.

Watermark will be included in the July addition of Washington CEO magazine. An event is being held on June 28th to recognize this year's 100 recipients. Watermark Credit Union will be ranked in the best places to work in the not-for-profit category.

Washington CEO magazine calls for nominations every year for the best places to work. Watermark was nominated and then rated by its own employees through a confidential online survey. The survey measures workplace strengths and weaknesses through employee opinions regarding work life including categories such as communication, training and education, responsibility and decision-making, performance standards, rewards and recognition, benefits, leadership, work environment, hiring and retention and corporate culture.

"My favorite thing about working at Watermark is the opportunity to see people realize their potential. Whether it is going back to school to earn a degree with our Education Assistance Program or finding a new innovative way to serve our members or enhance our products, Watermark employees are always involved in something new," said Stabbert.

Watermark Credit Union is a $450 million dollar financial institution. It currently employs 186 people and has seven branches located throughout the Seattle metro area providing a full range of financial services to more than 70,000 members. Watermark was founded under the name Seattle Telco Federal Credit Union, with the purpose of providing financial services to telephone employees and their families. Since that time, not only has the name changed, but the membership has also opened up to anyone who lives or works in the state of Washington.
To learn more about Watermark...

A Daughter Remembers Joe

"Shouting, arguing. I thought they were all mad at each other but they always shook hands when they parted. That's what I remember as a teenager in Mansfield, Ohio about the meetings held around our dining room table until late at night."

This was one of the recollections of Joe Scanlon's daughter Mary Lou Meehan, now 80 years old with clear memories of the days in the 1940s when Joe was trying to unionize the Empire Steel Company in Mansfield.

"We had meetings at our house very often", Mary Lou said. "It was a very different mix of my father's friends and might include a high school teacher, school board members, lawyers, and the former mayor of Mansfield. I would be in bed upstairs and could hear them. It was an exciting time."

Joe worked at Empire Steel which was an open hearth mill and he was always getting burned. "I still remember the awful brown salve he used on his burns," Mary Lou recalls.

There was a great deal of anti-union sentiment in the 40s and Empire was resisting Joe's attempts to form a union there.

"It was an interesting time but it was also frightening at times too," Mary Lou said. "My father receiving threatening phone calls and one time someone wrote 'Communist' on the side of our house.

"We lived in my grandfather's house across from the children's county home and my dad helped out with the boys and taught some of them to box. The Ohio State reformatory is in Mansfield and my dad, who was a boxer for several years, also taught some of the inmates to box. He also refereed boxing matches that were open to the public and sponsored by the Reformatory to raise money. It seemed like all of the inmates wanted to box. My dad got knocked around during some of these bouts. He was not a big man, maybe 5 feet 6" or 8" inches tall and weighed about 160 pounds but he was muscular. The inmates were always filling his pockets with notes asking him to contact a relative for them."

With WWII underway many families had gardens, referred to in some parts of the US as Victory gardens. It was also a time when families got together often with friends.

"Families used to meet in the Delano Lodge, a local building that was used for meetings and get- togethers," Mary Lou said. "When we had Christmas parties there we made sure that all the kids got presents purchased with money that had been donated."

It took Scanlon a year but he established a rapport with Jim Hill, President of Empire Steel and persuaded him to support the establishment of a Steelworker's union at Empire. Joe had the reputation of being a "good talker" as Mary Lou describes her father and it is a tribute to his tenacity and ability to persuade that led to the success in Mansfield.

This success earned Joe an invitation to join the staff of the national headquarters of the United Steelworker's Union in Pittsburgh.

Because there had been so many threats against Joe, the President of the Union, Philip Murray, assigned a bodyguard to protect him. He was F.Nordhoff Hoffmann, a former football player at Notre Dame during the era of Knute Rockne and The Four Horsemen. He played on the team that went undefeated for two years. Nordy as he was called earned an undergraduate and a law degree from Notre Dame. He worked with the union for many years and served as US Senate Sergeant of Arms from 1975 to 1981.

