R&D: One Of The Driving Factors Behind 3M’s Growth

During a period when many companies are allocating a smaller proportion of their revenues towards research and development, 3M (NYSE:MMM) is aiming to expand its R&D spending to about 6% of its revenue by 2017. Consulting firm Strategy& found that annual R&D spending, as a percentage of revenue, among the world’s 1,000 largest R&D spenders fell from 4.2% in 2005 to 3.7% in 2015.

3M considers innovation to be central to its vision and strategies, and has steadily increased its investments into R&D, from 5.3% of its sales in 2011 to 5.8% last year, totaling an investment of $8.5 billion over the last five years.

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In the company’s innovation model, the R, which is for the research part, is at the center of the company, and creates technology for the firm, while the D, or the product development, actively resides in the respective businesses. This ensures that the company continues to invest in its fundamental strength of technology, even in tough business conditions, and the common pool of technologies gets commercialized in diverse markets through the company’s different businesses.

In addition to the extensive resources the company has at its headquarters in Minnesota, 3M has rapidly expanded its R&D operations globally, and now operates laboratories in 36 countries, and has 8,300 researchers worldwide. Moreover, to drive further global growth, a specific Invest in Innovation (I3) program was put in place in 2012, to enable the company to focus on organic growth through prioritized investments. The increased R&D spending is expected to stabilize at 6% of sales by 2017. The additional I3 R&D funding is aimed at injecting additional impetus, to take 3M’s organic growth rate to a new level. The company even has a metric in place to measure the sales percentage of new products introduced in the previous five years. The company calls this the New Product Vitality Index. 3M is also consistently listed in consulting firm Strategy&’s top global innovators.

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