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Format for case memos

The memo should cover three important areas 1: The main problem the company/decision maker is facing (this is the most important step of the memo). This is your view of what the problem is - you have to dig deeper in the case to understand what might be going on. YOU HAVE TO DIFFERNTIATE BETWEEN SYMPTONS (e.g. decreasing revenuers and sales) AND UNDERLYING PROBLEMS (e.g. products no longer meeting the needs of the customer).

2: - . . ( ) ( ). @3. - . - . ( ).

Additional notes: If you have additional information you want to share regarding your analysis or alternative solutions etc. or want to show how you arrived at your recommendations (calculations), then you can provide them in the appendix. The appendix is optional. However, ask yourself if the reader can reasonably follow what you communicate in the memo without additional information.

Innovation at 3M Corporation (A) On the evening of October 23, 1993', Rita Shor, senior product specialist at 3M, looked across Hie conference room at her team from the Medical-Surgical Markets Division. She wondered when to draw to close the intense ongoing debate on the nature of the team's recommendations to the Health Care Unit's senior management. A handpicked group of talented individuals, the team had embarked on a new method for understanding customer needs called "Lead User Research." But this initiative to introduce leadingedge market research methods into 3M's legendary innovation process had now grown into a revolutionary series of recommendations that threatened to rip apart the division. While senior management wanted the \"Lead User" team to execute a manageable project involving surgical draping material to protect surgery patients from infections, the team now wanted to rewrite the entire business unit's strategy statement to also include more proactive products or services that would permit the upstream containment of infectious agents such as germs. This went against the incrementalist approach that for so long had pervaded 3M. After all, as Mary Sonnack, division scientist and an internal 3M consultant on the new Lead User methodology, noted "3M gets so much revenue from incremental products . . . like a blue Post-it note instead ofjust a yellow one." Outside the window, the late autumn breeze rippled through the tall Minnesota grassa seasonal reminder that it had been a year since the group first embarked on the Lead User process [see Exhibit 1}. The method, including training. had called for less than six months dedicated to the entire process. But the lengthy commitment from participants as well as 3M senior management might just pay off if it took the Medical-Surgical Markets division from a stagnating business to a reinvigorated enterprise. Clearly, however, unless the team came up with successful product ideas and effective positioning, the new methodology for product irmovation would die with the winter frost. And so might the entire business unit. History of 3M Corporation1 In 1902, on the banks of Lake Superior, five investors got together to excavate what they thought was highquality corundum, a mineral almost as hard as diamond that manufacturers used for producing abrasives. What they dug up under the banner of the Minnesota Mining and Lll-tucl-I of the inrm-anon on 3M history comes from G. C. Nicholson. "Keeping Innovation Alive." Renown-Technology Management. vol. 41 (31, Maryanne 1993, pp. 3-1-46 and 3M Annual Report, 1993. Manufacturing Company, however, turned out low-grade and worthless. After filling one $20 order, the venture folded up its mining operations and turned instead to the sandpaper business. Here, disaster struck again: the abrasives they had imported from Spain refused to stick to the sandpaper. Research and development (R&D) then at 3M, as the company became known, took place in a primitive laboratory so small the sole technician had to back out to let the boss in. The young technician figured out the problem after plunging some sandpaper into water and noting an oil slick. Follow-up investigations revealed that during shipment from Spain, an ocean storm had caused olive oil to leak into the abrasive material. This insight allowed for fixing the sandpaper problem while also establishing the emphasis on technology and innovativeness at 3M. By 1916, survival assured, the company started paying stock dividends. The firm, now headquartered in St. Paul, Minnesota, initially stayed close to abrasives, developing the world's first waterproof sandpaper in the early 1920s. 3M technicians began bypassing purchasing agents in order to better understand product needs. Often, they walked into factories and workplaces and talked directly to workers, an unheard of practice that yielded unexpected dividends. While visiting an auto-body shop in the 1920s, for instance, Richard Drew, a young lab assistant, heard a torrent of screams and curses. Workers had apparently just ruined a two-tone paint job when paint peeled away as they removed glued newspaper strips used as masking materials. Back in the lab, while working with a new and crinkly backing material for sandpaper, Drew came up with the idea that would provide the world with masking tape. To spend the long hours needed to perfect the new tape, however, he had ignored a direct order from the company head to put all his efforts into improving a preexisting product. Drew's success helped spawn the legend of the subversive 3M inventor and the 3M aphorism: "It's better to seek forgiveness than to ask for permission." It also helped inspire a "get-out-of-the-way" attitude on the part of management toward product developers. At the same time, Drew had opened up another "core technology" for 3M. A few years later, in fact, Drew went on to also invent Scotch@ brand cellophane tape, which would help the company prosper through the Great Depression. Over the decades, 3M enjoyed national and global growth as well as a reputation for remaining a "hothouse" of innovation. "We'll make any damn thing we can make money on," stated a past 3M president, Richard Carlton. According to the International Directory of Company Histories: "Observers and outsiders frequently describe 3M in terms approaching awe. 3M earns such respect because of its improbable, almost defiantly non-corporate nature. The company is gigantic, yet it is as innovative and as full of growth potential as though it were a small venture." 