Good morning Mr. Chairman and members of the Subcommittee. Thank you for the opportunity to testify before you today.
As the Business Development Manager for Government research programs at 3M, I am here to discuss 3M "best practices" associated with our new product commercialization process and the timely integration of breakthrough technology into "change the basis of competition" products.
As you know, 3M is a diversified manufacturing company with sales of more than $15.5 billion. We manufacture a broad range of products directed at six distinct commercial markets.
3M has grown by pioneering innovative technologies and creating new products with these technologies; thereby, creating new markets and revolutionizing existing ones. 34 percent of 3Mís total sales in 1999 came from products which were new to the market within the past four years. It is these new products which help sustain the profitable growth of the corporation.
To maintain this rapid pace of technology development and new product introduction, 3M has evolved a well defined technology development and commercialization process.
3M has invested more than a billion dollars per year over the past three years in research and development. This investment is directed both at broadening and strengthening 3Mís technology portfolio, as well as moving products rapidly through the commercialization process. Currently, approximately 20 percent of 3Mís R&D budget is directed at technology development and enhancement. Approximately 80 percent is directed at product development, scale-up/commercialization. In most cases, our companyís new products draw from 3Mís base of established technology platforms such as adhesives, microstructured surfaces, etc. 3M has established a core of 34 technology platforms and are continuing to establish new ones on a strategic basis. Occasionally, 3M will license or purchase technology or use strategic partnering with another company to add a critical technology to enable a product to successfully meet the product description which is in place.
Segregation of Technology and Product Development
3M has evolved to a laboratory structure which substantially segregates technology development from product development. Our experience has been that key technologies are used broadly across the corporationís market groups. By focusing technology development in a technology center, a critical mass of technology experts is created and costly redundancy is eliminated. 3M has formally established 14 technology centers for the corporationís most pervasive technologies. The responsibility of these centers is to establish and maintain world class capabilities in these critical technologies. A second responsibility is to work with product development teams in the business units to integrate this technology into the product development programs to assure successful and timely product introduction. This step is critical and a number of management tools have been established to ensure that it takes place.
3M is acutely aware that even our best technologies, when not applied to commercial product development, are of no value and we work hard to maximize that application.
Initiation of New Programs
3M develops and introduces many new products each year and a number of these are rather routine product upgrades and modifications which do not involve integration of new technologies. Our experience has shown, however, that by focusing on fewer, larger programs which have the ability to change the basis of competition in the market, a much more positive impact can be shown on corporate sales and profit results. I would like to focus my remarks on New Program Initiation on the process which has been developed for addressing these significant programs which are known at 3M as Pacing Plus Programs. While there is no one way a Pacing Plus Program is initiated, every case involves the identification of a customer problem or need and a product approach which can uniquely address that need. At this juncture, an assessment of magnitude of the business opportunity is made along with an assessment of technical and manufacturing feasibility. Based upon the ability to create a successful business case for the program, a cross-functional team is organized including people from marketing, product development, manufacturing, and other disciplines. Their job is to create a detailed product description including essential and non-essential performance parameters (we call them musts and wants). Based upon this description, decisions are made as to whether (and which) new technologies are required to meet the product description. At that point, the team, in conjunction with the appropriate technology center, makes the determination as to whether the technologies can provide the necessary performance capabilities. In some cases, the answer is, not quite. In this situation, a risk assessment is done with a determination made as to whether the required technology development and integration can occur within prescribed schedule limits. It is important to exercise discipline, either to slow down or terminate a program where significant technology development work remains. This is critical because at this phase of the program it gets very expensive to proceed. It is best, at this point, to move the initiative back into the technology center for solution before proceeding.
The Product Development Process
Once a determination has been made (through a formal review process) that a business case can be made for the product and that early indications are positive that the product will meet performance and manufacturing targets, the product development process begins. During this period, a marketing and business plan are initiated, performance tests are developed, and a manufacturing process plan is put in place to bring the manufacturing process into control so that cost, quality and cycle-time targets can be met. Throughout this process, a series of management reviews are held to assess market status adherence to schedule, cost growth, etc. This phase of the new product introduction process incurs the most cost; consequently, the earlier critical problems can be identified and the program brought back on track, the better. One of the approaches for successfully accomplishing this is the use of corporate program review teams. These teams are staffed with experienced technology development, product development, marketing, manufacturing, etc. experts from across the corporation. The teamís goal is to help make the program be successful. There are, however, occasions where a program must be terminated or returned to the technology development phase because of inability to meet schedule performance or manufacturing parameters..
In summary, it is 3Mís belief and practices that in order to be successful, we must:
Again, thank you, and Iíll be happy to answer any questions.
Rodney J. Larkins