Online Extra: 3M: Reading Between the Lines

When customers said they needed bigger batteries to power larger computer screens, 3M figured they really needed brighter displays. It was right

Whenever you use a laptop or personal digital assistant or turn on a flat-panel TV, chances are you're looking at a 3M (MMM ) product. What's more, these devices might not even exist today without 3M.

3M's hottest product today consists of an ultrathin plastic film that's slapped onto virtually every flat-screen display. The film enhances the image clarity and brightness. That alone accounts in large part for its popularity. But it has a more practical side, too. Because the film channels more light to the viewer, the screens require less light. That means they don't need as much power which, in turn, means the portable devices can get by with much smaller rechargeable batteries.


  Indeed, it was the need to extend battery life in laptop computers that compelled 3M researchers to invent these so-called optical films, sold under the brand name Vikuiti, 13 years ago. The St. Paul (Minn.) industrial conglomerate -- with an R&D staff of 6,500 in 31 labs around the world and a $1.1 billion budget -- innovates not by mechanically doing what its customers say. Instead, it succeeds by interpreting what these customers really need.

"One of the tools is how we train our people to ask the probing questions," explains Jay Ihlenfeld, 3M's senior vice-president for research and development. "So, when a customer says, 'We need a battery with a longer life or one that can put out more energy,' 3M knows to ask the next question: 'Why do you need that?' It's our job to drill down to understand what is the underlying solution."

This isn't a new skill at 3M. Over the company's 103-year history, its scientists have created a string of brand-new products, from magnetic recording tape to Post-it Notes and pharmaceuticals.


  In fact, 3M's first hit -- masking tape -- came out of a similar inquiry. The story goes that back in 1925, a 3M sandpaper engineer was visiting an auto-body shop where workers were complaining about the difficulty of painting a two-tone car without the colors running together. The engineer went back to his lab and figured out how to put a sticky backing on paper. Voilá -- masking tape, which became one of 3M's biggest and most-long-lived franchises.

Optical films are similarly simple in concept. They consist of layer upon layer of incredibly thin sheets of clear plastic. Each layer measures only 15 nanometers thick, and a piece of film can contain 800 layers. Even so, they add up to just a fraction of the diameter of a human hair.

Most of the electronic gadgets that use these films are made and assembled in Taiwan, Korea, Japan, and China. 3M does its manufacturing in Asia, too -- it has just opened two more factories in China -- so its materials can flow seamlessly into its customers' production process.


  3M's customers are all the big names in consumer electronics, including Sony (SNE ), Sharp (SHCAY ), Samsung, LG, Motorola (MOT ), and Nokia (NOK ), as well as the big names in PCs such as IBM (IBM ), Dell (DELL ), Apple (AAPL ), and Hewlett-Packard. (HPQ ). LCD TVs are now the biggest market for these films.

The prices of these components, as well as the products, have been dropping every six months. That puts pressure on 3M to innovate: It must either find ways to make the product for less and less money, or roll out new versions that command higher prices. But 3M must take care, for instance, not to substitute inferior material or use secondary manufacturing processes that might cost less but could cheapen its reputation.

"When we're selling a product today, we're working on the second generation and the third generation of products," says Andrew Wong, vice-president of 3M's optical systems division. "We're trying to obsolete ourselves before the competition does it for us."


  3M is constantly meeting with its customers and asking them what they want next. This process allows 3M to modify its current products and remain a supplier as its customers introduce new things, such as mobile phones with tiny color screens capable of showing video or larger and larger flat-panel TV screens.

But it doesn't simply follow directions. Rather, 3M gets info from all its customers and then uses its own understanding of the evolving market to pinpoint the best innovation for two to four years out. Ultimately, 3M's engineers and marketing reps hope to find a need that only their company can fill.

The best example of this art of divining customer needs is the optical film itself. Think back 15 or 20 years. Portable computer screens then were typically 8.4-inch diagonals with black and white displays, vs. the 14-inch horizontal screens with color that are common today. Back then, users were telling computer makers that they wanted bigger screens and maybe even color displays.


  But what 3M heard was that its customers needed ways to boost batteries' power or life, because color displays require more juice. 3M, which already was making transparent films for other applications, offered a far-from-expected solution: It would produce a see-through "light-enhancement" film that could channel the screen's light, directing more of it to the user's eyes.

That meant a computer that appeared twice as bright, would need far less power, and wouldn't require a bulkier power supply. Says Wong: "The customers didn't ask us for that particular solution" -- but that's what they got.

Another example: To stay ahead of the competition and practice what Wong calls "self-obsolescence," 3M engineers took apart laptops to see exactly where power was consumed and light was generated. They found that, by polarizing the light rays, they could double the screen's brightness again. This innovation took three to four years from idea to market.


  The latest iteration of 3M's optical films is a privacy filter. This screen has layers of film embedded with the equivalent of 3,000 to 3,500 tiny vertical blinds. They allow light to pass through straight to the viewer as he sits in front of his monitor or laptop -- but keep anyone with a side view of the screen from seeing anything but a black display.

This isn't a revolutionary product -- but it also didn't require a lot of effort, either. Indeed, 3M had made somewhat crude filters like this some 30 or 40 years ago for overhead projectors. 3M engineers dusted off this product and refined the films. Now, with today's greater manufacturing skills, these products are easy to mass produce.

Now, 3M is starting to sell a version of this privacy filter to Japanese auto makers, which are using them on dashboard GPS navigation screens in high-end cars. The filters can block the light from spilling upward and creating a distracting reflection on the windshield. Next up: putting the filter on in-car TV sets to keep the image from being visible to the driver.


  Again, this isn't revolutionary. But the worldwide marketplace is potentially huge, and it has cost 3M relatively little to create this product.

"Innovation is where you recognize high-value unmet needs in the marketplace and also recognize what we can do well," says Wong. "Innovation happens when you make those connections." And that happens a lot at 3M.

By Michael Arndt

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