Innovation

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Innovation

  1. 1. Lead User ProcessInnovation method for breakthroughs at 3MNew product design and developmentAmirkabir University of TechnologyDr. Saeed MansourGolnar ZamaniAbstract 3M has been known for decades as an entrepreneurial company thatperuses growth through innovation. It generates a quarter of its annualrevenues from products less than 5 years old. Long before “reinvention”became a buzzword of American business, 3M already had made change acentral part of its corporate culture [1]. Many say the company’s success overthe years is linked to its ability to change as 3M, its products and the worldmarketplace evolves. Once 3M top management has long felt that the 3Minnovation process was being focus on incremental improvements to existingproduct lines. They urgently wanted to improve matters, and wantedespecially to improve 3Ms ability to respond to the "unarticulated needs" ofcustomers by providing breakthroughs and services. Among many methods ofinnovation that the 3M used to improve their capability of makingbreakthroughs, The Lead User process offered a promising solution to thatproblem. Von Hipple (1999) marks that the Lead User market research method isbuilt around the idea that the richest understanding of new product andservice needs is held by just a few "Lead Users." They can be identified anddrawn into a process of joint development of new product or service conceptswith manufacturer personnel. In this research after a general description ofinnovation definition, the 3M Company is introduced as the research casestudy. In the fourth part the culture and methods of innovation that made orused by the 3M is discussed. And then the applications of a Lead User marketresearch method carried out by the 3M Company, a major Americanmanufacturer of products and materials has been interpreted.Key wordsInnovation, 3M Company, Lead User System
  2. 2. Table of Contents Part 1: Basics of project 1.1. Introduction ………………………………………………………………………. 1.2. Limitations …………………………………………………………………………. 1.3. Importance of the work …………………………………………………….. 1.4. Method of research …………………………………………………………… Part 2: Innovation 2.1. Definition of innovation …………………………………………………….. 2.2. Related concepts ……………………………………………………………….. 2.2.1. Innovation and growth ………………………………………………. 2.2.2. Innovation and design ……………………………………………….. 2.2.3. Innovation and failure ……………………………………………….. 2.2.4. Innovation and customers …………………………………………. 2.2.5. Innovation and knowledge ………………………………………… 2.3. Drivers of innovation …………………………………………………………. 2.3.1. Emerging technologies ………………………………………………. 2.3.2. Competitor actions ……………………………………………………. 2.3.3. New ideas …………………………………………………………………… 2.3.4. Emerging changes in the external environment …………. 2.4. Industrial innovation …………………………………………………………. 2.5. Product innovation ……………………………………………………………. 2.6. Business innovation …………………………………………………………… Part 3: Introduction of case study; 3M Company 3.1. 3M Company …………………………………………………………………….. 3.2. History of 3M ……………………………………………………………………. 3.3. Company profile ………………………………………………………………… 3.4. 3M performance ……………………………………………………………….. 3.5. 3M ranking and recognition ………………………………………………. 3.6. 3M trademarks …………………………………………………………………. Part 4: Ways of innovation at 3M Company 4.1. 3M breakthrough products ………………………………………………..
  3. 3. 4.2. 3M corporate culture for innovation …………………………………. 4.2.1. The 15% option …………………………………………………………. 4.2.2. Speed capital ……………………………………………………………… 4.2.3. Dual career path ………………………………………………………… 4.2.4. Reward and recognitions …………………………………………… 4.3. Essentials for innovation at 3M ………………………………………….. Part 5: Lead user system 5.1. Lead user system: A different approach …………………………….. to concept development ……………………………………………………. 5.2. Characteristics of lead user approach …………………………….….. 5.2.1. Lead user research and leading edge users …………………. 5.2.2. Lead user research and lead user experts ……………………. 5.2.3. Lead user research and concept development ……………. 5.3. Lead user approach in process ……………………………………….…. 5.3.1. Laying the foundation …………………………………………….…. 5.3.2. Determining the trends ……………………………………………… 5.3.3. Identifying lead users …………………………………………………. 5.3.4. Developing breakthroughs ………………………………………… 5.4. Users in lead users system …………………………………………………. 5.5. Different types of lead users ………………………………………………. 5.6. Benefits of Lead User method in brief …………………………………List of Illustrations Figure 3.1. ……………………………………………………………………………………… Figure 4.1. ……………………………………………………………………………………… Figure 5.1. ……………………………………………………………………………………… Figure 5.2. ………………………………………………………………………………………List of Tables Table 3.1. ……………………………………………………………………………………….. Table 4.1. ………………………………………………………………………………………..
