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Managed Innovation: 3Mís Latest Model For New Products

BY RITA SHOR

Managed innovation, like military intelligence, is often considered an oxymoron. Many companies find that as soon as "management" shows up, the forces of "innovation" start looking for a place to hide. For these firms, skunk works and other forms of innovation isolation units are popular because they are invisible to established structures.

At 3M, early leaders established a relatively successful approach to this dilemma by favoring independent R&D programs. 3M CEO William McKnight declared the companyís rationale more than 50 years ago when he said that, "As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. Mistakes will be made, 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 is dictatorial and undertakes to tell those under its authority exactly how they must do their jobs."

3Mís innovation success subsequently relied on long-term, individually directed exploratory research projects. Management for such projects, particularly in their early incubation stages, has been governed by two maxims: "Hands off!" and, "Donít ask, donít tell!" But shareholdersí concerns have changed, and 3M was forced to expand its innovation toolkit. This included more systematic approaches to innovation and methods that include more direct links with management.

One approach is called the Lead User System, which has reliably produced profitable new products, services and strategies for 3M. It does this at a rate that beats the "natural" odds.

Eric von Hippel of MIT initially developed the Lead User System. The system balances the needs of shareholders and management (with their bottom-line-oriented view of the world), against the needs of "fuzzy front-end" innovation developers (where micro-managing spells an immediate kiss of death).

Lead User Teams are made up of four to six individuals with a diverse set of skills. Teams with members from both technical and marketing functions are necessary. Depending on its focus, a team might be populated with members from procurement, manufacturing or any other functional area. All team members are taught techniques for creating profitable solutions to unarticulated customer needs, well in advance of the competition.

Lead User Teams are told to welcome ambiguity and uncertainty. They are taught to set their sights on exploring the areas where the possibilities for discovery are greatest because the pre-existing knowledge is most slim. The teams must learn to recognize these gaps in understanding as prime locations for generating new products and concepts.

All of this is done with the acceptance that these gaps tend to arise in areas where the team members have little experience. The teams are shown how to seek, value and protect ideas that donít reflect "business as usual," be it new technologies, applications, strategic relationships, channel partnerships, or service offerings.

Because the opportunities are typically so remote from their every-day experience, team members start by getting acquainted with "what we donít know." Team members then work to increase their knowledge base at a greatly accelerated pace, primarily through their contacts with "Lead Users" and "Lead User Experts."

The Lead User System achieves success by approaching innovation in a disciplined way. The cross-functional teams go through a set of phases, retrieving information from specific sources and then collaborating with these sources to create new products, services and strategies.

The teams seek information that is focused on what the customer will need in the future. Many trends are barely perceptible today; even the "early adopters" havenít yet arrived.

The greatest challenge is finding the right Lead Users and Lead User Experts. Enlisting their involvement is almost always a non-issue, as these individuals rarely balk at becoming involved in a creative collaboration with Lead User teams. Lead Users are professionals who are working with leading edge applications that are similar to the customer problem under study. They often have developed a prototype solution to that problem that they are willing to share.

Lead User Experts have deep knowledge of a range of advanced applications and important attributes of these applications. Lead User teams look for experts who are working in the targeted marketplace and in analog industries. These industries contain markets that share an important problem or solution of relevance to the future marketplace. Users and experts from analog industries wonít have insight on the whole problem or entire solution, but they have hard-to-find insight into the particular solution under study.

Lead User Team members are led ó dragged, kicking and screaming, if need be ó away from their existing information networks and toward unknown and unexpected people and organizations. Lead User Team members conduct interviews in stages, each wave taking them further from their pre-existing safe, but known, network of contacts.

Each new contact offers a new opportunity to redefine important attributes of future market demand and/or innovative solution approaches.

At every point in their interviewing, team members are looking for professionals far ahead of any known general adoption/diffusion cycle. These users tend to work in pockets of activity and can be hard to find. The "deep collaboration" between the Lead User Team, the Lead Users and Lead Use Experts requires that all of them become co-creators and that they understand that innovation will emerge from the interactions between and among them.

Lead User Teams obtain and synthesize information through reading, questioning, watching, and listening and through shadowing a Lead User as they do their work and use their prototype solution. Typically, teams conclude their work by bringing Lead Users and Lead Use Experts together with 3M development specialists for a workshop dedicated to collaborative solution design. After the workshop, the teams go back and finalize their prioritized plan for moving from concept to realized stages of development.