"He was a very big young man in his late 20s," said Mary Lou. "I can remember how much he ate. My mother cooked for a lot of people in a very tiny kitchen in the apartment we rented in a big old home in Pittsburgh. Finally my mother had to tell him we couldn't feed him any more."

Mary Lou lives in Mansfield with her 86-year-old husband Stuart who retired when he was 83. Their son Tim, 56, took over "Stu's" business as a manufacturer's representative for heating and plumbing supplies. Son Tom is 58 and works in Human Resources for Embarq, formerly Sprint. They have three grandchildren and two step grand children. Mary Lou and Stu will be celebrating their 60th wedding anniversary in 2008.

Editor's note: Joe Scanlon's experience as a steelworker and union leader prompted him to conclude that a company's health and survival required cooperation rather than competition between labor and management. His work as a staff member of the United Steelworkers of America came to the attention of Dr. Douglas McGregor at the Massachusetts Institute of Technology, where he was invited to join the faculty. McGregor and Scanlon pioneered the concept of employee involvement and gainsharing. Unfortunately, Joe Scanlon's premature death in 1956 denied him the opportunity to fully realize the impact he had on world industry.

Network Perfect Fit for Leadership Radio Show

"The Scanlon Leadership Network was a perfect fit for our show. It was great to have Paul Davis as a guest and learn more about the Network," said Adam Barragato, Producer of the Dan Mulhern Show.

Dan Mulhern is the First Gentleman of Michigan, husband of Governor Jennifer Granholm. Mulhern's unique radio show focuses on leadership's role in current events and gives listeners practical advice on how to be a leader at work, home and in their community. Guests of the show include CEO's, middle managers, principals, teachers, parents and people trying to lead more effectively.

Mulhern, who is a nationally recognized writer and inspirational speaker on topics affecting everyday leaders, recently invited Paul Davis, President, Scanlon Leadership Network to be a guest on his radio show which broadcasts on the Michigan Talk Network. It airs live daily 6-7:00 p.m. from station WJIM- AM 1240 in Lansing, MI and is currently in six or seven different markets and growing.

The appearance on the show gave Paul the opportunity to discuss the Scanlon principles and the positive results organizations achieve when they tap into the resources and creativity of employees and involve them in the business.

"Many people do not feel like they have the time in today's busy world to take on leadership duties. The Dan Mulhern Show creates an opportunity for people to learn how they can improve their leadership skills and take on the leadership roles available to them," said Barragato.

For more information on Dan Mulhern visit www.danmulhern.com. To listen to his show live go to www.wjimam.com.
To hear the Scanlon interview click on the podcast logo....

3M Business Week Article

At 3M, A Struggle
Between Efficiency And Creativity

How CEO George Buckly is managing the yin and yang of discipline and imagination

Brian Hindo, Business Week. June 11, 2007


Not too many years ago, the temple of management was General Electric (GE ). Former CEO Jack Welch was the high priest, and his disciples spread the word to executive suites throughout the land. One of his most highly regarded followers, James McNerney, was quickly snatched up by 3M after falling short in the closely watched race to succeed Welch. 3M's board considered McNerney a huge prize, and the company's stock jumped nearly 20% in the days after Dec. 5, 2000, when his selection as CEO was announced. The mere mention of his name made everyone richer.

McNerney was the first outsider to lead the insular St. Paul (Minn.) company in its 100-year history. He had barely stepped off the plane before he announced he would change the DNA of the place. His playbook was vintage GE. McNerney axed 8,000 workers (about 11% of the workforce), intensified the performance-review process, and tightened the purse strings at a company that had become a profligate spender. He also imported GE's vaunted Six Sigma program—a series of management techniques designed to decrease production defects and increase efficiency. Thousands of staffers became trained as Six Sigma "black belts." The plan appeared to work: McNerney jolted 3M's moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.

