A few excerpts...

FORTUNE -- 3M is everywhere. That's the point George Buckley, the chairman and CEO of 3M, is trying to make as he talks about his favorite subject, inventing things. Last year, he says, "even in the worst economic times in memory, we released over 1,000 new products."

3M has long been synonymous with innovation. Founded in 1902 as the Minnesota Mining & Manufacturing Co., it has deployed a range of practices to promote out-of-the-box thinking.

In another unusual practice, 3M awards annual Genesis Grants, worth as much as $100,000, to company scientists for research. The money is allocated by their peers and is spent on projects for which "no sensible, conventional person in the company would give money," says Chris Holmes, vice president of 3M's abrasives division.

Despite such practices, many inside and outside 3M, including Buckley, think 3M lost some of its creative juice under James McNerney, the acclaimed GE alum who led the company from 2001 to 2005 and is now CEO of Boeing (BA, Fortune 500). It's not that McNerney, the first outsider to run 3M, did a poor job. The company had become sluggish, and McNerney whipped it into shape. He streamlined operations, laid off 8,000 people, and imported Six Sigma management techniques, popularized by GE, to analyze processes, curb waste, and reduce defects. "He brought the discipline and the focus on execution we needed," says Mark Colin, who oversees a 3M business that makes products for mobile devices. Earnings grew, margins improved, and shareholders cheered.

But the efficiency gains came at a price. Scientists and engineers griped that McNerney, an MBA, didn't understand the creative process. Six Sigma rules choked those working in the labs. "It's really tough to schedule invention," says Craig Oster, a mechanical engineer who has been with 3M for 30 years. (Boeing said McNerney would not be available for comment.)

"Our business model is literally new-product innovation," says Larry Wendling, who oversees 3M's corporate research. The company, as a result, had in place a goal to generate 30% of revenue from new products introduced in the past five years. By 2005, when McNerney left to run Boeing, the percentage was down to 21%, and much of the new-product revenue had come from a single category, optical films. (3M also has a history of acquisitions and has announced deals recently.)

The board turned to Buckley, now 63, who had demonstrated his business chops as CEO of Brunswick, an Illinois company known for bowling gear and boats. But the most important thing to know about Buckley, a Brit with a Ph.D. in electrical engineering, is that he's a scientist at heart who has several patents to his name. In other words, he's a good fit for 3M. "This is to me an engineer's and scientist's Toys 'R' Us," Buckley says.

Above all, Buckley has been an outspoken champion of the labs. Last year, despite the recession, he kept R&D spending at more than $1 billion. Says management guru Ram Charan, who advises 3M: "George has accelerated the innovation machine by devoting his personal time, his energy, his focus, to empowering the researchers, opening up their minds and urging them to restore the luster of 3M." The results speak for themselves: The percentage of 3M's revenue from products introduced in the past five years is back to 30% and may reach the mid-30s by 2012.

Six Sigma remains in force in 3M's factories, but it's gone from the labs. Each of 3M's six major business units has its own research lab, which is product-focused, while the corporate research staff works on core technologies that are shared by all the businesses. Altogether, 3M employs 6,500 people (out of about 75,000) in R&D.

It's safe to say that no 3M product will generate the buzz of, say, the next iPhone. But 3M has never been about inventing the Next Big Thing. It's about inventing hundreds and hundreds of Next Small Things, year after year.

If you replace "3M" with "HP" in most places, wouldn't that seem to describe a good path to follow for HP's future? Ah, but what do I know?

Tend to agree he [Ellison] will buy HP or try to.

HP is currently as inefficient as Digital was and our real added value is ...where? Printers (high end), PCs (forget it), services (joke), servers (probably), integration (ROTFLOL). We still have 11 layers of management and when there are efforts to reduce this we go from one extreme to the other so we have 300 people reporting to a guy or 45 so it simply doesn't work even though the ratios look OK.

So, yes, HP is ripe for a killing by someone. As for employees leaving, who cares?

The next big shock will be the Oracle/HP partnership (such as it was - none) being officially declared dead. As I previously said, we pissed off Cisco, Microsoft and Oracle so who is left? We actually do a pretty good job with customers too...