3M inventors did not share directly in product royalties; rather, the firm hoped that individual love for discovery would drive innovation. 3M sought to encourage innovation through a variety of means including awards for innovation as well as in-house grants for innovative projects. The company also allowed all staff to spend 15% of their time to explore new ideas outside of assigned responsibilities. Post-it@ Notes were developed on the 15% time scheme by 3M inventor Art Fry, who first used a weak adhesive to produce convenient hymnal markers for his music recitals. 3M also employed a "dual ladder" approach that allowed senior, technically inclined individuals with attractive career opportunities to advance, without having to switch to management. In addition, the company held internal showcases for products and ideas to help encourage inter-departmental cross-pollination or \"'"bootlegging'r of discoveries. As a result of these steps, 3M employees tended not to move to other companies. The 3M model of expansion involved splintering off decentralized units based on new key product areas that were sufficiently different from prior key technologies. The first core technology from the 19205 had been adhesives and sandpaper. By the late 1990s, however, over 30 key technologies existed at 3M. Much market growth for 3M also came from nding new twists to existing product platforms: for instance, digital "Post[t Software Notes," or the use of 3M's Thinsulate, first introduced in was for apparel, in reducing sound in automobiles In the 19905, 3M operated with four objectives: producing 3m; of sales from products that did not exist four years earlieran attempt to accelerate away from the incrementalism that had served as an engine for growth in the past few decades; greater than 10% annual growth in earnings per share; greater than 3% return on capital employed; and JED25% return on equity. It also sought to change the mix of new products to emphasize products truly TIE\"! to the world, instead of line extensions, which typically had provided two out of three new-product sal dollars. To achieve high rates of innovation 3M placed a heavy emphasis on REED. [n 199?, it employed 4,500 scientists, engineers, and technicians in the United States, and another 2110f] overseas. On average, 3M spent 6.53M] cents of every sales dollar on laboratorybased R&D, which amounted to just over $1 billion in IWTnot including process engineering and quality control expenses. In 199?, 3M companies operated in more than 60 countries, and overseas businesses generated half of the rm's $15.0? billion in revenue and half of its $2.? billion in operating income. 3M employed Fim workers, of whom with 36,000 were outside the United States. {See Exhibits 2 and 3.) The Medical Products Division, the first 3M division dedicated solely to health care, was founded in 1961. A decade later, the Health Care Group at 3M provided an umbrella for all healthrelated product divisions including the MedicalSurgical Markets Division. By 199?, SM claimed over 10,0[10 healthrelated products ranging from surgical drapes to dental llings to respirators to software. By 199-4, Health Care sales topped $2 billion." Innovation at 3M in the 1990:: Product teams at 3M typically involved "skunkworks" teams primarily comprising technical individuals; teams also involved process engineers to help ensure that the particular product under development could be efciently made. These engineers also provided teams with feedback about 3M's manufacturing capabilities. The entire team faced no risk if an idea floppedindeed, there might even be a celebration In case of failures, members of disbanded teams could go on to other projects. Although failures were often celebrated, each technical person's output over one or harm years would be evaluated as a whole. The 3M mythology allowed for technical employees to take matters in their own handsas exemplified by the Post-it notes story. Marketing input traditionally came from current customers and sales representatives. Product developers focused on finding new angla or twists on early trends. At the same time, few market researchers worked at 3M; only one market rearcher served 900 engineers Instead, the firm hired out for market research reports from smaller market research firms. To identify market needs and trends, 3M product developers in the Health lCare unit, for instance, utilized several tools: 0 Data from sales representatives with daily contact with physicians or registered nurses. 9 Focus groups' for example, one business unit within the Medical-Surgical Division would gather some 3|] nurses biannually from across the rlation in a room to obtain reactions to proposed products. a Customer evaluations of currently marketed products. I Site visits by 3M scientists and teclmologists to observe physicians and nurses at work, with the intent to identify unforeseen needs a Data on risk factors for diseases Several disadvantages to these methods had become apparent over the years. For one, hiring out for market research created too many interfaces between development teams and customers. Another major disadvantage was that the information obtained was not necessarily proprietary. Anyone, for example, could open up a medical textbook to find key risk factors for diseases. Attempts to seek more proprietary information through, say, focus groups provided virtually no clue about market needs some five to '10 years down the road. While visiting customers provided an opportunity for Thomas Edison-type "immvations by serendipity," customers were somewhat blind about their own needs, and thus could not provide clues about developing revolutionary products. Even these customer visits, although traditionally a part of 3M, had often become deemphasized during the past few decades of successful growth through incremental innovation. This often led to situations where, as Mary Sonnack pointed out: "Typically, one or two product developers or even marketers think of a product, then they throw it over the wall to the commercializers.