Then, four and a half years after arriving, McNerney abruptly left for a bigger opportunity, the top job at Boeing (BA ). Now his successors face a challenging question: whether the relentless emphasis on efficiency had made 3M a less creative company. That's a vitally important issue for a company whose very identity is built on innovation. After all, 3M is the birthplace of masking tape, Thinsulate, and the Post-it note. It is the invention machine whose methods were consecrated in the influential 1994 best-seller Built to Last by Jim Collins and Jerry I. Porras. But those old hits have become distant memories. It has been a long time since the debut of 3M's last game-changing technology: the multilayered optical films that coat liquid-crystal display screens. At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter

Those results are not coincidental. Efficiency programs such as Six Sigma are designed to identify problems in work processes—and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company's culture, as they did at 3M, creativity can easily get squelched. After all, a breakthrough innovation is something that challenges existing procedures and norms. "Invention is by its very nature a disorderly process," says current CEO George Buckley, who has dialed back many of McNerney's initiatives. "You can't put a Six Sigma process into that area and say, well, I'm getting behind on invention, so I'm going to schedule myself for three good ideas on Wednesday and two on Friday. That's not how creativity works." McNerney declined to comment for this story.

PROUD CREATIVE CULTURE
The tension that Buckley is trying to manage—between innovation and efficiency—is one that's bedeviling CEOs everywhere. There is no doubt that the application of lean and mean work processes at thousands of companies, often through programs with obscure-sounding names such as ISO 9000 and Total Quality Management, has been one of the most important business trends of past decades. But as once-bloated U.S. manufacturers have shaped up and become profitable global competitors, the onus shifts to growth and innovation, especially in today's idea-based, design-obsessed economy. While process excellence demands precision, consistency, and repetition, innovation calls for variation, failure, and serendipity.

Indeed, the very factors that make Six Sigma effective in one context can make it ineffective in another. Traditionally, it uses rigorous statistical analysis to produce unambiguous data that help produce better quality, lower costs, and more efficiency. That all sounds great when you know what outcomes you'd like to control. But what about when there are few facts to go on—or you don't even know the nature of the problem you're trying to define? "New things look very bad on this scale," says MITSloan School of Management professor Eric von Hippel, who has worked with 3M on innovation projects that he says "took a backseat" once Six Sigma settled in. "The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation," adds Vijay Govindarajan, a management professor at Dartmouth's Tuck School of Business. "The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different."

The exigencies of Wall Street are another matter. Investors liked McNerney's approach to boosting earnings, which may have sacrificed creativity but made up for it in consistency. Profits grew, on average, 22% a year. In Buckley's first year, sales approached $23 billion and profits totaled $1.4 billion, but two quarterly earnings misses and a languishing stock made it a rocky ride. In 2007, Buckley seems to have satisfied many skeptics on the Street, convincing them he can ignite top-line growth without killing the McNerney-led productivity improvements. Shares are up 12% since January.

Buckley's Street cred was hard-won. He's nowhere near the management rock star his predecessor was. McNerney could play the President on TV. He's tall and athletic, with charisma to spare. Buckley is of average height, with a slight middle-age paunch, an informal demeanor, and a scientist's natural curiosity. In the office he prefers checked shirts and khakis to suits and ties. He's bookish and puckish, in the way of a tenured professor.

Buckley, in short, is just the kind of guy who has traditionally thrived at 3M. It was one of the pillars of the "3M Way" that workers could seek out funding from a number of company sources to get their pet projects off the ground. Official company policy allowed employees to use 15% of their time to pursue independent projects. The company explicitly encouraged risk and tolerated failure. 3M's creative culture foreshadowed the one that is currently celebrated unanimously at Google (GOOG ).

Perhaps all of that made it particularly painful for 3M's proud workforce to deal with the hard reality the company faced by the late '90s. Profit and sales growth were wildly erratic. It bungled operations in Asia amid the 1998 financial crisis there. The stock sat out the entire late '90s boom, budging less than 1% from September, 1997, to September, 2000. The flexibility and lack of structure, which had enabled the company's success, had also by then produced a bloated staff and inefficient workflow. So McNerney had plenty of cause to whip things into shape.

