1. WHAT WORKS
F I N D I N G PRODUCTS THAT STICK
Wendling's R&D shake-up has led to a
number of marketable breakthroughs.
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
A
L I T T L E O V E R F I V E Y E A R S
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 re-
searchers 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 protege 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 "tech-
nologies of the present"—like the adhe-
sives used in old-line products such as
Post-It notes and Scotch tape—from cen-
tral R&D's top priorities and reorganiz-
ing 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 prof-
its are up 23 percent, and R&D
spending as a percentage of sales—
a key bang-for-your-buck barom-
eter—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 dis-
cipline—nanotechnolo-
gy—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 ul-
trabright cell-phone displays, natu-
ral-looking dental fillings, and su-
perconductive 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 commer-
cialization 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,
54 BUSINESS 2.0 NOVEMBER 2 0 0 5

2. WHAT WORKS
3M began spinning off individual research
departments from central R&D and es-
tablished technology centers with sepa-
rate 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 be-
yond them. "We had mini-alignments with
our old markets," he says. Between 1976
and 2002, researchers at IBM and Xerox
ling found, was that the 6,500-employee
R&D organization had become so frag-
mented 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 tech-
nology 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
T H E FIRST STEP WAS TO ASSIGN THE MA-
jority of 3M's scientists—who had previ-
ously been managed in a central division—
The Right Chemistry
A rebound in sales and profits has followed 3M's R&D revamp.
R e v e n u e s .
(in billions)
$25
Net i n c o m e
(in billions)
$3.5
New nanotech
products
$20 $3.0
BflEn'
Annual sales
2000 2001 2002 2003 2004 2005*
"Projected. Source: Bloomberg
filed more than 2,000 nanotech applica-
tions, while 3M filed only about 750. Says
Wendling, "We were losing our edge in pi-
oneering science."
Staffing, too, had slowed down inven-
tion. With sparse communication between
research groups, 3M kept hiring the types
of scientists who had proven valuable in
the past, like polymer chemists and mate-
rials specialists. They helped the compa-
ny keep its edge in established markets
such as adhesives but didn't do much to-
ward forging ahead in nanotech, biotech,
and other pioneering fields.
But the biggest stumbling block, Wend-
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 re-
search, 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 sci-
entists 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 re-
searchers 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 tem-
peratures, voltages, and viewing
angles—all critical factors in de-
ciding 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-pro-
jection televisions, and air traf-
fic control systems.
To get an invention to the fin-
ish 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 part-
ner with. Finding a business
unit that knows its market
makes us more confident. Nothing is more
frustrating than to do good tech develop-
ment and not have your product commer-
cialized for business reasons."
That might fill a lot of middle-level man-
agers with envy, but so far Wendling has
no reason to change course. "Most scien-
tists are naturally motivated to find uses
for their breakthroughs," he says. "Once
you've applied science and produced some-
thing you can get your hands on, you look
for every opportunity to do it again." •
Daniel Del Re is afreelance writer based in
New Jersey.
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