You know, if hp would just treat employees the way that Bill and Dave advocated, you could save a lot of time and money on surveys. Just sayin'...

2010-08: Some suggestions from some HP and ex-HP friends of mine and publications, too...

Innovation Killers...

Financial controls destroy your business' ability to engage in innovation.

This is the claim of Clayton Christensen, Stephen Kaufman, and Willy Shih in their Jan 2008 HBR article entitled, Innovation Killers. For years these three have been researching why so many smart and hardworking managers in excellent performing companies fail to innovate successfully. This research revealed that the financial controls used to manage your organization to optimum efficiency often times inadvertently act as a blockade for ground-breaking new ideas. Let's observe...

The authors identify the misguided application of three commonly used financial-analysis tools as innovation killers:

[comment/reply]... "That first paragraph sounds a LOT like what Bill and Dave used to say..."

There is such a thing as "good enough" (or maybe "just enough"). There has to be simply because there is such a thing as "too much cost-cutting, expense control, operational efficiency, etc." The old laws of diminishing returns. You reach a point with everything where just a little more (or less) makes it all worse, not better. Good managers are able to identify when/where that "good enough" point is.

You know: the SAS Institute went public and after a few short years went private again stating they could not run the company in a way which was in the best interest for all stakeholders.

Hell, yes... and HP was "virtually private" even after the public offering, since Bill and Dave and their foundations owned a huge chunk of the shares!
I doubt it would happen... could they possibly afford it? What's the float today?!
But if the leaders BEHAVED like Bill and Dave, it might be just as good, if any of 'em had the genital fortitude to say, "screw Wall Street, we're running the Company FOR the Company..." and got down to brass tacks.

Several times I worked in divisions that were in startup or turnaround mode -- or in departments with little glamour -- where there was little money for raises.

But the company-wide profit sharing, the way we were treated, and the satisfying and (yes) fun work -- meant that that didn't matter that much.

I completely agree that the atmosphere has changed, and I would even go so far as to say that Hurd took the cost-cutting too far (ok, climb off the ceiling at what you consider my ridiculous understatement). But HP was fat, with too many redundant processes and obsolete ways of working and antiquated systems. I think Hurd put us into shape where we can grow back some of the bone and muscle he cut, because he did cut quite a lot of the fat as well.

As people have said, and as my conversations with other HP people have indicated as well, we need somebody like a Mark Andreesen or a Steve Jobs: a visionary who can take the now lean HP and bring out the next generation of InkJet or LaserJet or ProLiant or EVA or VT100 or Superdome. Something which distinguishes HP from the IBM/Dell/Oracle/EMC/Cisco's of the world, and makes HP the default choice for that class of product, and which will drag along all of the other products and services.

Cut the fat? Not from the perspective here. We still have dozens (hundreds..) of folk in 'marketing' but none in product marketing so we have nothing to actually sell in services. We have around 800 people in Europe (my estimate) who do nothing but forecast and judge the field forecasts. We have dozens of resource managers and dozens in HR, none of whom provide the slightest added-value to working with clients. We have five timekeeping systems and 30 expense systems - the list goes one and on. We have no money for client presales meetings but can muster up the money for an internal meeting for 50 people. I went to one on Cloud last year and there were five people from the US, one of whom NEVER SAID A SINGLE WORD in three days! Fat? We ain't even started....

Cut the fat? Not from the perspective here. [Europe]

We still have dozens (hundreds..) of folk in 'marketing' but none in product marketing so we have nothing to actually sell in services.

We have around 800 people in Europe (m estimate) who do nothing but forecast and judge the field forecasts.

We have dozens of resource managers and dozens in HR, none of whom provide the slightest added-value to working with clients.

We have five timekeeping systems and 30 expense systems - the list goes one and on.

We have no money for client presales meetings but can muster up the money for an internal meeting for 50 people. I went to one on Cloud last year and there were five people from the US, one of whom NEVER SAID A SINGLE WORD in three days!

Fat? We ain't even started....

