By Dusty Weis, Association of Equipment Manufacturers

Many people haven’t heard of the complete and utter failure upon which 3M was founded.

These days, the Minnesota-based company tallies $32 billion in sales annually, employs 90,000 people worldwide and produces products that are critical parts of just about anything that’s manufactured, anywhere.

But the innovation that drives this ubiquitous success started in 1902 with five founders who launched a plan to mine the valuable mineral corundum. To their horror, they discovered their claim actually consisted of the nearly worthless material anorthosite. So, facing total ruin, they turned their efforts to manufacturing sandpaper, and a company culture of adaptive innovation was born.

Today, 3M employees are given permission to pursue their own ideas—and to fail at them, as long as they learn something in the process. It’s a company where developers and researchers are valued as highly as top managers, where co-workers decide who the top performers are, and where the management credo is, “Hire good people, and leave them alone.”

These ideas might sound far-fetched to some equipment manufacturers in today’s industry. But at a recent AEM Thinking Forward event at 3M headquarters, Global Technical Director for Automotive and Aerospace Solutions Terry Ceulemans told participants that the mindset is responsible for most of 3M’s pioneering inventions throughout history.

“Failure leads to learning, and learning leads to success,” Ceulemans says. “That is the way we look at things here.”

AEM's Thinking Forward series of events is aimed at helping OEMs find inspiration for new and innovative practices they can implement in their own companies. And, in a world where disruptive trends and technologies are changing business models overnight, Ceulemans points to several key lessons that equipment manufacturers can take away from 3M’s corporate culture in order to stay on the front lines of innovation.

How 3M’s “15 Percent Rule” Drives Innovation

In 1923, 3M engineer Richard Drew was at an auto body shop in St. Paul, Minnesota and observed a car painter struggling with tape that did a poor job of preventing paint from bleeding into areas where it wasn’t supposed to be. Even though 3M was primarily an abrasives manufacturer, Drew swore the company could create a product to solve that problem.

His obsession with creating a superior “masking tape” eventually prompted a warning from then-vice president of the company William McKnight that he should confine his efforts to sandpaper-related projects. But Drew continued the project in his spare time, eventually pairing cabinetmaker’s glue with treated crepe paper to create Scotch-brand tape, which would drive $1.15 million in sales just a decade later.

Accordingly, Ceulemans says McKnight incorporated “the 15 Percent Rule” into his core management principles. The notion is that employees should be empowered to use up to 15 percent of their time, which otherwise might be spent on coffee breaks or water cooler chatter, to pursue seemingly out-of-left-field ideas about which they’re passionate.

“It’s your idea, and you should have the flexibility to hone that idea into something concrete that you can present to management and ask them for their support and endorsement,” Ceulemans says.

McKnight went on to become president of the company in 1929, and served as a leader of the company until 1966. But he never forgot the lessons he learned early in his career from Drew and others like him, and when he famously put his management principles to paper in 1948, McKnight set the company’s course through history by removing the stigma from productive failure.

“Mistakes will be made,” McKnight wrote. “But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs.”

“Management that is destructively critical when mistakes are made kills initiative. And it's essential that we have many people with initiative if we are to continue to grow.”

Innovators Should Keep Innovating – the Dual Ladder System

There are employees at some companies who dread success, out of a fear that they might someday be forced to do the unthinkable—manage a team of subordinates.

Ceulemans says you see it very often among researchers and product developers who succeed early in their careers, and feel that the only way to advance professionally and financially is to accept a promotion, back away from the work they love and manage a team instead. But according to 3M’s philosophy, he says, that only ensures that you lose the best talent from your innovation pool.

“The problem we see is you can have a bright product developer or researcher turning into a bad manager,” Ceulemans says. “That’s a lose-lose situation for the individual and the company.”

3M has solved this problem, Ceulemans says, by introducing what they call a “Dual Ladder System” of advancement within the company. Successful employees can choose to advance their careers up one of two parallel “ladders” within the company—one side responsible for advancing science and product development, and the other for managing teams of people.

On either side of the ladder, the compensation and benefits at the various levels are completely equal. Ceulemans says this incentivizes employees to direct their talent where they can do the most good for the company, rather than forcing them to move into management if they want to get ahead.

And it’s a critical way to ensure that the best innovators keep innovating.

“We need to have great people who are advancing science in the company,” Ceulemans says.

Tearing Down Organizational Silos with Peer Recognition

The first stop on a tour of 3M’s Innovation Center is an interactive video wall showcasing dozens of winners of the company’s prestigious “Carlton Society” honors. Often referred to as “3M’s Nobel Prize,” each honoree is someone whose innovations have radically reshaped the industry and whose mentorship has helped put other employees on a trajectory to success.

It’s like many corporate recognition programs, but with one major difference—inductees into the Carlton Society are nominated by their co-workers, not by company management.

“Every single one of them is peer-nominated, which means they have to connect their expertise with the people around them to help them solve their problems,” says Jason Campagna, manager of the Innovation Center. “At that point, when you’re seen as a key connector, you’re seen as deserving of one of those awards.”

It’s not just the major awards, either—all forms of employee recognition are driven by the employees themselves. According to Campagna, this incentivizes employees to spend more time collaborating across departments and less time trying to “climb the ladder.”

“If you want to change any organization’s culture, you change the reward structure,” Campagna says. “If people see there’s no extra value in staying in their silo, they’ll go to the place they need to create the most value for them and the company.”

Inherent in this notion, Campagna says, is another guiding principle at 3M—that no one is “too high up the food chain” to answer questions from someone who has a new or different idea. In order to get people working between departments, anyone with a question is encouraged to make a phone call or send an email to anyone else who they think might be able to help.

“And, if they aren’t the expert, they just make a suggestion of two people to whom you might ask the same question,” Campagna says. “Following that pattern, there’s a good chance an answer will be found in three to five phone calls.”

“Hire good people, and leave them alone.”

For many managers, the prospect of allowing employees to use up to 15 percent of their time on side projects might seem like a good way to get a workforce that’s only 85 percent effective.

But Terry Ceulemans, 3M’s Global Technical Director for Automotive and Aerospace Solutions, says that sort of short-term math loses sight of the bigger picture. In his eyes, 3M is investing 15 percent of its labor costs, and the returns on that investment have been staggering.

“A lot of the high-impact products in this company over the last hundred years are a result of the 15 percent culture,” Ceulemans says.

Without it, unintended discoveries like reflective traffic signs, Scotchguard and Post-It Notes might never have happened. These and many other iconic products drive billions in annual sales at a company that got its start manufacturing sandpaper, but never stopped looking for new problems to solve, even when that meant allowing its employees to fail without fear of punishment.

"Encourage experimental doodling," former 3M President William McKnight famously told his managers decades ago. "If you put fences around people, you get sheep. Give people the room they need."

AEM members learned about this and other topics at a Thinking Forward event at the 3M Innovation Center in Maplewood, MN on June 5. Visit aem.org/think to learn about more of these upcoming events in a city near you, including one at Autodesk in San Francisco on August 23.

Dusty Weis is AEM’s strategic communications manager, covering the impact that new and emerging trends and technologies will have on the construction, agriculture and manufacturing sectors. Email him at dweis@aem.org or follow him on Twitter @dustyweis.

Subscribe to the AEM Industry Advisor for regular updates about this and other cutting edge topics.