\" .'Ls a result, thousands of 3M product concepts and inventions awaited markets and languished on drawing boards and REED labs. The McdicciSurgimi Markets Division Over the past century, a few medical pioneers, including Benjamin Lister and Florence Nightingale, had demonstrated that the cleanliness of healthcare providers and the hospital environment could reduce the rate of new infections in patients. Previously, patients died on account of the hospital nearly as much as because of what put them there in the first place. It took several decades, however, for the pendulum to swing from the medical establishment to ridiculing such a stress on sanitation to mandating high standards of hygiene among health professionals. As a result, surgeons and attending staff now scmbbed with an almost ritualistic devotion using antiseptic detergents and donned sterile clothing and foot covers before entering operating rooms. What was being operated upon was also antiseptically prepared or "prepped\"r for surgery. Thus, operating teams carefully established \"sterile fields" on the skin around the pertinent area, freeing it from microbial contamination. A key part of this process involved use of surgical drapes, which served to isolate the \"eld of surgery" from all other potential sources of infection including the rest of the patient's body, the operating table, the anesthesiologist's equipment, and all members of the surgical team. But the diversity of the microbial world constantly challenged this artificial fortress. As a result, medical personnel had to remain vigilant about catheters and tubes along which agents of infections could migrate into the patient. From mid-century on, surgical operating rooms became a product developer's dream-come-true. Product categories dedicated to preserving sterility included razors and clippers for shaving hair, presurgical soaps for scrubbing hands, sterile surgical gloves and masks, drapes, handwashes, antibiotics, lavages for washing away excess blood in a sterile fashion, sponges with or without handles, antiseptic solutions, and dressings. The surgical drapes business unit within the Medical-Surgical Division focused largely on reducing infections from die skin through surgical drapes and surgical prepping. For 3M, the drape business represented one extension of Richard Drew's attempts to meet the needs of auto-body workshops. By the mid 1990s, 3M was highly penetrated in one niche of surgical drapes which brought the company over $100 million in yearly sales. But sales in the United States had limited growth remaining in these market niches. Overseas markets were limited by the high oost of 3M products, when converted into local currencies Most surgical drape products were developed using the equivalent of one full-time product developer and generated about $I million in sales each. Occasionally. :- Sal-$20 million product would come along. but these big products were becoming fewer and fewer. Typically, it would take about two years to get a surgical drape product out from initial product conception to market. In the best case, this could be shortened to a year,- in worse cases, it could take up to four years The surgical drapes section of the Medical-Surgical Markets Division had discovered the hard way int technological excellence by itself meant little. In the early 19903. for instance. the division had spent three years developing a virus-proof gown that would let water vapor but not viruses pass through the fabric through microscopic pinholes. This manufacturing feat, however, came in just as managed care was taking hold. Although customers loved the fabric, the mitt-15% price premium banished the product into a tiny nidte in the European market. By 1996, the business unit had gone almost a decade with only one successful product. Senior management charged Rita Shor with H12 mandate of developing a breakthrough product within the existing business strategy. She was assigned to the task not only because of her seniority, having been at the division 11 years, but also because she was thought of as being creative and a consensus buden Lead User Research at 3M'5 Medical-Surgical Markets Division Shor realized, at the outset, that 3M's traditional methods for understanding customer and market needs would not suffice. Market research reports provided an abundance of data but contained little useful information for conceptualizing a breakthrough product. She recalled, however, an in-house lecture given a few weeks before by Mary Scum-och, who had become increasingly involved with new product development using a new methodology termed \"Lead User Research" that she had studied at the Massachusetts institute of Technology [MIT]. Shor wondered if this might provide the key to a breakthrough product The premise of this novel mediodolngy was diat certain consumers experienoed needs ahead of other consumers and that some of the former would seek to innovate on their own By tapping the expertise of 'tl: so-called r\"lead users," manufacturers could find invaluable sources of innovation. Lead users had often already created innovations to solve their own leading-edge needsfamiliar examples were white-out ("liquid paper"), invented by a secretary for correcting typographical mistakes, and the sports drink Gatorade, developed in Florida with invaluable input from athletes. 3M's experience with traditional market research had been disappointing; it had not led to the kinds of innovations senior management wanted for the marketplace. As (Jiucl: I-larstad, former vice president of die Commercial and foice Supply Division and now vice president of Corporate Marketing, recalled: At the end of the day, we didn't learn anything from our market research department. 