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Companies say they want breakthrough products, but most are far more adept at making incremental improvements to existing lines. A pioneering division at 3M successfully navigated a process that leads to breakthrough thinking.
When senior managers think of product development, they all dream of the same thing: a steady stream of breakthrough products--the kind that will grow rapidly and maintain high margins. And managers set ambitious goals to that end, demanding, for example, that a hight percentage of sales come from products that did not exist a few years ago. Unfortunately, the development groups at many companies don't deliver the goods. Instead of breakthoughs, they produce mainly line extensions and incremental improvements to existing products and services. And as the pace of change accelerates in today's markets, that's a recipe for decline, not growth.
Given the imperative to grow, why can't product developers come up with breakthroughs more regularly? They fail primarily for two reasons. First, companies face strong incentives to focus on the short term. Put simply, although new products and services may be essential for future growth and profit, companies must first survive today to be around tomorrow. That necessity tends to focus companies strongly on making incremental improvements to keep sales up and current customers-as well as Wall Street analysts-happy. Second, developers simply don't know how to achieve breakthroughs, because there is usually no effective system in place to guide them and support their efforts.
The latter is a problem even for a company like 3M, long known for its successful innovations. Traditionally, the company's management has fostered innovation by taking a get-out-of the-way attitude toward product developers who, in turn, have worked according to the aphorism "It's better to seek forgiveness than to ask for permission." This relationship between managers and developers has resulted in the creation of a long line of profitable products, from waterproof sandpaper and Scotch tape in the 1920s to Postit Notes and Thinsulate in the 1970x.
But by the mid-1990s, 3M's top managers were concerned that too much of the company's growth was coming from changes to existing products. Breakthroughs were fewer and farther between. The demands for-and the rewards from-incremental improvements spurred the company to focus on current products. To counter this trend,...