  4. 4. Lead User ProcessInnovation method for breakthroughs at 3MPart 1: Basics of project1.1. Introduction To clarify the Lead User Process: Innovation method for breakthroughs at3M as the topic of this research it has been tried to explants the generaldefinition of innovation and different derivations and concepts of this term inthe first place. In the next step the 3M Company (the case study of thisproject), has been introduced through its history and profile and operations. Inthe last two parts the methods and cultures of innovation in 3m Company hasbeen named and the Lead User approach specifically has been defined as thekey strategy of 3M toward its innovation.1.2. Limitations This study is not attempting to identify or compare different methods ofinnovation with each other inside or out of the 3M Company. The research isrestricted to identify and gather basic data about the approaches of 3MCompany toward innovation for their breakthroughs. Time limitation can benamed as the most important Constraint of this project.1.3. Importance of the research In the past, many organizations have been able to survive even with verylimited amounts of innovation. They focus on providing quality products andsimply update them to a level that maintains their competitiveness in themarket. This method still applies to some products with long lifecycles and fewopportunities for innovation. Recently however, organizations need more thangood products to survive; they require innovative processes and managementthat can drive down costs and improve productivity. Consumer expectationsalso drive the amount of innovation in the market. Modern consumers aremore informed and have more options in terms of what they buy and whothey buy it from [3]. Innovation is important as it is one of the primary ways to differentiateproducts from the competition. And in a very broad sense, it is important to
  5. 5. the advancement of society around the world. New and innovative productscan increase the standard of living and provide people with opportunities toimprove their lives. Breakthroughs in medicine and technology havesignificantly improved living standards around the world. Innovation has alsolead to significant improvements in the way businesses operate and has closedthe gaps between different markets [3].1.4. Method of research In this study, documentary investigation and desk research and a case studyis used for the research. In this scope of study no further attempts in searchingfor data was necessary. The Vancouver referencing method as the official term of referencingmethod in Amirkabir University of Technology has been used for this researchas well.
  6. 6. Lead User ProcessInnovation method for breakthroughs at 3MPart 2: Innovation2.1. Definition of innovation Innovations can be in the form of new products or services, or cost-reducingprocess improvements, or innovative business models and methods. Thebenefits of innovation occur in all aspects of the profit loss statement:innovators drive additional sales volume, achieve price premiums and reducecosts through process improvements [4]. In other words, innovation is thedevelopment of new customer’s value through solutions that meet new needs,inarticulate needs, or old customer and market needs in new ways. This isaccomplished through different or more effective products and processes oreven services and technologies or ideas that are readily available to marketsand governments and society. Innovation has been and continues to be animportant topic of study for different disciplines [5].2.2. Related concepts Innovation is often used in conjunction with some other related terms. Toexplore the term of innovation in more detail in order to get a deeperunderstanding, some of the related concepts with innovation need to beexplained [5].2.2.1. Innovation and growth Innovation is about developing growth. According to Drucker (1988),innovation can be viewed as a purposeful and focused effort to achieve changein (an organization’s) economic or social potential. Bottom-line growth canoccur in a number of ways, such as better service quality and shorter leadtimes in nonprofit organizations and cost reduction, cost avoidance, andincreased turnover in profit-focused organizations [5].2.2.2. Innovation and design The term design in the context of innovation is defined as “the consciousdecision-making process by which information (an idea) is transformed into an
  7. 7. outcome be it tangible (product) or intangible (service)” [5]. The design activitydraws heavily on creativity to resolve issues such as the aesthetics, form, andfunctionality of the eventual outcome. In this way, during the exploitationphase of the innovation process, organizations engage in design activities thatwill produce an output that provides the optimum fit with marketrequirements. Although design is an integral part of the exploitation phase ofan innovation, it is only one aspect. Exploitation can include other elements,such as process development and market preparation [6].2.2.3. Innovation and failure One of the first writers to emphasize the importance of innovation wasSchumpeter (1942), who described innovation as “creative destruction” that isessential for economic growth. Innovation is essential for helping organizationsgrow. Growth is often measured in terms of turnover and profit, but growthcan also occur in knowledge, human experience, and the efficiency and qualityof products, processes, and services. The innovation process will naturallyinvolve unsuccessful ideas. These are seen as a natural byproduct of theinnovation process. In order for some ideas to succeed, many more must fail.Organizations can learn from these failures and bring new knowledge (andsometimes technology) to use in future innovative actions that may benefit theorganization. Organizations that can successfully sift out the good ideas fromthe bad will be more adaptable than those that cannot do so. In managing theinnovation process, destroying poor ideas is often as important as nurturinggood ones. Destroying poor ideas early on allows scarce resources to bereleased and refocused on new ideas [5].2.2.4. Innovation and customers An innovation must add value to customers to make them purchase orconsume the product or service or perceive an improvement. An importantpart of the exploitation process is ensuring that the innovation adequatelyfulfills prospective customers’ needs. The better the innovation fulfillscustomer needs, the more likely customers are to adopt it. A common mistaketechnology companies make is to focus on the technological capability of theiroffering rather than on how that technology can satisfy customer needs. It isimportant to emphasize that a customer is anyone who purchases or uses a