3M had to find new ways to identify leadingedge customer needs and develop conoepts for breakthrough products and services. Traditional market research methods couldn't deliver the goods. And product developers would not assume ownership for understanding customer needs because they considered that to be the responsibility of market researchers. So we ended up eliminating the market research department to learn about customer needs! Sonnack, uncler mandate from Harstad to seek out newer and better customerfocused product development pnooesses, thought that Lead User research tit well with 3M's customerfocused philosophy {see Exhibit 4). [n 1994, she began an unusual yearlong stay at MIT to study with Professor Eric von Hippel, who had pioneered Lead User research. For von Hippel, the collaboration represented a way to develop a step-by~step methodology for practitioners and seek further validation of Lead User concepts. Sinoe he had not charted out a "how-to" manual, he started this prooess with the help of Sonnack and Minnesota organizational psychologist Joan Churchill. One of Sonnack's and lChurchill's goals was to disseminate the Lead User prooess throughout 3M. Support for the new methodology existed at high levels within the company. William Coyne, 3M's Head of Research and Development, for instanoe, was fairly critical of the strategic planning process because he felt that "traditional strategic planning does not leave enough room for innovation And innovation camot be planned ahead of time." This view did not go unchallenged within 3M's senior management and represented a radical departure from the incrementalist approach to innovation. "Strategic planning looks in the rearview mirror and cannot keep up with the rate of change in today's markets,'r added Coyne. "We need to understand leading-edge customer needs to change the basis of competition." Widespread adoption of the Lead User process could help get 3M back to its roots of working more closely with customers and understanding such market needs. Through one of Sonnack's inhouse lectures, Shor first heard about the new methodology. In [une of 1996, she telephoned Sonnack to say: Our business unit has been going nowhere. Wlle we are number one in the surgical drapes market niche, and pull in over a hundred million in yearly sales, we are stagnating. We need to nd new customer needs we haven't thought of before. If we don't bring in radically new ways of looking for products, upper management may have little choice but to sell off the business. At the time, Sonnack's and Churchill's inhouse consulting schedule was crowded. But Shor's degree of commitment appeared to match Sonnack's enthusiasm for the new methodology, and the two women agreed to meet. Were the MedicalSurgical Markets Division to focus product development based on the Lead User method, it would became one of the rst divisions at 3-H to do so. During their preliminary meeting, Sonnack warned Shor about the need for high level commitment from both team members and their management. Selling the new approach to senior management would use much of Shor's time and efforts. At rst, senior management had balked at such a large commitment. But Shor pointed out that an adequate human resources commitment to the new methodology might prove more costeffective than having 10 to 15 people working disiointedly. She tactfully reminded management that far more human resources were often redeployed for attacking technical problems that developed later in the product development process: "3M can pour a hundred thousand dollars at the drop of a hat for a production problem late in the product development process, but it is not used to doing so for such an early stage." Finally, however, Shor obtained support from her senior management to assemble a product innovation team on the basis of creativity and enthusiasm from the Medical-Surgical Markets Division. In a few weeks she was able to assemble an impressive interdisciplinary teams. All team members were to commit half their time to the project. But as it turned out, several team members found that their managers still expected them to perform most of their traditional duties. As a result, much of the teamwork took place on Saturdays or outside the office at restaurants. The team sought in a disciplined manner to follow a project schedule with four stages prescribed by the Lead User research methodology (see Exhibit 4). Stage I: Project Planning Stated goal in process manual: In this "homework" or scouting stage of the study, which typically lasted 4-6 weeks, teams identified the types of markets and new products of interest, and the desired level of innovation. In September of 1996, as the first stage started, Sonnack and Churchill sat in on Shor's early Lead User team meetings to focus the process. The two co-leaders probed the team with questions like, "what do you know about this market . . . what don't you know?" "How about reimbursement policies?" "How important is the skin itself as a source of infection?" The team met for four hours each week in a conference room lined with some 20 flip charts so that ideas could be jotted down quickly. Between meetings, team members would search the Internet, literature, and their people network for information on relevant topics. Through this process, the team built up an invaluable database of information. For instance, it learned that 30% of infections occurred from the patient's own skin-a figure that highlighted the need for good surgical drapes. Stage I took the team about six weeks. Stage II: Trends/Needs Identification Stated goal in process manual: The ultimate goal of this stage, which typically lasted 5-6 weeks, was to select a specific need-related trend(s) to focus upon for the remainder of the study. Typically a four-day team workshop kicked off this stage. The 3M team started Stage II with a five-day workshop intended to make sense of all the information gathered in Stage I. Through the workshop, which marked the culmination of all weekly meetings thus far, the team developed the following