BIB PART | esigng a esomerYa-Driven Sty nd Ma Video Case Subaru When a company has a winning product, it has it made, Or does It? Suoaru is a winning company fone of the few automo- tive companies to sustain growth and profts in hard economic times) with various winning products, including the Impreza, Leg- acy, Forester, and Outback, But what happens when any one product stars to decline in popularity? This video demonstrates how Subaru constantly engages in new product development as part of ts offorts to manage tho product Ite eyalo far each of ite models, Subaru is focused on both developing the next version fof each existing model and developing possible new models to boost its product portfolio Ater viewing the video featuring Suberu, answer the folowing ‘questions, 9-44 Discuss the product fe cyclo in rlation to one Subaru product. 9-45 How do shiting consumer trends affect Subaru's products? 9616 Has Subaru remained customer oriented ints new prod- ct efforts? Explain, Company Case 3M: Where Innovation Is a Way of Life In recent years, companies topping the worlds “most innovative" lists typically have boon high-toch leaders such as Googe, Apo, Samsung, and Amazon. When thinking of comparios that sot the word on fre with one revolutionary product after another, the image ofa stodgy company that originated in the mining industry more than 100 years ago i hay the icon. But although 3M may not be as fleshy as today's high-tooh headtnos, it's anything but stoogy 3M-—the Minnesota Mining and Manufacturing Company—is 1 multational powernouse with more than $20 billon in annual salas. Yoar-attar-yoar, with machine tke procison, 20 parcont of Ms sales fiter down as operating profs, alowing the comoary to inereass its dvidond to shareholders— something it has done every year forthe past 58 yeas. 4M salle mo than 50,000 products in nealy 200 countios across dozens of industes, including offce products, constuc- ton, telecommunications, electronics, healt care, aerospace, and automotive, Among Ils products are some of the worlds most recognizable consumer brands, such as Scotch tape, Nexcare frst aid products, Fitrete home fiaton products, anc Post-it Notas, But 8M's portfolios also packed with huncreds of brandis thal most people have never heard of-—such as Pruven waste bags for picking up dog poop. “Tho unusual breadth of M's procict portfolio i both a bless- ing and a curse fr the company. Having a hend in so many industies shields the compary from overelance on any given market. Even when multiple ndustis are down, many more are ong just na. That explains 3M's fnancal strength, But also ‘exclains why GM has a hard time thrling Wall Sract. Evan a ht new product doesn't make much ofa diffrence in 3M’ steady bt unspectacular growth rate—one thatis consistently inthe low sngle dg. Like SM, the company’s current CEO, Inge Thulin is mothodical and understate, He keeps a long-term focus and places sttong temphasis on maintaining 2M's velble proftabilty. But Thulin is also interested in stoking the fr just a bit, to puta ile mors heat Under sales growth, Ona of tho fst things Thulin ai as CEO was to ttm 3M annual sales growin goal tom 7 o 8 percent—a goal the compary consistently missed—to between 4 and 6 percent Than, asthe world watchad, SM organic sels growth grew to 5.8 percent. And under Thulin leadership, 2M is now on track to mantain that svongar growth rata How diel Tauln do i? The same way @M has boon do- ing it for decades, At the core of 8M's success isis business rmodel—crganie growth comes ftom innovation and! the creation of market-changing products. Such market-changing products have al times created entirely new industries. 2M has sustained this type of innovation decade after decade by fostering a deep culture of innovation, encouraging colaboration, and maintaining ‘a ddication to research and development. Culture of Innovation From its earlest days, 3M created a culture of innovation by al- lowing team members to take rks in a protected environment. 