  8. 8. product or service. Customers can include students who purchase a book inthe university bookstore, patients who use services in a hospital, or membersof the public who use the services of a local library [6]. Customers can also be internal to an organization. University lecturers whooffer a service to students are in turn customers of the library, for example.Doctors who deliver a service to patients are also customers of supportlaboratories, and librarians are customers of the library’s computer servicedepartment. When we use the term organization in this book, we refer to theorganization around which innovation is focused. This can be an entirecompany, a department within a company, or a team of individuals [5].2.2.5. Innovation and knowledge Innovation is built on a foundation of creativity and sometimes oninvention, resulting in the creation of new knowledge and learning within theorganization. Even when failures occur, the learning gained can be a valuableasset for the organization. The scope of innovation exists primarily within therealm of the individual and the collective knowledge of the organization. Thishas become increasingly evident as the complexity of technology and marketshave increased. Therefore, the knowledge reservoir of the organizationdetermines the type and level of innovation possible. If an organization’sculture and routine are capable of capturing knowledge from past failures,then future innovative efforts will not repeat the mistakes of the past.Organizations that develop such knowledge systems are in a better position tostore and share this knowledge so that it will improve the innovation processthrough enhanced idea generation, better decision making, and more effectiveexploitation. In this way, all ideas, whether successful or not, can contribute tothe organization’s long-term success [7].2.3. Drivers of innovation Various factors encourage an organization to innovate. Each of thesedrivers demands continuous innovation and learning so that the process canbe repeated continuously. These drivers also help to create a sense of urgencyaround the need to create new organizational goals and generate new ideasfor meeting these goals. These drivers can be summarized as follows [5]:
  9. 9. 2.3.1. Emerging technologies These have the potential for significant innovation across the organizationand can be the basis for innovative products, processes, and services that canrevolutionize the fortunes of an organization. In the past, organizationsdeveloped technologies in large R&D laboratories; however, in today’senvironment the sources of emerging technology are often far too prolific forany one organization to develop internally. Consequently, organizationsexpend more resources scanning the environment for potential technologicalopportunities. Sources of emerging technology can include universities, high-technology startups, and competing organizations [5].2.3.2. Competitor actions The innovative actions of competitors and other organizations can beanother driver of innovation. Competitors can provide a benchmark regardingwhich projects and initiatives to pursue. Copying competitor innovationsreduces risk because the products may have already been adopted by themarket. Although such behavior is unlikely to increase market share, it can beeffective in maintaining the status quo by counteracting the advantage to thecompetitor [5].2.3.3. New ideas from customers, strategic partners, and employees In the past, innovations were developed from the insights of a smallnumber of designers and engineers. Now, however, with greater technologicalcomplexity and market segmentation, modern organizations are engaging asmany stakeholders as possible in the innovation process. This can result inincreased scanning capabilities and better information about market needs.Engaging employees, suppliers, customers, and other lead users can revealnew opportunities that otherwise might have gone undiscovered [8].2.3.4. Emerging changes in the external environment All organizations are affected by changes in their external environment;these changes can be another driver of innovation. Environmental changes canoccur because of competitor actions that have revolutionized the businessenvironment or can happen through macro shifts in the political, economic,cultural, or technological environment. As organizations struggle to realign
  10. 10. with their new business environment, they must innovate their products,processes, and services accordingly [8].2.4. Industrial innovation Industrial innovation is about helping organizations grow. Growth is oftenmeasured in terms of turnover and profit, but can also occur in knowledge,human experience, efficiency and quality. Innovation is the process of makingchanges to something established by introducing something new. As such, itcan be radical or incremental, and it can be applied to products, processes, orservices and in any organization. It can happen at all levels in an organization,from management teams to departments and even to the level of theindividual. Applying innovation is the application of practical tools andtechniques that make changes, large and small, to products, processes, andservices that results in the introduction of something new for the organizationthat adds value to customers and contributes to the knowledge store of theorganization [9].2.5. Product innovation Product innovation is about making beneficial changes to physical products.Related terms that are often used interchangeably include product design,research and development, and new product development (NPD). Each ofthese terms offers a particular perspective on the degree of changes toproducts. The degree of change can include the following [9]:  Incremental improvements  Additions to product families  Next-generation products  New core products Established organizations typically have a portfolio of products that must beincrementally improved or adjusted as problems are identified in service or asnew requirements emerge. It is important that they also work on additions tothe product families. One of the main activities of the product design team isthe work it performs on next-generation products or new models of products.They may also work on designing radical new products or new core products
  11. 11. that expand the portfolio significantly and often involve radically newprocesses to create them. These new core products ideally offer theorganization the possibility of major increases in revenue and growth, whichcan also create the potential of a temporary monopoly in the market. Theproduct development process for next-generation and new core productsfollows a familiar cycle in most organizations [5]: 1. Ideation 2. Preliminary investigation 3. Detailed investigation 4. Development 5. Testing and validation 6. Market launch and full production Each of these steps involves interaction with customers, who mayparticipate in idea generation and feature recognition. Key performancecriteria in the design process revolve around the following [5]:  Time to market  Product cost  Customer benefit delivery  Development costs These criteria can be traded off against one another. For example,development costs can be traded against time to market, customer benefitscan be traded against product costs, and so on. Three design methods haveestablished themselves as providing a management system for effectiveproduct innovation: phase review, stage gate, and product and cycle timeexcellence1 [5].1 PACE: The PACE method is concerned primarily with developing product developmentstrategies (McGrath, 1996). The method links product strategy with the overall strategy andvision of the organization. A key feature is deploying the voice of the customer throughoutthe product design process. Strategies are divided into six product strategic thrusts:expansion, innovation, strategic balance, platform strategy, product line strategy, andcompetitive strategy [5].