parameters for a breakthrough product: It should conform to the body, prove more effective than current products, be easy to apply and remove. The team, by now, had reached a stage where secondary literature could no longer add much of value. The second half of the workshop provided a turning point for the next phase of research: identifying appropriate expertise residing in experts at the leading edge of practice. The team undertook intensive group brainstorming about identifying appropriate experts to contact for more ideas and information from analogous areas of product development. Towards this end, workshop leaders encouraged participants to "step outside the box" because the most logical person might not prove the most appropriate expert. Through the rest of this stage, team members collected information from these identified experts Team members started talking over the telephone to a wide range of experts ranging from veterinary sciences to medics from the U.S. Mobile Army Surgical Hospital (MASH) unit in Bosnia.The MASH unit, discovered by team co-leader lohn Pournoor. had been considered a potential lead user because of its needs for portable, inexpensive, and flexible products. Product flexibility would ideally allow for low inventory,- a prime consideration for a mobile medical unit. Hospitals. in contrast. could stock dotzens of different product sizes and types. Interestingly, the MASH physicians did not fully realize their own need for manageable inventories since they focused on problems of communications. computerization, and telemedicine in the field: thus, they were not the lead users the team was looking for. Although the MASH physicians would not be able to collaborate more intimately with the 3M Medical-Surgical Markets Division, this stage turned up other expertsfrom the theater make-up business to veterinary sciences to oceanographerswho would contribute to later stages. Stage 11 took the team about six weeks. Stage II] at and: Preliminary Concept Generation Stated gout in process :narruai': in this stage, which typically tiistiri' 5-6 tin-eks. lead User groups acquired I! more precise understanding of Ftttit'kc'f needs in the seiected' areas affccas. The teams begun to generate preliminary concepts invoicing irieai attributes andfentutes that :hauiri best meet customer needs. By casting a wide net for product concepts, the division's business unit rapidly realized it knew precious little about the needs of customers outside the developed world. While sanitary conditions in the developed world had long since moved infectious disease down the roster of major killers (below causes such as cardiovascqu and cancer), in the developing world infectious diseases were still major killers. If 3M hoped to find a breakthrough infection control product here, however, the team quickly realized it should visit several emerging market sites. The majority of new growth opportunities might lie here, even though disposable products were not popular or affordable. Through December 1996 and January 199?, the team broke up into groups of two and traveled to hospitaLs in South America and Asia. Shor and Pournoor visited Malaysia. Korea, Indonesia and India. This was the first time the Medical-Surgical Markets Division had sent product developers. rather than marketers, to visit potential customers. It allowed the 3M team members to see how operating room personnel coped with infection challenges of extreme environments. According to Sheir: While we saw some excellent, world-class hospitals in India, we aLso observed hospitals in which surgeons operated barefoot and even we visitors had to take off our shoes. For surgical field preparation, these teams used cloth [often with holes} that provided no resistance to Fluids migrating to the wound itself! Sometimes, surgeons would use pieuzs of raincoat to cover over the patient's groin and other dirtier areas to keep microbes from migrating. Some surgeons used antibiotics wholesale, since these seemed cheaper to them than disposable drapes. _ _ _ Often, only in side-conversations would surgeons reveal that surgical infection was a problem. We also quickly realized that many other nations did not care about labor-savings from our products. Labor was inexpensive and unlikely to be replaced or reduced. As a result, we realized we should not over-engineer our products for these markets. The international fact-finding trips lengthened the expected duration of Stage III almost four-fold. While they yielded invaluable information about extreme environments and international market needs, they turned up no experts on lead use in terms of product efficacy. With an eye toward bringing the project to a useful culmination. individual team members. under Srmnack's and Churchill's guidance, continued searching for appropriate lead users that might actually help develop product concepts. Team members continued talking with customers. academics, industry experts, as well as searching through refereed journals and the [nterneL The team found no single lead user with the exact set of specifications that the proposed 3M breakthrough product or products would need. Instead, a variety of lead users were found with expertise about different relevant attributes. Commenting on the often painstaking search for an appropriate expert, Pourmmr felt, "It is like finding a partner for marriage." Some experts came from traditional backgroundsfor instance, an expert on infection control that consulted with the US. Center for Disease Control. Sometimes experts were found in the least likely places. During the premiere of the Lion King show in Mirmeapolis, for instance, a team member ended up chatting backstage with one of the make-up artists. As it turned out, the artist's husband, himself a make-up artist, had consulted with an orthopedic products firm. This make-up artist possessed specialized knowledge about the application of materials to the skin, which the team evennially felt would prove useful for developing breakthrough products. At the end, stage 11] took the team about six monthsabout four times as long as the process manual had recommended. How to pool together the combined knowledge and talent of this diverse array of knowledge to develop product concepts would prove the challenge of the final project stage. Stage IV at 3M: Final Concept Generation Stated goal in process manual: In this stage, which typically lasts 5-6 toeelts, lead User teams ialte preliminary concepts developed in Stage ill toanrd cortipleiion and also seelt to ensure that all possible solutions have been explored. This stage centers around a nurishop with invited lead users. In the summer of 199?, bad luck struck the team in the form of a change in senior management. Thus far, the team had kept upper management apprised of the team's progress because "that way, when you make recommendations and submit proposals, there are no surprises."