There was a time when 3M Co. (MMM ) epitomized U.S. innovation. For years, this great Midwestern company consistently generated up to a third of its annual profits from new products. Some time in the 1990s, the company that invented sandpaper, floppy disks, Scotch tape, and Post-it Notes lost its magic and got stuck. James McNerney, an alumnus of General Electric Co. (GE ) who became chairman and CEO in 2001, is trying to light 3M's fire once again. Nothing is more important to 3M than his success.

McNerney's challenge is to show that he has the DNA for innovation. He is cutting costs, visiting customers, and introducing Six Sigma to boost management rigor and measure performance. He is focusing 3M's $1.1 billion annual research budget and 1,000 scientists and engineers on hot new growth markets in health care and high-tech displays for consumer electronics. But innovation is about embracing uncertainty and taking risks, and McNerney has yet to show that he can do that. The GE way to success is through measurement -- stating precise goals and surpassing them. 3M's success had been in taking commercial advantage of unexpected scientific discoveries.

America's challenge is to keep its innovation economy running. It is disturbing to see that the latest disruptive technology -- camera cell phones -- originated in Europe and Asia. Camera phones are remaking the digital camera, printer, film, and telephone industries. This is the heart of innovation: a fusion of new technologies that change all kinds of behavior and businesses. The U.S., hobbled by incompatible cell-phone standards, is lagging.

It is worrisome as well to see the best and brightest foreign students turning away from U.S. universities because they can't get visas. One of the country's sources of innovation is this stream of young people, who come to study and stay to start companies, especially in high tech. Now many, particularly from Asia, are going to China.

Finally, it is disturbing to see that the issue of innovation is being virtually ignored in the Presidential campaign. Certainly it's important to talk about taxes, budget deficits, and Social Security. But the question underlying all of these is how best to get America to innovate, because that's the path to growth, jobs, income, and wealth.

McNerney's struggle to restart the 3M innovation machine is part of a larger fight to keep America at the leading edge of innovation. Both must be won.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE