■ 3M Minnesota Mining and Manufacturing (3M) fosters a culture of inno-
vation and improvisation that was evident at its very beginnings: In 1906 the
directors were faced with a failed mining operation, but they ended up mak-
ing sandpaper out of the grit and wastage. Today 3M makes more than 60,000
products, including sandpaper, adhesives, computer diskettes, contact lenses,
and Post-it notes. Each year 3M launches scores of new products. This $15
billion company’s immodest goal is to have each of its divisions generate at
least 30 percent of sales from products less than four years on the market.^7■ 3M encourages everyone, not just engineers, to become “product cham-
pions.” The company’s 15 percent rule allows all employees to spend up
to 15 percent of their time working on projects of personal interest.
Products such as Post-it notes, masking tape, and 3M’s microreplication
technology grew from 15 percent-rule activities.
■ Each promising new idea is assigned to a multidisciplinary venture team
headed by an “executive champion.”
■ 3M expects some failures and learns from them. Its slogan is “You have
to kiss a lot of frogs to find a prince.”
■ 3M hands out its Golden Step awards each year to the venture teams
whose new product earned more than $2 million in U.S. sales or $4 mil-
lion in worldwide sales within three years of its commercial introduc-
tion.Table 2.1 shows how a company might calculate the cost of new-product devel-
opment. The new-products manager at a large consumer packaged-goods company re-
viewed the results of 64 new-product ideas. Only one in four ideas, or 16, passed the
screening stage. It cost $1,000 to review each idea at this stage. Half of these ideas,
or eight, survived the concept-testing stage, at a cost of $20,000 each. Half of these,
or four, survived the product-development stage, at a cost of $200,000 each. Half of
these, or two, did well in the test market, at a cost of $500,000 each. When these two
ideas were launched, at a cost of $5 million each, only one was highly successful.
Thus the one successful idea had cost the company $5,721,000 to develop. In the
process, 63 other ideas fell by the wayside. The total cost for developing one successful
new product was $13,984,400. Unless the company can improve the pass ratios and
reduce the costs at each stage, it will have to budget nearly $14 million for each suc-Developing
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