\"' The new division manager, Sam D'unlop, was one of the rare managers to come with a traditional market research background. His vision was aligned with the old 3M strategy of incremental growth in high margin products. Dunlop had accepted the new post against his wil], with the mandate to \"stop the hemorrhage of profits and reconsolidate the division.\" He was close to retirement, and over the past few years none of the units he headed had thrived. In an initial meeting with team leaders, Dunlop stated more than once, "We must not tax the current operating income!" Although he recognized the need for departing from traditional product development, the focus on finding \"wild-eyed" lead users made him uncomfortable. His marketing training had stressed logic and quantifiable data, which could be collected and analyzed in a predictable, linear fashion. The Lead User methodology, in contrast, collected qualitative data from people, with new questions leading to new concepts, which in turn started up a new cycle of questions that begged further answers. Where the process would ultimately lead was never known with full certainty at the project's start. As a temporary compromise, DunJop reduced the Lead User team by one member and made his opposition to the project quite clear. Shor and her team had to sell the program starting from scratch, reminding the new managers about how inefficient the old ways of developing products had been. Cine tactic was to invite some of the business managers to join several team brainstorming sessions. This, according to Pournoor, \"got them out of the box," and made them more receptive. Nonetheless, team members remained uncomfortably aware of the watchdogs of corporate profitability nipping at their ankles. The Stage IV Workshop: Learning from Lead Users Even with the project's green light blinking anemically, the team finally decided to center the Stage IV workshop around the bold question, \"ls there a revolutionary approach to infection control?" In deference to management's concern with the near term bottomline, however, the team decided to focus specifically on product efficacy and cost. Rita Shor expressed the workshop goals to 11 3M personnel {see Exhibit 5} and '11 outside experts (see Exhibit ti] that had gathered on August ti ata St. Paul hotel: By the end of the workshop, we want at least three product concepts that could dramatically improve microbial control in the surgical setting of today and tomorrow, with significant cost savings for surgeons in the United States and in the rest of the world. We seek breakthrough innovations that range from being so big as to render obsolete the current system, or, alternatively, so simple that they would use our existing technologies in a new ways. All assembled experts signed intellectual property rights to 3M, but received modest financial remuneration in the form of an honorarium. The workshop lasted two and a half days, a period, described by Lead User team co-Ieader ]ohn Pournoorr a veteran of many product develop menl focus groups, as \"not too long and not too short." This length of time allowed for two to three iterations of concepts. In the introductory session, group members introduced themselves and discussed how their backgrounds might pertain to the task on hand. The group of experts, varying in age from .35 to 7'9, came from disciplines ranging from dermatology to makewup artistry to veterinarian sciences {see Exhibit 6}. The workshop was divided into exercise sessions lasting several hours each. For each session, participants divided up into smaller groups of three to five individuals. Although groups constantly changed, "An element of competition among groups developed,\" according to Pournoor. \"This reminded me of my old work at Boeing, where we'd have two different teams working in parallel on the same project.'r Group members and facilitators faced at least four major challenges. The first arose from the lack of structure found in many corporate meetings. As a result, some groups tended to "ounder\" during much of the exercise sessions. in a surprisingly large number of sessions, however, teams adhered to a strict schedule, which served to shepherd them toward solutions in the last few minutes. A second challenge came from introverted and extroverted participants. Initially, for instance, the make-up artist, according to Pournoor, "felt intimidated by all the big words being thrown around, and ] think he began to wonder what he was doing there. As time went on, however, his expertise and our needs converged. He contributed more and more." By contrast, the surgeon tended to squash all new ideas that arose early in the session. During a break, however, the veterinarian took him aside, saying, "Do you remember how during your training you were under someone's thumb? Well, that's what you're doing to us." After reflecting upon these words, the surgeon actually stayed up much of that night searching the Internet for new information, and thereafter went on to encourage other team membersr contributions A third challenge came from finding ways to marry very creative ideas with technical feasibility. A rare nexus of lead user need and technological reality occurred following a period when the veterinarian stopped to