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.

1. The Industrial Markets Group markets products such as masking tapes and abrasives.
2. The Transportation, Graphics and Safety Market Group markets products such as reflective sheeting for traffic signs and respirators for worker safety.
3. The Health Care Market Group markets products such as advanced drug delivery systems and health information systems software.
4. The Consumer and Office Market Group markets products such as Post-it® Notes and Scotch-Brite™ scouring pads.
5. The Electro and Communications Market Group markets products such as 3M™ MicroFlex Circuits and 3M™ Volition ™Fiber Optic Cabling System.
6. The Specialty Materials Market Group markets products such as Dyneon™ Fluoropolymers and Scotchgard™ Protective Chemicals.

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 3M’s 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 3M’s technology portfolio, as well as moving products rapidly through the commercialization process. Currently, approximately 20 percent of 3M’s 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 company’s new products draw from 3M’s 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.

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 corporation’s 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 corporation’s 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.

1. Technology center executive management personnel are incorporated into market group executive management teams.
2. Salary increases and promotions of technology center employees are substantially based on successful technology transfer leading to product introduction success.
3. Transfer of technology center personnel, to product development/business group teams on either a temporary or permanent basis, is strongly encouraged and is, in fact, part of the technology centers’ charter.
4. A fourth, critical element in assuring effective technology transfer into the business units (where product development activities occur) are the efforts expended in technology awareness programs throughout the corporation. For example, quarterly summary reports from all technology centers are sent to each pertinent business unit. Periodic technology center poster sessions are held where all 3M product development personnel are invited to interact with the individual scientists, ask questions about their work, and network on future product development programs. There is also a corporate technology annual event where the latest technology developments in the company are exhibited with the key technology experts available to answer questions. Our Technology Forum organization allows for this kind of interaction and communication to happen on a world-wide basis.

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.

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.

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 team’s 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 3M’s belief and practices that in order to be successful, we must:

1. maintain significant investment in technology and product development;
2. be preeminent in the technology platforms which support our major business;
3. separate the technology development from the product development functions;
4. effectively integrate advanced technology into our new product offerings;
5. focus on fewer, higher impact programs;
6. continuously refine the process for identifying and selecting key product opportunities for the corporation; and
7. enhance the program monitoring process to provide the product development or commercialization team with required insight and resources or in specific cases, change the program direction.

Again, thank you, and I’ll be happy to answer any questions.

Rodney J. Larkins