GREEN-BELT TRAINING REGIMEN
One of his main tools was Six Sigma, which originated at Motorola (MOT ) in 1986 and became a staple of corporate life in the '90s after it was embraced by GE. The term is now so widely and divergently applied that it's hard to pin down what it actually means. At some companies, Six Sigma is plainly a euphemism for cost-cutting. Others explain it as a tool for analyzing a problem (high shipping costs, for instance) and then using data to solve each component of it. But on a basic level, Six Sigma seeks to remove variability from a process. In that way you avoid errors, or defects, and increase predictability (technically speaking, Six Sigma quality has come to be accepted as no more than 3.4 defects per million).

At 3M, McNerney introduced the two main Six Sigma tools. The first and more traditional version is an acronym known as DMAIC (pronounced "dee-may-ic"), which stands for: define, measure, analyze, improve, control. These five steps are the essence of the Six Sigma approach to problem solving. The other flavor is called Design for Six Sigma, or DFSS, which purports to systematize a new product development process so that something can be made to Six Sigma quality from the start.

Thousands of 3Mers were trained as black belts, an honorific awarded to experts who often act as internal consultants for their companies. Nearly every employee participated in a several-day "green-belt" training regimen, which explained DMAIC and DFSS, familiarized workers with statistics, and showed them how to track data and create charts and tables on a computer program called Minitab. The black belts fanned out and led bigger-scale "black-belt projects," such as increasing production speed 40% by reducing variations and removing wasted steps from manufacturing. They also often oversaw smaller "green-belt projects," such as improving the order fulfillment process. This Six Sigma drive undoubtedly contributed to 3M's astronomical profitability improvements under McNerney; operating margins went from 17% in 2001 to 23% in 2005.

While Six Sigma was invented as a way to improve quality, its main value to corporations now clearly is its ability to save time and money. McNerney arrived at a company that had been criticized for throwing cash at problems. In his first full year, he slashed capital expenditures 22%, from $980 million to $763 million, and 11% more to a trough of $677 million in 2003. As a percentage of sales, capital expenditures dropped from 6.1% in 2001 to just 3.7% in 2003. McNerney also held research and development funding constant from 2001 to 2005, hovering over $1 billion a year. "If you take over a company that's been living on innovation, clearly you can squeeze costs out," says Charles O'Reilly, a Stanford Graduate School of Business management professor. "The question is, what's the long-term damage to the company?"

Under McNerney, the R&D function at 3M was systematized in ways that were unheard of and downright heretical in St. Paul, even though the guidelines would have looked familiar at many other conglomerates. Some employees found the constant analysis stifling. Steven Boyd, a PhD who had worked as a researcher at 3M for 32 years before his job was eliminated in 2004, was one of them. After a couple of months on a research project, he would have to fill in a "red book" with scores of pages worth of charts and tables, analyzing everything from the potential commercial application, to the size of the market, to possible manufacturing concerns.

Traditionally, 3M had been a place where researchers had been given wide latitude to pursue research down whatever alleys they wished. After the arrival of the new boss, the DMAIC process was laid over a phase-review process for innovations—a novelty at 3M. The goal was to speed up and systematize the progress of inventions into the new-product pipeline. The DMAIC questions "are all wonderful considerations, but are they appropriate for somebody who's just trying to...develop some ideas?" asks Boyd. The impact of the Six Sigma regime, according to Boyd and other former 3Mers, was that more predictable, incremental work took precedence over blue-sky research. "You're supposed to be having something that was going to be producing a profit, if not next quarter, it better be the quarter after that," Boyd says.

For a long time, 3M had allowed researchers to spend years testing products. Consider, for example, the Post-it note. Its inventor, Art Fry, a 3M scientist who's now retired, and others fiddled with the idea for several years before the product went into full production in 1980. Early during the Six Sigma effort, after a meeting at which technical employees were briefed on the new process, "we all came to the conclusion that there was no way in the world that anything like a Post-it note would ever emerge from this new system," says Michael Mucci, who worked at 3M for 27 years before his dismissal in 2004. (Mucci has alleged in a class action that 3M engaged in age discrimination; the company says the claims are without merit.)