Innovation Means More Than "Just" New Products.

3Mís experience has shown that the Lead User System is successful not solely from the product-oriented point of view, but at a higher plane of creating comprehensive new business models. Several of 3Mís Lead User Teams were led to these strategy-level developments when they uncovered huge profitable future markets, demanding both new products and new technologies.

But these markets also required entirely new strategies for 3M to be able to profitably enter and drive those markets. These teams were faced with the question of, "What do we do if these lucrative new future markets do not fit within our existing business market strategies?"

With the support of 3M management, these Lead User Teams created the necessary new strategies and business models that provided the "fit." These teams then went on to develop customer support services, product/service toolkits, product families and novel approaches to channel partnerships.

The changes the teams are creating in 3Mís business culture are currently causing the greatest excitement among 3M managers because they encourage higher levels of innovation within 3Mís organization. Most importantly, the Lead User Systemís collaborative approach takes the company away from viewing innovation as an individually practiced art that takes place primarily in the lab. Innovation is becoming viewed as a cross-functional market-focused collaborative discipline, completely dependent on activities and relationships that cross the companyís boundaries.

The Lead User System is now one of the more productive and cost-efficient innovation methods in use at the company today. The system accomplishes in months with four to six people what otherwise has sometimes taken far longer to obtain: profitable, commercial products that tap unarticulated customer needs. And the products and services the Lead User System creates are more novel, more likely to "change the basis of competition" ó a watchword phrase at 3M.

Could The Lead User System Work For Your Company?

The Lead User Teams have been successfully run in a number of companies outside 3M. To benefit from this method, an organization must embrace the following criteria:

Teams are small, cross functional and allowed to report to management on their own terms. Continuous management awareness is essential in order to prepare executives for the ultimate recommendations made by the team. Teams must be able to operate at the right location on managementís radar. They must be given a mandate to take the risks and the time required to develop novel, hopefully revolutionary strategies, products and services that "change the basis of competition in your business unit." This objective requires trust all the way around.

Although the Lead User System employs a systematic process, it sometimes doesnít feel familiar or predictable. Team members and their managers must be willing to "hang in there" when uncertainty hits. Oftentimes, participants find that their pursuit of unusual information leads them astray and does not fit with their prior development experiences. But each novel contact offers a new opportunity to redefine important attributes of future market demand and products. The Lead User System provides a tested framework for the team members as they pursue the unknown. The teams and their managers have to be committed to "staying the course."

Sometimes the best course of action is to stop development. The Lead User System demands simultaneous, frequent and immediate market needs assessments and solution development. Lab-based trials and testing are always taking place. But because Lead User Teams are always simultaneously scoping customer needs, no single technical effort is permitted to go too far down an unwarranted path.

Team members and their management must be willing to tolerate this type of "concept cycling," as they will find that they are often exploring development paths that they later choose not to pursue. The Lead User System offers an examination of future customer interests in light of a companyís existing assets and proprietary technologies. The fact that this examination takes place constantly, and simultaneously, rather than sequentially, leads to concept and solution development, testing, refinement and, often, rejection taking place throughout the process.

The Lead User system will change your people and your innovation culture. To be a good candidate for a Lead User Team, your organization has to be open to change. Team members develop a quantitatively and qualitatively different connection with future customers and partners. 3Mís ongoing measurement and value assessment process finds that even the most productive 3M scientists whose reputations were built by using the traditional, "inventor in the lab" method of innovation credit the Lead User System with enriching their pursuit of innovation. These scientists and other members of the 3M Lead User Teams have developed an appreciation of the big developments often found in the interactions that take them out of the lab, out of the company and out of their industries

From "shadowing" a third-world user to understand where their process strengths and weaknesses exist, to working with professional theatrical mask-makers to better understand human skin properties, the Lead User System has provided a proven discipline for profitably leveraging resources inside and outside of 3M for models, expertise and future competitive advantages.

Anyone interested in more information about this top may find the writing of Eric von Hippel to be interesting: www.mit.edu/people/evhippel.

Rita Shor is Corporate E-Business Manager at 3M Corp.