  12. 12. 2.6. Business innovation According to the U.S. magazine Business Week, the process of innovationconsists of re-creating business models and building entirely new markets tosatisfy unmet human needs; above all, it aspires to select and execute the rightideas, and bring them to market in record time. Traditionally, innovation in thebusiness world has meant seeking new technological solutions. However, inthe 1990’s, the dissemination of Total Quality Management1 gave birth to anew approach to innovation: to innovate, it was not only necessary to find newtechnological solutions, but also to explore new markets. Thus, in addition tocreating new forms of contact with customers, new approaches to satisfyingtheir needs were also opened up [9].1 (TQM): A management philosophy created by Deming (1986) that aims atcontinuous improvement in the quality of products and processes [9].
  13. 13. Lead User ProcessInnovation method for breakthroughs at 3MPart 3: Introduction of case study; 3M Company3.1. 3M Company 3M was founded in 1902 at the Lake Superior town of Two Harbors,Minnesota. Five businessmen set out to mine a mineral deposit for grinding-wheel abrasives. But the deposits proved to be of little value, and the newMinnesota Mining and Manufacturing Co. quickly moved to nearby Duluth tofocus on sandpaper products. Years of struggle ensued until the companycould master quality production and a supply chain [10].3.2. History of 3M  In 1910, new investors were attracted to 3M, such as Lucius Ordway,who moved the company to St. Paul.  In 1916, early technical and marketing innovations began to producesuccesses and the company paid its first dividend of 6 cents a share.  In the early 1920s, the worlds first waterproof sandpaper, whichreduced airborne dusts during automobile manufacturing, was developed.  In 1925, a second major milestone occurred when Richard G. Drew, ayoung lab assistant, invented masking tape – an innovative step towarddiversification and the first of many Scotch Pressure-Sensitive Tapes. In thefollowing years, technical progress resulted in Scotch Cellophane Tape for boxsealing and soon hundreds of practical uses were discovered.  In the early 1940s, 3M was diverted into defense materials for WorldWar II, which was followed by new ventures, such as Scotchlite ReflectiveSheeting for highway markings, magnetic sound recording tape, filamentadhesive tape and the start of 3Ms involvement in the graphic arts field withoffset printing plates.  In the 1950s, 3M introduced the Thermo-Fax copying process,Scotchgard Fabric Protector, videotape, Scotch-Brite Cleaning Pads and severalnew electro-mechanical products.
  14. 14.  In the 1960s, Dry-silver microfilm was introduced, along withphotographic products, carbonless papers, overhead projection systems, and arapidly growing health care business of medical and dental products.  In the 1970s and 1980s, Markets further expanded into pharmaceuticals,radiology and energy control.  In 1980, 3M introduced Post-it Notes, which created a whole newcategory in the marketplace and changed people’s communication andorganization behavior forever.  In the 1990s, sales reached the $15 billion mark. 3M continued todevelop an array of innovative products, including immune response modifierpharmaceuticals; brightness enhancement films for electronic displays; andflexible circuits used in inkjet printers, cell phones and other electronic devices.  In 2004, sales topped $20 billion for the first time, with innovative newproducts contributing significantly to growth. Recent innovations include Post-it Super Sticky Notes, Scotch Transparent Duct Tape, optical films for LCDtelevisions and a new family of Scotch-Brite Cleaning Products that giveconsumers the right scrubbing power for a host of cleaning jobs [11].3.3. Company Profile As shown in figure 3.1. [11] 3M is a diversified technology company with aglobal presence in the following businesses: industrial and transportation,health care, display and graphics, consumer and office, safety, security andprotection services, and electro and communications. 3M is among the leadingmanufacturers of products for many of the markets it serves. Most 3Mproducts involve expertise in product development, manufacturing andmarketing, and are subject to competition from products manufactured andsold by other technologically oriented companies. At December 31, 2007, theCompany employed 76,239 people, with 34,138 employed in the United Statesand 42,101 employed internationally, i.e. 55% of the total staff. 3 Moreover,63% of total sales are made internationally (total sales reach $24.462 billion in2007). 3M’s six business segments bring together common or related 3Mtechnologies, enhancing the development of innovative products and servicesand providing for efficient sharing of business resources. These segments haveworldwide responsibility for virtually all 3M product lines. Certain small
  15. 15. businesses and lab-sponsored products, as well as various corporate assets andexpenses, are not allocated to the business segments [11]. Figure 3.1. 3M’s six business segments and their proportion of the total sales in 2007 3M’s general offices, corporate research laboratories, and certain divisionlaboratories are located in St. Paul, Minnesota. In the United States, 3M hasnine sales offices in eight states and operates 74 manufacturing facilities in 27states. Internationally, 3M has 148 sales offices. The Company operates 93manufacturing and converting facilities in 32 countries outside the UnitedStates [11].3.4. 3M Performance 3M is fundamentally a science-based company and produce thousands ofimaginative products. It’s a leader in scores of markets - from health care andhighway safety to office products and abrasives and adhesives. 3M success isjoining with the ability to apply technologies - often in combination - to anendless array of real-world customer needs. 3M Company leverage thesecompetencies to create innovative solutions for the customers and also toprovide investors with attractive long-term returns [12].
