Case studies for faculty members and students

3M

Evaluating management techniques helps 3M get out of a sticky situation

Nintendo is making computer-game characters out of them. The Smiths’ front man Morrissey once fired his
band’s bassist using one. And you can bet that right now there are millions of them scattered across offices all
over the globe.

God bless the humble Post-it Note, memory-aid of the forgetful and modern-day telegram for those on a desk
break.

The Post-it was invented in the 1960s by a scientist working at 3M, who wanted to help a chorister keep his
bookmarks stuck to his hymn book. But Post-it Notes are not all that 3M does – its portfolio of 55,000 products
ranges from stethoscopes to Scotch Tape. With labs in 35 countries, innovation is at the core of the company.

Indeed, in a recent BusinessWeek poll, 3M ranked just behind Apple as the world’s most innovative company.
3M has always been proud of the fact that one third of its sales come from products invented within the past
five years, so when that figure recently slipped to one quarter, the newly appointed chief executive, George
Buckley, realised that something was wrong. He concluded that over-zealous management techniques were
stifling creative thinking in its R&D department, so that the rate at which inventions such as the Post-it Note
were reaching the market had slowed drastically.

The problem was that Buckley’s predecessor, James McNerney, had left behind a lasting legacy: the Six Sigma
management programme, implemented in 2001. A rigorous methodology which uses data and statistical
analysis to measure and improve a company’s operational performance, Six Sigma works by identifying ‘defects’
in manufacturing and service-related processes.

This set of practices was originally devised by Motorola to increase efficiency within a company, and ultimately
raise profitability. McNerney saw the company’s major defect as its inconsistent profit and sales growth, so in
response he cut capital expenditure by a third over two years.

You can’t have creativity without discipline and you can’t have discipline without creativity Pip Frankish, 3M

But what looks good on paper isn’t always mirrored in reality. In the R&D labs, the analysis and profit-pressure
that Six Sigma brought had begun to choke innovation. Instead of squeezing out inventions more efficiently, the
structure was squeezing researchers’ creativity. Instead of dreaming up ideas, scientists were dreaming up ways
of filling in their Six Sigma databases.

Gradually, the scientists realised that great ideas could no longer flourish and that the environment in which
they had previously worked was much more conducive to innovation. The Post-it was invented by an employee
using 3M’s ‘15% rule’, which allowed engineers to spend 15% of their time pursuing personal projects. With time
and efficiency restrictions in place, it’s unlikely the Post-it Note would ever have stuck.

When Buckley took over, he set about loosening the Six Sigma reins in the company’s labs, increasing the R&D
budget by 20%. “It was clear that we had to re-energise the growth engine,” says Pip Frankish, head of corporate
communications at 3M, “and the signs are that we’re starting to do that.”

Six Sigma has not been eliminated, but it has been ‘deployed pragmatically’. It is still used in many areas of the
company, including R&D, but applied far less rigorously. “The creative process is a messy one,” says Frankish.
“You can’t have creativity without discipline and you can’t have discipline without creativity.”

The core goal of Six Sigma is to eliminate defects: yet for true innovation to take place, mistakes must be made
along the way. With the focus now on allowing freedom of innovation – even if it means making the occasional
error – 3M scientists have already noted the difference.
LG Electronics

LG discovers the power of functional, seductive design – and chocolate.

LG Electronics’ motto is ‘Life’s good’, which seems pretty apt at the moment. Awards too numerous to mention,
a doubling of brand awareness for the last two years, global sales of more than £19bn, number one in the world
for plasma TVs and number five for mobile phones – life’s good alright.

Design has always been key to LG’s culture. The company, set up in 1958, broke new ground in Korea by hiring
an industrial designer, and just a year later set up a department which focused purely on product design.

In the last two years LG has won 50 prestigious Red Dot design awards, with products such as the sexy KG800
phone (more famous as the ‘Chocolate’ phone) and the sophisticated new Prada phone leading the charge in
2007, being praised by the awards’ creator Professor Peter Zec for “focusing on human needs in the digital age”.
There is nothing especially chocolatey about the KG800, LG just thought the name would help people remember
it. And, as it sold 10 million units in the first 17 months, they were right.