That amazes me.

Here in the US, the situation is completely different.

Marketing is practically non-existent, product marketing is being emptied as fast as possible (we now have 2 product managers for servers, one for Integrity and the DL980, and one for all of the other ProLiants, where we used to have a product manager for each of the low-end, mid-range and high-end Integrity servers), sales managers do all of the harassment on the forecasts, HR is (I think, judging from the accents) in Costa Rica, we have a single time-keeping system and a single expense system, etc.

Raise morale?

1) Sack Mott and all his staff (on the org chart our shadow IT and associated staff still number in the hundreds). Outsource our IT to someone who knows what they are doing
2) Get rid of ES
3) Merge EB/Software and all the others except the hardware products divisions.
4) Give EB a profit margin on selling hardware just like external distributors get.
5) Reduce the number of management levels from 11 to about 4
6) Increase the span of control to 30 and reduce the BS managers have to do (like check if our PCs have encryption ferchissakes - can't IT do that remotely? Oops, sorry, forgot, they are incompetent)
7) etc

HP is not going down the tubes, it has done already. We are no longer a company but a loose federation of competing companies. No-one is responsible for anything and managers never get sacked. Qualifications mean nothing and nor does experience. We would rather sack an experienced person who is without a chair than move some useless dick off his chair and replace him - musical chairs is about all we are good at.

[reply...]

So tell us how you really feel... :^)

I disagree on 1 and 2, but kind of agree on the others.

1) Mott did exactly what he was tasked to do: take out costs, bring in efficiency and (his words, which I like) "ruthless standardization", and make everybody march to the same drummer. If he went too far in the direction, it was only because those were his marching orders. If he was told to increase customer satisfaction, I expect he would do that with the same zeal he has shown for doing what he was told to do by Hurd.

2) E(D)S is a kind of mixed bag. I have some E(D)S people who I refuse to work with primarily because they take too long to do too little, while I have other E(D)S people who are a joy to work with and with whom I am selling a ton of gear. I don't think you can blame the entire organization, when it comes down (as it always does) to individuals who are either tree-hugging or have actually noticed the "HP" on their paychecks.

3) and 4) Ok. But also merge the server hardware divisions to match SWD, IPG and PSG: everybody sells everything in that division. There aren't different sales forces for the P4000 (iSCSI NAS, formerly LeftHand) and XP storage, there aren't different sales forces for desk side printers and the big workhorse printers, and there aren't different sales forces for notebooks and desktops. These divisions recognize that customers want someone who can talk about it all. Only BCS (Integrity, PA-RISC and Alpha) and ISS (ProLiant) make these arbitrary and meaningless separations. We have to get rid of this foolishness.

5) I think 4 is a little aggressive, but 5 could work...

6) My manager is great about that. He has formally told us that none of us have to take the certification test that he is being told we are to take, and he will all mark us compliant on it. He doesn't check the encryption status of our notebooks since he had to re-image his after the encryption software locked him out of his notebook, etc. And he is joined in this by every L1 manager that I am aware of in the field (I can't speak for Engineering or the back office managers), who consider all of this to be foolishness.

[Comments on the VOW...]

I already did the VOW.

The very nature of the questions indicates the chasm between management and reality in the field and of course there are the obligatory PC questions about diversity in your group and did we understand the strategy etc.

This will inspire, as usual, another round of explaining this weeks five year strategy but won't address the internal organizational chaos which is HP these days where everybody is fighting everyone else for everything.

One of the gems in EMEA is company cars. These have long been part of the culture. So, recently they announced new plan. Everyone will have to justify the car as a tool with a certain number of km's driven and of course to be PC, if you use your own car it has to be 'green' ferchissakes.

Here's the rub though. All consultants and sales will have to justify them so I have colleagues in sales in Geneva who will lose their cars because their clients are in Geneva (the fact that all sales in every company have cars will likely inspire a few to leave) but anyone above a certain level (ie all the excel managers) don't have to justify a car and get it as a perk and a BMW no less. This last part was kept very quiet of course.

Oh what a company....'twill implode