  16. 16. 3.5. 3M Rankings and Recognition Some of the 3Ms achievements in ranking and recognition are [12]:3M ranked No. 37 on Universum USA’s list of “Top 100 MBA Employers” for2012. Research firm Universum USA annually ranks the most desirableemployers in the world based on where MBA candidates say they would mostlike to work.3M came in at No. 29 on Corporate Responsibility Magazine’s 2012 list of “100Best Corporate Citizens.” The list ranks companies in seven areas, includingenvironment, human rights, employee relations and philanthropy.3M ranked No. 27 on the 2012 list of “America’s Most Reputable Companies.”The list, developed by the Reputation Institute and Forbes magazine, is theresult of an online study of more than 10,000 consumers, measuring theirperceptions of the 150 largest U.S. companies.3M ranked No. 18 on Fortune magazine’s 2012 list of “50 Most AdmiredCompanies.”3M ranked No. 4 on Chief Executive magazine’s 2012 list of “10 BestCompanies for Leaders”—a list of corporations who lead the pack when itcomes to leadership development.3M was among 13 companies in Minnesota (and 190 companies nationwide)to receive a 100-percent index rating in the 2012 Corporate Equality Indexreport for workplace inclusiveness. Washington, D.C.-based Human RightsCampaign Foundation rated employers on policies and practices that are mostfriendly to lesbian, gay, bisexual and transgender employees.
  17. 17. 3.6. 3M trademarks As shown in table 3.1. 3M Company owns lots of brands and trademarksunder its main organization. Some of those trademarks are named below [10]: Active™ Aldara™ Aseptex™ Black Watch™ Buf-Puf™ Colorquartz™ Command™ Controltac™Diamond Grade™ Durapore™ DuraPrep™ Dyneon™ Elek-Tro-Cut™ Filtrete™ Fluorel™ Imperial™ Interam™ Isotak™ Lacelon™ Littmann™ Magic™ Magnetic™ Microfoam™ Micropore™ Minitran™ Mistlon™ Nexcare™ Nextel™ Nomad™ Novec™ O-Cel-O™ Panaflex™ Plastiform™ Post-it® Reston™ Retsul™ Safety-Walk™ Sasheen™ Scotch® Scotchban™ Scotch-Brite™ Scotchcal™ Scotchcast™ Scotchgard™ Scotchkote™ Scotchlite™ Scotchlok™ Scotchmate™ Scotchshield™ Skimmit™ Steri-Strip™ Stikit™ Tambocor™ Tartan Track™ Tartan Turf™ Tattoo™ Tegaderm™ hermo-Fax™ TThinsulate™ 3M™ Three-M-Ite™ Transpore™ Tri-M-Ite™ Trizact™ Unitek™ VHB™ Vikuiti™ Volition™ Table3.1. List of 3M Company trademarks
  18. 18. Lead User ProcessInnovation method for breakthroughs at 3MPart 4: Ways of innovation at 3M Company4.1. 3M Breakthrough Products Traditionally the 3M’s management has fostered innovation by taking a “getout of the way” attitude toward product developers who, in turn, have workedaccording to the aphorism “It’s better to seek forgiveness than to askpremission”. This relationship between managers and developers has resultedin the creation of a long line of profitable product from waterproof sandpaperand scotch tape in the 1920s to Post-It-Notes and thinsulate in the 1970s. butby the mid 1990s, 3M’s top managers were concerned that too much of thecompanies growth was coming from changes to existing products.Breakthroughs were fewer and farther between. The demand for- and therewards from- incremental improvements spurred the company to focus oncurrent products. To counter this trend, management set a bold objective: 30%of sales would come from products that had not existed four years erlier [12]. For the company to meet that goal, some employees started becomingacquinted with a new method for developing breakthrough products: TheLeader User Process. The process which makes the generation ofbreakthrough strategies, products and services systematic is based on twomagor findings by innovation researches [12]. First the researchers found that many commercially important products areinitially thought of and even prototyped by users rather than manufacturers.Second they discovered that such products tend to be developed by “LeadUsers” companies, organizations and individuals that are well ahead of markettrends and have needs that go far beyond those of the avarage user. Thosediscoveries transformed the difficult job of creating breakthroughs fromscratch into a systematic task of identifying lead users- companies or peoplethat have already developed elements of commercially attractivebreakthroughs- and learning from them [13].
