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Editor's Note: In this excerpt from his new book, "What's Holding You Back? 10 Bold Steps that Define Gutsy Leaders," consultant and former Microsoft COO Bob Herbold argues that innovation and process-improvement methodologies can each play an important role-just not on the same stage.

Over the last decade, process-improvement techniques such as Six Sigma have been given a lot of publicity. Six Sigma is a rigorous and disciplined methodology that uses data and statistical analysis to measure various aspects of an organization's operational performance, thus raising questions and suggestion areas for possible improvement. Its main use is to take variability out of a process, reduce errors or defects and increase the predictability of a process.

Some leaders attempt to apply Six Sigma everywhere within their companies. This tends to be a big mistake, considering that innovation is such a fragile and variable process. By definition, Six Sigma is a tool for taking the variability out of processes.

3M and Six Sigma

Few companies have been given more accolades in the area of innovation than 3M, whose inventions included masking tape, Thinsulate and Post-it Notes. Unfortunately, by the late 1990s, life had become quite challenging for the company. "Profit and sales growth were wildly erratic," according to Business Week. "[The company] bungled operations in Asia amid the 1998 financial crisis there. The stock sat out the entire late-1990s boom. The flexibility and lack of structure, which had enabled the company's success, had also by then produced a bloated staff and inefficient workflow."

In December 2000, hoping to turn things around, 3M announced that Jim McNerney of General Electric was stepping in as the new CEO. Considering that GE was both an early adopter and a strong proponent of Six Sigma, it wasn't surprising that McNerney brought along intense interest in implementing Six Sigma at 3M.

Soon after McNerney's arrival, thousands of 3M employees were being trained as Six Sigma black belts, qualifying them to serve as consultants within the company. Virtually every 3M employee was given extensive "green belt" training on how to use data, create charts and minimize variability and errors in their work.

Because 3M had been suffering from too much emphasis on creativity and minimal structures concerning how things were run, McNerney enjoyed almost instant success. The main value of Six Sigma tends to be to drive out cost and save money, so McNerney had a lot of opportunities. In his first full year, he slashed capital expenditures 22%. He held research and development funding constant for four years, hovering at just over $1 billion per year. And in a move that was viewed as highly suspicious by employees, McNerney revised the way that R&D work was done to shape it into a process.


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