reect on his view of the ideal operating room: Iand probably most surgeonswant to focus on only one area on the operating table. I don't want to see anything except what I'm focused on, especially when I'm tired or under stress. With this in mind, could we create a material that we could quickly pull out of the wall or a box and place directly over the patient to create an infection barrier? Such a material should ideally draw the surgeon's attention to only the area being operated upon. This would prove valuable because time is of the essence, and surgery is a waltz that must be performed correctly every single time. Subsequent brainstorming identified a preexisting material found in 3M's current line of products as possibly capable of bringing the veterinarian's needs to product reality. This exchange of ideas ended up forming the basis of one of the workshop's key product concept recommendations. The fourth challenge lay in navigating a sea of facts. Here, an intricate interplay of questions and answers between experts from a diverse range of interrelated disciplines helped keep the entire product development process aoat. For example, one participant asked, \"How do we make all these antimicrobial materials stick to the patient's body?" The make-up artist, heretofore in the background, pulled open his large binder of dozens of pre-fabricated/pre-made concoctions of skin- adhesive materials that 3M would have otherwise missed. By the end of the ensuing discussion, he ended up sketching a product concept for layering on materials onto surfaces with smooth contours that could be shown to the other participants. In the course of several sessions, the invitees successfully rose to the challenges facing them and generated numerous product concepts. In the final session, the group met as a whole to rate and prioritize all concepts on the basis of commercial appeal and technical feasibility. Finally, team members agreed upon the next steps for rening the leading candidates [see Exhibit 7'}. The external experts ended up rating the workshops highly, from an A- to A+ largely because, in Shor's words, "They'd been in brain-storming sessions where everybody tossed out ideas, but this time, they got to turn the ideas into concrete concepts. . . ."f (See Exhibit 3.} After the lead users and other invitees had left town, the product development team from the Medical-Surgical Markets Division met to decide upon its final recommendations to senior management. The team felt the following "metrics" should be used for ranking the product development concepts that had arisen from the recent workshop: :- Customer preference for the new products. II Creation of new growth for the division. with the goal of double-digit annual growth. Creation of new businesses and industries that could change the basis of competition for the business unit. :- Boosted global presence of the division. II Higher growth for the rest of 3M through, as much as possible, incorporation of proprietary 3M technology with patent protection. The team ended up with three product recommendations that involved an "economy" line with a strong focus on cost, a \"skin doctor" line, and an antimicrobial \"armor" line (see Exhibit 7}. The first two recommendations represented straightforward linear extensions of existing 3M product lines. The last, the team thought, represented a departure from past activities and might thus open the door to new business opportunit - in presenting these three recommendations to senior manag ergy with 3M' s existing activities and business unit strateg Di): Airplane mode on uct lines could potentially boost sales from preexisting 3M products that helped reduce microbial contamination. As another example, the first proposal could also draw from a preexisting line of 3M drapes. It was the fourth recommendation, however, that divided the team and formed the basis for a long, heated discussion among the team members. The Fourth Recommendation: Evolution or Revolution? Over the past few months, the product development team had become increasingly aware of a gaping hole in medical knowledge involving infection containment. Discussions with lead users and associated experts indicated that the medical community still groped for ways to prevent infections and was easily swayed by any report that appeared credible. No health care company had yet stepped in to take leadership in the area of early intervention in the disease process. Thus a vacuum existed in which 3M could find a new growth area. For the fourth recommendation, therefore, the product development team had begun thinking about re-writing the business unit's strategy statement to include upstream containment of infections or, in other words, to keep infections from happening by precautionary upstream measures. Entering the area of upstream containment, however, meant becoming adept at a new set of skills and knowledge. It meant, for example, being able to track early contamination and its possible consequences in a health care facilitynot only detecting specific contaminants but also identifying and, depending on their riskvlevel, targeting individuals for interventions. The new approach thus called for much more sophistication than the traditional industrial viewpoint, which held one patient just as deserving as the next of the latest surgical drape or the newest handwash. With the new approach, for instance, a malnourished patient might be targeted for nutritional interventions in addition to standard interventions, and diabetic patients might be identified for extra antibiotic coverage. At 3M, such sophistication called for combining technologies from more than one core area or from areas in which 3M lacked depth. In particular, the product development team recognized the need to combine technologies from its Medical-Surgical division with diagnostics. But because the term "diagnostics" held a negative connotation at Slitfollowing the brief and unhappy acquisition of a small diagnostics company in the 1980's, the team diplomatically substituted the word \"detection" in wording its recommendations. The very need for diplomacy with phrasing of recommendations brought home the ramifications of a shift in direction. "l.