  19. 19. 4.2. 3M Corporate Culture for Innovation 3M has a number of programs geared to support and grow innovationamong its researchers. These include:4.2.1. The 15% option Many employees can spend up to 15% of their workweek on projects oftheir own choice that might benefit the company. They often dont have toinform their manager of the project or even justify it [13].4.2.2. Seed capital If researchers create a new technology or idea, they can request seedcapital from their business unit managers to develop it further. If that fundingis denied, they can take it to any other 3M business unit. Failing even that, theycan request a corporate Genesis Grant for independent R&D awards of up to$100,000; about a dozen of these are granted each year [12].4.2.3. Dual career path Researchers can choose to follow a technical career path or a managementcareer path, with equal advancement opportunities. This option is offeredsuccessfully by a number of technology firms, allowing researchers to morefully develop their technical professional interests without being penalizedfinancially for not going into management [13].4.2.4. Rewards and recognitions 3M sponsors 12 global and four US-based award programs to honorindividuals who make significant contributions to the company. Each businessand staff unit, department, and area also has ways of recognizing andrewarding people [12]. These include:- The Carlton Society Honors employees for outstanding career scientific achievements, their contributions to new technologies or products, and high standards of originality, dedication, and integrity [14].- Circle of Technical Excellence & Innovation Awards Recognize employees who have made exceptional contributions to 3Ms technical capabilities [14].
  20. 20. - Pyramid of Excellence Awards Recognize the top performing administrative employees for their exceptional achievements [14].- Quality Achievement Awards Recognize employees for individual and team outstanding quality improvement efforts [13].4.3. Essentials for innovation at 3M Gates reviews require cross-functional teams to demonstrate extensive andstatistically valid “VOC”/ “VOM’’. Their overall innovation strategy is focusedon two core themes – deep technological competence and strong productdevelopment capabilities. They combine these to enable them to offer a steadystream of breakthrough products and line extensions/product improvements.A great strength is the integrated input from the technical and marketing sidewhich enables ‘creative association’, coming up with new and often powerfulcombinations of needs and means [1]. In table 4.1. Some of them are listed[13]: Setting stretch targets – such as ‘x% of sales from products introduced during the past y years’ – provides a clear and consistent message and a focus for the whole organization Allocating resources as ‘slack’ – space and time in which staff can explore and play with ideas, build on chance events or combinations, etc. Encouragement of ‘bootlegging’ employees working on innovation projects in their own time and often accessing resources in a non-formal way – the ‘benevolent blind eye’ effect. Provision of staged resource support for innovators who want to take an idea forward – effectively different levels of internal venture capital for which people can bid (against increasingly high hurdles) – this encourages ‘entrepreneurship’ (internal entrepreneurial behavior) rather than people feeling they have to leave the firm to take their good ideas forward. Table 4.1. Inputs from the technical and marketing side in 3M
  21. 21. As shown in figure 4.1. There is a formal stage-gate system for innovationsand extensions based on established products but in addition there is a clearprogress route for more radical ideas, moving from an incubator stage, wherethey are encouraged and where development funds are available against loosetargets, through to much more rigorous business plan appraisal for projectsfurther down the line. The ‘trial by fire’ approach is well-known but carrieswith it a strong element of encouraging innovation champions to take non-linear ideas through the system. Effectively they run parallel systems which allinvolve funnels and clear gateways through which ideas pass into narrowerparts of the funnel and which also commit more extensive resources – butalthough the mechanisms differ, the intent is the same [15]. Figure 4.1. 3M corporate NPI1 framework A more important fact about 3M is that it has a strong internal culture thatpromotes bottoms-up concept generation by its employees. For example, 3MCompany policy encourages all technical or marketing employees to spend upto 15% of work time on a project of their own choosing. Besides that, theyhave very deep technological strengths in its areas of expertise. During thistime, developers work on new ideas both as individuals and as informal teams,and bring them to the point where they can be considered for formal supportas a product or service development project. Where 3M innovation was foundto be lagging, however, was in the area of innovations driven by insights intonovel, unarticulated market needs2. needs that are unarticulated for ordinaryusers in a target market might well be clearly understood, clearly expressed –and perhaps even solved via a user developed product or service prototype -by users who lived at the leading edges of that market or functionally similarones. This meant that the daunting task of finding unarticulated needs mightbe transformable into learning to identify and learn from lead users [10].1 NPI(New Product Introduction)2 “Unarticulated needs” is 3M’s term for needs that customers have not yet found a way to express - oftenbecause they are very novel or rapidly-evolving – but that customers would be very pleased to have solutionsto nonetheless.