There has been little formal research on whether the tension between Six Sigma and innovation is inevitable. But the most notable attempt yet, by Wharton School professor Mary Benner and Harvard Business School professor Michael L. Tushman, suggests that Six Sigma will lead to more incremental innovation at the expense of more blue-sky work. The two professors analyzed the types of patents granted to paint and photography companies over a 20-year period, before and after a quality improvement drive. Their work shows that, after the quality push, patents issued based primarily on prior work made up a dramatically larger share of the total, while those not based on prior work dwindled.

Defenders of Six Sigma at 3M claim that a more systematic new-product introduction process allows innovations to get to market faster. But Fry, the Post-it note inventor, disagrees. In fact, he places the blame for 3M's recent lack of innovative sizzle squarely on Six Sigma's application in 3M's research labs. Innovation, he says, is "a numbers game. You have to go through 5,000 to 6,000 raw ideas to find one successful business." Six Sigma would ask, why not eliminate all that waste and just come up with the right idea the first time? That way of thinking, says Fry, can have serious side effects. "What's remarkable is how fast a culture can be torn apart," says Fry, who lives in Maplewood, Minn., just a few minutes south of the corporate campus and pops into the office regularly to help with colleagues' projects. "[McNerney] didn't kill it, because he wasn't here long enough. But if he had been here much longer, I think he could have."

REINVIGORATED WORKFORCE
Buckley, a PhD chemical engineer by training, seems to recognize the cultural ramifications of a process-focused program on an organization whose fate and history is so bound up in inventing new stuff. "You cannot create in that atmosphere of confinement or sameness," Buckley says. "Perhaps one of the mistakes that we made as a company—it's one of the dangers of Six Sigma—is that when you value sameness more than you value creativity, I think you potentially undermine the heart and soul of a company like 3M."

In recent years, the company's reputation as an innovator has been sliding. In 2004, 3M was ranked No. 1 on Boston Consulting Group's Most Innovative Companies list (now the BusinessWeek/BCG list). It dropped to No. 2 in 2005, to No. 3 in 2006, and down to No. 7 this year. "People have kind of forgotten about these guys," says Dev Patnaik, managing associate of innovation consultancy Jump Associates. "When was the last time you saw something innovative or experimental coming out of there?"

Buckley has loosened the reins a bit by removing 3M research scientists' obligation to hew to Six Sigma objectives. There was perhaps a one-size-fits-all approach to the application of Six Sigma as the initial implementation got under way, says Dr. Larry Wendling, a vice-president who directs the "R" in 3M's R&D operation. "Since [McNerney] was driving it to the organization, you know, there were metrics established across the organization and quite frankly, some of them did not make as much sense for the lab as they did other parts of the organization," Wendling says. What sort of metrics? Keeping track of how many black-belt and green-belt projects were completed, for one.

In fact, it's not uncommon for Six Sigma to become an end unto itself. That may be appropriate in an operations context—at the end of the year, it's easy enough for a line manager to count up all the money he's saved by doing green-belt projects. But what 3Mers came to realize is that these financially definitive outcomes were much more elusive in the context of a research lab. "In some cases in the lab it made sense, but in other cases, people were going around dreaming up green-belt programs to fill their quota of green-belt programs for that time period," says Wendling. "We were letting, I think, the process get in the way of doing the actual invention."

To help get the creative juices flowing, Buckley is opening the money spigot—hiking spending on R&D, acquisitions, and capital expenditures. The overall R&D budget will grow 20% this year, to $1.5 billion. Even more significant than the increase in money is Buckley's reallocation of those funds. He's funneling cash into what he calls "core" areas of 3M technology, 45 in all, from abrasives to nanotechnology to flexible electronics. That is another departure from McNerney's priorities; he told BusinessWeek in 2004 that the 3M product with the most promise was skin-care cream Aldara, the centerpiece to a burgeoning pharmaceuticals business. In January, Buckley sold the pharma business for $2 billion.

Quietly, the McNerney legacy is being revised at 3M. While there is no doubt the former CEO brought some positive change to the company, many workers say they are reinvigorated now that the corporate emphasis has shifted from profitability and process discipline to growth and innovation. Timm Hammond, the director of strategic business development, says "[Buckley] has brought back a spark around creativity." Adds Bob Anderson, a business director in 3M's radio frequency identification division: "We feel like we can dream again."