2M knows that it must ty thousands of product ideas to hit tho new product jacknot, One woll-worn slogan at $M is, "You have tokiss a lot of frogs to find prince." "Kissing frogs” often means making mistakes, but 3M accepts blunders and dead ends as 2 normal part of creativity and innovation. In fac, its philosophy ‘seoms to be “If you aren't making mistakes, you probably aren't doing anything.” ‘As It urns out, "blunders" have tuned into some of M's most successful products. Old-timars at 3M love to tell the story about the chemist wno accidantaly sped a new chemical on hr sneakers. Some days later, ste noticed that the spots hit by the chemical had not gotten dirly—an attractive benefit. It was that aiscovery that eventually ad to the creation of Scotchgard fabric protactor. Thoy tal about the carly 3M sciontist who had 8 deathly foar of shaving with a straight razor. So he invented 2 very fine, waterproof sancinaper, which he used to sand the stubble from his face each morning. Athough this invention never caught on as a shaving solution, it became one of 3M's best- seling produets—wet-dry sandpaper, now used for a wide var- ety of commercial and industrial applications, ‘And then there's the one about 3M scientist Spencer iver Slher startad out to develop a superstrong adhesive: instead, he ‘camo up with ona that dnt stick very wal at all. Ho sont the apparently useless substance on to other 2M researchers to see whether they could find something to do with i. Nothing hap- pened for several years, Then @M scientist Arthur Fry had an idea, As a choir mamoor in local church, Mi. Fry was having ‘rouble marking places in his hymnal—the litle scraps of paper he used kept fling out, He tied dabbing some of Mr, Siver's weak glue on fone ofthe scraps, It stuck nicely and later pected off without dam- aging the book. Thus were born M's Pos-t Notes, a product that is now one of the top sang offce supply products in the world, (One of the ways &M fosters a culture of innovation is by or ccouraging everyone to look for new products. The company'sCHAPTER § renowned “15 percent rulo" alows all employoas to spend up to 16 percent of their time “bootlegging’—working on projects of personel interest whether those projects directly beneft the com pany or not. And yet, thers is a vibe throughout the company re- ‘garding these precious sx hours a woak. Wha knowe where the ext Post-it Note wil come from? “I's one of the things that sets 3M apart as an innovative company . .. giving every one of our ‘employees the ability to folow their instints to take advantage ‘of opportunties for the company,” says Kurt Beinlch, a technical director who oversees a 70-person lab team, “Its realy shaped ‘what and who 3M is.” Encouraging Collaboration \While M's 15 percent program has inspired other companias to fallow suit (both Google and HP apply their own version). its a rare perk in the corporate world, Not only is it an expense, but to be successtl it takes a lot more than smply giving employees the time. Experts suggest that this kind of program works best ‘al companes where there isa high level of colaboration across ‘employees and departments 3M has that collaboration in spades, One examples an annual ‘event that is simple but has a huge impact. The event resembles. ‘2 middle school scionce fas, as employees from dozens of 3M divisions make cardboard posters describing their 15-percent- time project, Employees hang out next to their posters, await feedback, and look for potential collaborators, Wayne Maurer an RAD managor in 3M's abrasivos vision, rafors to it as a chance ‘or paople to unhinge thor “inner gack. ‘For tcwrical people it's ‘the most passionate and engaged event we have at 2M.” “The event ist just an opportunity to show of ithas actually moved projects through the development phase to commercial ization, Past projects that have made it to market include clear bandages, optical ‘ms that rofect light. and paintors tape that prevents bleeding, The event has even put new fe in projects that have sat on a back bumer for yoars. ‘One employee had an idea for creating a sandpaper with ro- shaped grt particles that woulcn't dull so quickly. But ator play- ing around withthe idea for a while, he shelved it and moved! on to other things. Fifteen years later, the employee resuected the project during his 15 percent timo anc made a poste in hopes of, geting somo iceas that would move the project along. With the help of