  22. 22. Lead User ProcessInnovation method for breakthroughs at 3MPart 5: Lead User System5.1. Lead User System: A Different Approach to ConceptDevelopments “Lead User System” is a research approach, which has reliably producedprofitable new products, services and strategies. The Lead User marketresearch method is built around the idea that the richest understanding of newproduct and service needs is held by just a few "Lead Users." They can beidentified and drawn into a process of joint development of new product orservice concepts with manufacturer personnel [16]. Lead user research is done in the initial phases of an innovation project forthe purposes of identifying strong market opportunities and developingconcepts for new products or services. Concepts are developed with directinput from "lead users." Lead users are individuals - or they may be firms - thatare experiencing needs that are ahead of the targeted market(s). Often, theydevelop product or service prototypes to satisfy their leading edge needs thatwill be commercially attractive to firms [2].5.2. Characteristics of lead user approach The lead user approach to concept development differs fromconventional methods in three very important ways:5.2.1. Lead user research captures the rich need information possessed byleading edge users. Conventional marketing research asks typical customers what they thinkthey need tomorrow in the way of new products and services. Researches haveshown that average users usually cannot say with any accuracy what they willwant in the future. They often can only speculate about their future needs - orask for improvements in existing products and services in terms that are verygeneral and already obvious to both users and manufacturers. They may ask,for example, for existing products to be made “cheaper” or “faster” or “easier”to use. Lead user research focuses on inquiring into the product and service
  23. 23. needs of “lead users” [17]. Lead users are sophisticated product/serviceconsumers who are facing and dealing with needs that are ahead of the bulk ofthe marketplace. These leading edge users have proven to be a much richerand more accurate source of information on future market needs than“routine” users because they are actively grappling with the inadequacies ofexisting products and services. By focusing data collection on lead users, theresult is higher quality information on emerging market needs - and thus,better product and service concepts [8].5.2.2. Lead user research captures prototypes and ideas for new productsand services that are developed by lead users and lead user experts. It is conventional for marketing research specialists to focus only on thecollection of customer needs data. The creation of new products and servicesthat can satisfy those needs is considered to be the province of internallybased research and development staff [4]. (von Hippel, 1988) Studies haveshown that lead users often both experience emerging needs and may developprototype products and services that can satisfy these needs. Lead userprototypes can then become the basis for commercially attractive newproducts and services that will be appealing to routine users in the generalmarketplace. Lead user research exploits this fact by bringing lead usersdirectly into the company’s concept development process. Thus, the projectteam can benefit from both the solution data and the need information that isheld by lead users. Lead user research also directly brings “lead use” expertsinto the work of concept development. Lead use experts are top authorities intheir fields who are doing leading edge work related to the team’s project.Some firms, especially in high-technology fields, utilize experts as advisors.What is “different from usual” about this model is that the range of expertsdrawn upon is wider and the experts, as well as lead users, actually collaboratewith internal personnel in concept development. There are two major benefitsof involving both lead users and lead use experts in the development of newproducts and services [17]: 1. They can provide extremely valuable design data. 2. Their input cuts down the work required of development engineers.
  24. 24. 5.2.3. Lead user research accelerates concept development. As shown in figure 5.1. lead user researches have proven to be a muchfaster concept development process than conventional approaches used bymany firms. For example, managers have compared lead user methods totraditional ones and estimate that they can complete concept developmenttwice as fast by doing a lead user study [17]. The process is faster, in large part,because technical and marketing departments are working collaborativelythroughout a study. Thus, they are able to more fully share information andfully coordinate their efforts. Also, the new concepts that come out of a studytypically require less development work because technical staff has directaccess to the rich information lead users have acquired by experimenting withprototype solutions under actual field conditions [4]. Figure 5.1. Lead users have product or service needs that are ahead of all other user groups in a given market.5.3. Lead user approach in process The lead user process gets under way when a cross-disciplinary team isformed. Teams typically are composed of four to six people from marketingand technical departments; one member serves as project leader. Teammembers usually will spend 12 to 15 hours per week on the project for itsduration. That high level of immersion fosters creative thought and sustainsthat projects momentum. Lead user projects proceed through four phases. Thelength of each phase can vary quite a bit. For planning purpose, a team should
  25. 25. figure on four to six weeks for each phase and four to six months for the entireproject [18].5.3.1. Phase 1; Laying the foundation During this initial period, the team identifies the markets it wants to targetand the type and level of innovations desired by key stakeholders within thecompany. If the team ultimate recommendations are to be credibly received,these stakeholders must be on board early [18].5.3.2. Phase 2; Determining the trends It’s an axiom of the process that lead users are a head of the trend. In firstplace team has to find out what the trend is. The team must talk to experts andleading-edge applications in the area being studied [12]. In figure 5.2. [12] thecurve illustrates the shape of a market trend. Lead users have needs that arewell ahead of the trend; over time more people feel the same need. Figure 5.2. Lead user curve