The chocolate tag was not a one-off. Hee-Gook Lee, LG’s president and chief technical officer, wants the
company to create “playful, fun-to-use” products and believes “a great emphasis on a premium design strategy”
enhances LG’s brand value.

A very great emphasis: LG spent £1.5bn on R&D last year and it has set its sights on becoming one of the top
three consumer electronics and telecommunications companies by 2010. It has 25 R&D labs around the world –
its strategy being ‘global localisation’, a design thrust that comes from understanding the differences between
the world’s marketplaces and cultures.

We broadened the concept of ‘haptic’ design to all five senses – touch, smell, the glowing lights and all the
emotional things

LG strives for design that is at once minimalist and seductive. Designers are encouraged to “experiment in a
playful manner with fresh ideas and unusual combinations,” but vice president Jae-Jin Shim says LG is not
interested in design for design’s sake, warning that it can conceal the “underlying beauty of the product”.

Kim Jin, the chief of LG Electronics’ mobile phone design lab, says: “LG’s design philosophy is to appeal to
customers’ emotions”. She says the concept was originally called ‘haptic’ design. “It originally meant the feeling
of touch, but we broadened the concept to all five senses – touch, smell, the glowing lights, all the emotional
things.”

Jin encourages her designers to do what she calls “town-watching”, sending them out to the chic streets of
Hongdae or Cheongdam-dong. “Each time they go, they can see differences in the shops and in the people even
from a month before. Designers need to catch such subtle differences.” On one of these trips, she noticed a
trend towards more natural shapes and this inspired the Chocolate phone.

The Chocolate phone was the world’s first mobile handset with a touch-sensitive keypad. Jin says “a single
success does not make a company a true leader”. LG has taken ‘emotional design’ a step further, adding a
lavender scent to the keypad of the ‘White Chocolate’ phone, sold as a limited edition for Valentine’s Day last
year. Whatever next? One that cries real tears when you get dumped?
Rolls-Royce :Why Rolls-Royce is one British manufacturer flying high in a downturn

The issue

The name Rolls-Royce has become so synonymous with quality that leaders in their fields are routinely
described as the ‘Rolls-Royce’ of that field. It wasn’t always this way. In 1971, the manufacturer went bankrupt
and was nationalised.

The car manufacturing operation was sold off two years later. After being privatised in 1987, judicious
acquisitions and a reputation for reliability saw the aero-engine division become the world’s second-biggest
maker of large jet engines.

Yet as manufacturers from emerging economies moved into the aerospace sector, the company has had to fight
fiercely to retain its customers as they are targeted by new, cheaper rivals.

The solution

The genesis of Rolls-Royce’s revitalisation lies in design. After nationalisation, it invested heavily in a new engine
prototype that enabled it to overtake rival Pratt & Whitney, which had owned 90% of the large engine market in
the 1960s. Crucially, the new design was scalable, so it could be customised easily for every new type of plane.

Staying profitable since then has meant thinking beyond product. All the major aero-engine manufacturers offer
after-market service programmes. Rolls-Royce needed something extra. Service was placed at the heart of its
offering.

Instead of buying an engine and then a service package, it decided to encourage customers to pay a fee, under a
contract, for every hour an engine ran. In return, the company maintained it and replaced it if it broke down.

Rolls-Royce’s TotalCareprogramme – the fruit of these endeavours – is renowned for its quality, and has
effectively ‘locked in’ key clients. As well as offering maximum benefit to the customer, TotalCare also gives
Rolls-Royce a competitive advantage. From its operations room in Derby, engineers monitor the performance of
3,500 engines flying at any given moment.

Data beamed from each plane is analysed and used to spot potential issues. This information can be passed to
Rolls-Royce engineers around the world who can then focus on a precise problem without having to strip down
the engine.

The outcome

Together, these strategies ensure Rolls-Royce keeps its customers’ planes and its own business flying. It has used
design to innovate radically, rather than simply to create an incremental advantage rivals could easily copy.

TotalCare has given Rolls-Royce a competitive edge. Around 80% of engines sold include TotalCare: spare parts
and long-term servicing operations have overtaken new sales to account for 63% of the engines division’s total
revenues.