new employees and new technology, 3M discovered that a particle's sharp, pyramic-ike shape became more durable with a change in the mixing order of the ingredients. That discovery lod to the launch of Cubitron I, sandpaper that acts more like a exiting tool On the mark since 2008, it sil stumps other com- panies trying to create copycat products, Emphasis on R&D “There are fow companies that provide more support for research and development than 3M. For years, 2M invested 6 percent of, sales every year in RED, But in recent yeas, that spending had been cut fo just 6.5 percent—a small ference on paper, but ‘one that Thulin beloves is significant. “Those long-term inves- ments are needed to get the growth engine un and going.” such investments are reduced. Thulin believes, “you wil Kil the bust ness.” That's why 3M's F&D expencitures are once again up to 8 percent. Thun believes R&D “is the heartbeat o tis company, andit's a compettve advantage for us.” By comparison, the av- ‘erage of R&D expenses across comporations is about 3 percent, Now Poduet Development and Produ Life-cycle Strategies 319 For tho most recent year, Appla spant 4.6 billon on R&D, a com- pany record that stil amounted to only 2.6 percent of sales, But it isn't just the amount of money that is important for a successful R&D program. Its how the money Is used. In add tion to increasing tho R&D allotment, Thulin is putting more p= cofity on the 3M technologies that have the most potential for ‘growth. Among these technologies are fims designed to protect ‘everything from smartphones to kitchen appliances, and a con- struction wrap that will outperform DuPont's Tyvek as a weatner- resistant barr for homes and bulkings But Thuli’s plan for allocating RAED funds also includes efimi= rating 3M units with poor fnaneial performance, or those that aren'ta good ft wth the company’s core strengths. For Thulin, 's rathing personal: i's stctly business. Last yaar, 3M sold Scion- tie Anglers, which rakes fishing lin and other related products, ‘Thulin believed there was litle symbiosis between developments in that product Ine and other 8M technologies. ‘And! although Thulin’ plan also facusas on high-tech araas, it ‘also recognizes the importance of a broad portfolio that includes Ioy+tech items —such as doggie doo bags. Infact, 2M is commit- ted to a broad range of pet-care supple, “You cannot have only high-tech in every category because then you will not gst space in tho shops,” says Thulin, recognizing thal mass rolalrs want to purchase fulines of products within and across categories from ‘manufacturers, ‘3M will Ikely never have grow rates matching Apple, Face- 'b00K, or avon Microsoft in ts hayday. But it will also likely nover ‘experionce the potential downturns that even the biggest compa- ries eventually face, 3M's long-term dedication to innovative new products and technolbgles has sustained the company for de- ‘cades, and there's no reason to expect that ths will changa, And who knows —the next “big thing” may just have "3M" stamped on ‘tinstoad of "Apolo." Questions for Discussion 9-17 Based on concepts ciscussed in this chapter, describe the factors that have contributed to SM's new product success, 9-18 Is 3M's product development process customer can- tored? Why or why nat? 9-19 Considering the product Ife cyclo, what challenges doos 3 face in managing its product portlio? 9-20 Are there limits to how broad M's product portfolio can grow? Explain 9-21 Ist possible for 2M to maintain steady growth and profit billy and reise that growth to much higher levels? ‘Sources: ov Mahoney, “2 MIN Cos. Make Fortune's List of Wolds Most Admired”, Twin Gites Mag, Feoruary 27, 2014, ntp:/Rebmag ‘SonyNews/Recent-News/?014/Feoruary/?-MN-Cos-Make-Fortunes LstorWertis-MostAdme; “Hero Is Why Wo Thek 3M Is Worth '§140," Forbes, March, 2014, wwe forbes. convstes/oreatspaculsions! 2o14/0a0ehee-s-Nhy-wo-think-deviswern-120!; James AL Hagerty, “50,000 Proauets but 3M Stl Searchag for Gouin,” Wab Street Jour fal, Novernber 18, 2013, p. BI: Kacm Goetz, “How 3M Gave Every” ‘one Days Of and Crested an Ienovation Dynamo," Fast Company, February 1, 2011, wwtastcodesign com’ 1683137/how-sr-gave- oveyone-days-o-and-crated-an-nacvation-asnamo,