  26. 26. 5.3.3. Phase 3, Identifying lead users The team now begins a networking process to identify and learn from theusers at the leading edge of the target market and related markets. Thegroup’s members gather information that will help them identify especiallypromising innovations and ideas that might contribute to the development ofthe breakthrough products. Based on what they learn, team also begins toshape preliminary product ideas and to assess the business potential of theseconcepts and how they fit with company interests [18].5.3.4. Phase 4; Developing breakthroughs The goal is to move the preliminary concepts toward completion. The teambegins this phase by hosting a workshop with several lead users, a half-dozenin- house marketing and technical people and the lead user team itself. Suchworkshops may last two or three days. During that time the participant’s firstwork in small groups and then as a whole to design final concepts thatprecisely fit the company’s needs [18]. After the workshop, the project team further hones the concepts,determines whether they fits the needs of target market users, and eventuallypresents its recommendations to senior managers. By that point its proposalswill be supported by solid evidence that explains why customers would bewilling to pay for the new products. Although the project team may nowdisband, at least one member should stay involved with any concepts that arechosen foe commercialization. In that way the rich body of knowledge that wascollected during the process remains useful as the product or service familiesare developed and marketed [18].5.4. Users in Lead Users system Not all users are created equal with respect to the development ofcommercially-important innovations and innovation prototypes. Researchshows that almost all user-developed ideas and prototypes of generalcommercial interest tend to be developed by “Lead Users” – that is, users that[8]:1. Expect to get high benefit from an innovation and so have a strong incentive to innovate and;
  27. 27. 2. That are ahead of a target market with respect to one or more important trends. If it is demanded to find users that are actively exploring and testing newideas, it is a waste of time to survey users in the center of the target market.Instead, develop methods must to seek out users that are at the leading edgewith respect to needs that are important to that market – even if such leadusers are rare and hard to find - because that is where interesting user ideageneration and innovation is concentrated. For example, if an auto companywants to find innovative ways to improve car braking, it should surely searchamong automobile users who are at the leading edge with respect to this need– say, auto racers. But it should also go on to search for innovative ideas inother fields that have a high need for “stopping things in a hurry” such asaerospace [19].5.5. Different types of lead users It is useful to think about three different categories of lead users that canprovide important information to lead user project teams. During a lead userstudy, team members systematically contact each type in order to get the bestpossible information for their project. The three types of lead users are [2]: 1. Lead users in the target application and market; 2. Lead users of similar applications in advanced “analog” markets; 3. Lead users with respect to important attributes of problems faced by users in the target market [17].5.6. Benefits of Lead User method in brief The Lead User method is designed to collect both need and solutioninformation from lead users. In other words, in the lead user method, theemphasis is more on finding prototype product and service ideas that havealready been generated by lead users than it is on generating those ideas in-house [20]. There are two major reasons why it makes sense to focus on theidentification and collection of innovative ideas generated by lead users [17]:  The first is that user need information can very “sticky” – very complex and poorly encoded, and so very hard and costly to transfer
  28. 28. from users to the manufacturer. When this is so, and when it isrelatively less costly to transfer solution information frommanufacturer to user than it is to transfer need information theother way, it can make economic sense to locate the problem-solvingwork of idea generation at the site of the sticky need information –the user. The second reason that it makes sense to search for ideas and concepts among lead users is that there are often many more innovating users thinking about a problem than there are manufacturer-based developers, and these users are thinking about and testing a lot of different ideas.
  29. 29. References1. Stapleton, G. (2009), Keeping innovation alive- The 3m way, Retrieved October 27th 2010 from www.fitwise.co.uk/events/snn/documents/03.GStapleton.pdf2. Churchill, J., Von Hipple, E., Sonnak, M., (2009), Lead user project handbook: A practical guide for teams3. The New South Wales Information Website, (2012), Innovation Module, Retrieved November 4th 2012 from: http://toolkit.smallviz.nsw.gov.au.part/14/69/2914. Samson, D., (2010), Innovation for business success: Achieving a systematic innovation capability, University of Melbourne5. Sullivan, O., (2008), Understanding innovation, Working paper #45628, National University of Ireland, Galway6. Storti, A.J., (2006), Leadership for innovation: What leaders must do for innovation to happen, Home School Alliance for Technology Management, Vol 10, 2(Aug).7. Tan, B., (2004), The consequence of innovation, The Innovation Journal: The Public Sector Innovation, Vol 9(March).8. Von Hipple, E., Sonnak, M., (1999), Breakthroughs to order at 3M via lead user innovation, (Jan),Working Paper #40579. Vianna, M., [et al.], (2012), Design thinking: Business innovation (1st Ed.), MJV Press, Rio de Janeiro10. 3M Corporation, (2002), A century of innovation: The 3M story (1st Ed.), Minnesota: 3M Publishing11. gerybadze, A., Reger, G., (1999), Globalization of R&D: Recent changes in the management of innovation in transnational corporations, Elsevier, Vol 28, 2(March), 251-274.12. 3M Group, (2012), A culture of innovation, Retrieved November 4th 2012 from: http://solutions.3m.com/wps/portal/3M/en_US/3MCompany/Information/AboutUs/WhoWeAre/13. Von Hipple, E., Thomke, S., Sonnak, M., (1999), Creating breakthroughs at 3M, Harvard Business Review, (Sep- Oct), #9951014. www.business week.com/stories/2006-05-09/3ms-seven-pillars-of- innovation
  30. 30. 15. Cooper, R., Dreher,A., (2010), Voice-of-Customer methods: What is the best source of new product ideas?, Marketing Management Magazine, September Issue, PP 38-4816. Shore, R., (2010), Managed Innovation: 3M’s latest model for new products, Retrieved November 4th 2012 from:http://www.manufacturingnews.com/news/editorials/shor.html17. Herstatt, C., Von Hipple, E., (1991), Developing new product concepts via the lead user method: A case study in a “Low Tech” field, Journal of product innovation management, 9(Feb), 221-21318.Holt, K., (2002), Market Oriented Product Innovation: A Key to Survival in the Third Millennium, Netherland: Kluwer Academic Publishers.19.Gardien, P., Kyffin, S., (2009), Navigating the innovation matrix: An approach to design-led innovation, International Journal of Design, Vol 3, No 1, Netherlands Publishing20.Blaszczyk, R.L., (2000), Imaging consumers: Design and innovation from Wedgwood to Corning, Maryland, John Hopkins University Press.

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