Although Western airlines aren’t ordering as many new planes as they used to, Rolls-Royce can also look
forward to an increase in orders – and TotalCare packages – from Middle Eastern carriers, including Etihad and
Qatar Airways. In the meantime, its engines power planes for 45 of the world’s leading 50 airlines.

And the good news for the wider economy is that Rolls-Royce is the country’s second-biggest exporter, earning
more than 85% of its revenues from abroad – a prospect that would have seemed laughable just a generation
ago.
JS Humidifiers

How JS Humidifiers grew sales by over £1m just by rethinking its brand.

The issue

Complacency is a cardinal corporate sin. Avoiding it, even if you have been a market leader for 25 years in a
specialised field, requires ruthless self-scrutiny and the openness to bring in new thinking. Luckily the UK’s
largest humidification specialist, JS Humidifiers, exhibited both these traits when it decided to put design first.
And the decision is already delivering a return on investment.

Since 1980, the company, which generates annual sales of £7m, has been providing equipment to control
environments ranging from pharmaceutical plants to art galleries. In 2006, technical director Tony Fleming says,
the company needed to change to sharpen its competitive edge.

“We’d been making and selling our two flagship products – JetSpray and HumEvap – for many years,” he says.
“To ensure their continued success, they needed updating. We were also aware of new competitors, so the time
was right for a facelift.”

The solution

Taking advantage of the Knowledge Transfer Partnership scheme – the part-government funded programme
that enables businesses to improve their competitiveness by using the knowledge, technology and skills that
exist within academic institutions – JS Humidifiers brought in product design graduate StanislasBrahier to work
on its redesign project and inspire the company’s in-house team with fresh ideas.

“We needed help with our corporate design,” Fleming admits. “We needed to create products that looked as if
they belonged to the same family, with the logo in the same place and so on. I asked our Business Link advisor if
he knew anyone locally who could help us and he recommended the Design Council’s Designing Demand
programme.”

Designing Demand helps businesses become more innovative, competitive and profitable by helping managers
exploit the power of design.

The designers encouraged us to focus on reducing waste and cost, as well as enhancing the productTony
Fleming, JS Humidifiers

James Duguid and Jonathan Ball were drafted in to help define project objectives and act as design mentors.
“We wanted to use our own guys,” Fleming says, “but we needed to make sure they had assistance. James and
Jonathan set us on the right track. As well as advising us on enhancing product appearance, they encouraged us
to focus on other things such as reducing waste and cost.”

The redesigned JetSprays and HumEvaps were not only better looking and cheaper to make, their improved
energy efficiency made them more environmentally friendly.

Fleming adds: “We assessed such factors as supply-chain management, inventory and commonality of
components. Our CAD software has been used to its full potential, which has improved efficiency because
drawings now go straight to sub-contractors’ machinery rather than having to be re-programmed by them. The
software also enables us to prototype much more rapidly.”

The outcome

The redesigned JetSpray proved an immediate hit and attracted orders totalling £1m when it was launched at a
major trade show in 2007. HumEvap has sparked a similar buzz. “The redesigns have impressed our customers,”
Fleming says. “And without doubt, our competitiveness has increased as a result.”
Designing Demand’s influence has inspired staff at JS Humidifiers. As well as boosting the bottom line and
increasing competitive edge, a new zeal for design is evident throughout the company.
Caterpillar

Green and clean: a tractor driven by customer insight

The issue
Responsible for 40% of global CO2 emissions and beset by its gas-guzzling image, the construction industry knew
as far back as the 1990s that it was a likely target for eco-warriors.

Caterpillar, the world’s largest maker of construction equipment, decided to seize the initiative by giving its
heavy-duty industrial tractors – its biggest product line – an eco-friendly makeover, involving its customers every
step of the way.

The solution
Although the environment was a key driver for Caterpillar, it was oil prices that really kick-started innovation.
“Did we know oil would be $140 a barrel today?” says engineering manager Mike Betz. “Probably not. But the
price of oil was a key factor.”

It became clear the answer was an entirely new machine – a hybrid diesel-electric tractor, targeted at the
construction and mining sectors. Caterpillar wanted to produce one that had the power and capabilities of the
market leaders, including its own D7R (launched in 1996), but with much less effect on the environment.
Betz and his team fine-tuned the technology to make a hybrid tractor workable, using generators and wires
instead of some heavy mechanical parts and bulky batteries.