|"|-"t1.ile traditional product development team members at 3M face no immediate consequences for failures," according to Pournoor, the polymer chemist, \"we were actually thinking about challenging the entire business strategy. We were crossing boundaries. . . . I think this resulted from using the Lead User methodology, which, in addition to allowing us to gather and use information differently than before, also provided emotional support for change. Team members no longer felt like 'lone-rangers' as they might have under the traditional regime." In the evening before the final recommendations were to be presented, the team met to resolve a deadlock over the fourth recommendation. lv'laurice Kuypers, the market development supervisor, sparked the debate by stating, "We don't want the Lead User methodology tobe viewed as a means for fomenting revolution. We already have three great product recommendations. If the team proceeds too quickly with the fourth recommendation, senior management may pull the plug on everything: theproduct recommendations as well as the Lead User method itself." Innovation ails-M Corporation IAI 699-012 Mark lohnson, the process development specialist, countered, \"Men [ started with this method, I thought we were just going to develop new products. But now, talking with these lead user experts; has shown me that what we were planning was not too effective anyway. We should seriously question our unit's business stra tegy." Susan Hiestand, the business manager, chipped in: \"Wasn't our mandate to find break-throughs? We were warned that with the Lead User method we will never be able to predict the final outcome or the path we will end up taking. Well, here we are with our breakthrough: It's not a product you can drop on your foot; it turns out to be a process or a service!" \"I think in the back of his mind," Iohn Pournoor warned, "Dunlop would not mind seeing this process fail. Let's not give him any excuses for scrapping everything we've worked and sacrificed for, with our extra hours of hard work on this process. Let's focus on the first three recommendations, plant a few seeds about infection prevention, and draw the managers into making the intellectual leap themselves. Let them become the revolutionaries... or Jcorporate visionaries.\" Rita Shor looked at her watch. In less than an hour she would have to draw the discussion to a close and seek consensus. She recalled how in the final workshop, the sessions often oundered until very close to the end, when miraculoust the group would arrive at consensus. But thatas invaluable to fostering creativity as it had provennow seemed like playing a board game on a rainy day. Today's decisions would ripple through the very real world of business, with the future of a sizable business unit at stake. Exhibit 1 Important Milestones 1902 Minnesota Mining and Manufacturing founded. 1948 3M Steri-Drape@ Surgical Drape introduced. 1961 Medical Products Division, the first 3M division dedicated solely to health care, founded. 1993 May Eric von Hippel at MIT contacts Mary Sonnack to see if 3M would help test Lead User methodology. Sonnack would spend the entire next year to learn and help formalize the Lead User methodology and initiate the involvement of psychologist Joan Churchill in the later part of the year. 1996 June Rita Shor given task of finding breakthrough products for Medical-Surgical Markets Division. Shor approaches Mary Sonnack after hearing Sonnack lecture internally at 3M about Lead User methodology. September-October Stage 1 of Medical-Surgical Markets Division Lead User project starts. Shor's product development team meets with Mary Sonnack. End of October Stage 2 starts. December Stage 3 starts. The product development team decides to search internationally for breakthrough ideas on surgical draping. 1997 January-March Medical-Surgical Markets Division team visits South America and Asia for breakthrough ideas on surgical draping- April Lead user meetings/workshops result in several concepts. Team starts search for appropriate lead users. June-July New management in Medical-Surgical Markets Division seeks justification for Lead User process and wants accelerated outcome. The team convinces new management to maintain support. Stage 4 starts. August Large 2.5-day Lead User workshop with 11 outside experts and 11 3M insiders. October 27 Scheduled date for Medical-Surgical Markets Division team's presentation to management concerning recommendations generated from Lead User process. November Medical-Surgical Markets Division management's deadline for resource allocation for product concepts generated from Lead User process. Source: Case interviews.Exhibit 2 Selected 3M Financial Data (dollars in millions, except per-share data) 1995 1996 1997 Sales 13,460 14,236 15,070 Cost of goods sold 6,861 7,216 7,710 Gross profit 6,599 7,020 7,360 Selling, general, and administrative expenses 3,440 3,646 3,815 Depreciation, depletion, and amortization 859 883 870 Operating profit 2,300 2,491 2,675 Net income (after taxes) 976 1,526 2,121 Other Data: EPS (primary)-excluding extra items and discontinued operations 3.11 3.63 5.14 Dividends per share 1.88 1.92 2.12 ROA (%) 9% 11% 16% ROE (%) 19% 24% 36% Market value 27,791 34,597 33,212 R&D expenses 883 947 Source: 3M Financial ReportsExhibit 3 3M Revenue by Classes of Products/Services ($millions) 1995 1996 1997E 1998E Tape products $2,042 $2,096 $2,215 $2,370 Abrasive products 1,220 1,270 1,375 1,510 Automotive and chemical products 1,328 1,460 1,620 1,800 Connecting and insulating products 1,470 1,564 1,688 1,850 Consumer and office products 2,272 2,460 2,672 2,925 Health care products 2.221 2,356 2,545 2,775 Safety and personal care products 1,220 1,301 1,385 1,505 All other products 1,687 1,729 1,835 1,980 Total $13,460 $14,236 $15,335 $16,715 Source: R.P. Curran, "Minnesota Mining & Manufacturing Co.-Company Report," Merrill Lynch Capital Markets, New York, July 11, 1997