Betz made sure groups of key customers were involved in the design process. This was useful because, he says:
“They could be very critical, but felt an obligation to tell us the truth.”
Reducing operating costs was one key message, but feedback from operators helped make the new model more
user-friendly. New innovations improved operator visibility and handling, reduced noise and introduced and
electronic parking brake and air conditioning – essential when you’re shifting piles of rubble all day in the glare
of the sun.

Through a process of analysis, dubbed ‘quality function deployment’ (QFD) Caterpillar helped to balance
customer needs with the tractor’s overall cost, aligning both with the firm’s business objectives.
The result of more than 50,000 laboratory and machine hours was the launch this summer of the D7E – the first
tractor of its class with an electric drive. The new machine, promoted with the slogan “A dozer that conventional
wisdom said could not be built... until now” could revolutionise the industry. The D7E arrived in the nick of time
– the rollout of Environmental Protection Agency (EPA) Tier 4 rules in the US means emissions from construction
vehicles must be 90% lower than their mid-1990s levels by 2010.

The outcome
The new tractor’s turning circle may resemble an oil tanker’s, but in its way the D7E is as groundbreaking as the
Toyota Prius hybrid. Caterpillar says the new tractor uses 30% less fuel, costs 25% less to service and is 10%
more productive than other top-ofthe- range models.

Innovation does come at a price – the D7E is 17% more expensive than the D7R, and that may slow take-up as
businesses struggle to justify the extra investment in a slump.Still, the feedback about the machines placed with
customers for trials has been very positive, and Caterpillar hopes long-term gains on fuel – and the D7E’s eco-
credentials – will win clients over and position it as the must-have brand in the upturn.

Caterpillar’s track record suggests it may be right. In the Great Depression, it kept making sturdier, costlier
models, and introduced its signature Hi-Way Yellow livery. The strategy increased market share in the long term
and created such a strong brand it even spun off into a fashion range.
Article first published in Design Council Magazine, Issue 7, Winter 2009
Xerox

Reusable paper is one innovation that Xerox will never sell for a pittance.

One morning in 2006, a group of scientists arrived early for work at the Xerox Research Centre of Canada, in
Mississauga on the shores of Lake Ontario.

There was a nervous excitement in the air as they crowded round a table on which lay a single sheet of paper.
Hushed silence gave way to cheers and high-fives as the scientists saw that the sheet was completely blank.
“That was a pretty special moment,” says research centre manager Paul Smith.

After three years of research and development, the team had perfected erasable paper, the holy grail of
sustainability. The previous evening, the sheet had been a typical, text-heavy office document – albeit one
produced by a specially modified printer. Within 16 hours it had wiped itself clean, ready to be printed on again
an unlimited number of times. Having first revolutionised the office in 1947, with the invention of the
photocopier, Xerox is poised to do it again.

More than two trillion pieces of paper are recycled every year in office environments. Xerox’s new paper, and
associated printer, could drastically reduce the number of trees felled to make virgin paper as well as saving on
power usage: reprinting uses a fraction of the energy that recycling does.

The road to erasable paper started with a desire to understand how the mountains of paper consumed in offices
were actually used. When Xerox categorised the contents of the Mississauga centre’s recycling bins, it found
that 40% of printed paper is ‘transient’. “People put things in the recycling bin one day, and print the same thing
out again the next,” says Smith. “It’s easier to find information electronically than to find the piece of paper
again.” Printed emails, web pages, reference materials viewed only once and – the worst offenders – cover
pages are all wasteful. “Cover pages are used for a fraction of a second. You can reuse that paper immediately.
We knew we could make that happen, but it required a totally different printer concept. You can’t use
conventional ink or toner because you can’t get them off the paper again,” says Smith.

His team developed photochromic compounds in paper that absorb light to display an image, but only hold the
light for a limited amount of time. The technology is similar to that used in photo-sensitive sunglass lenses.
Xerox’s Palo Alto Research Centre in California then had to develop a printer that uses a light-emitting bar to
print with the exact wavelength of light required to react successfully with the compound. The result is paper
which wipes clean in 16-24 hours but will probably cost at least twice as as much as regular copier paper. The
printer – which can manually erase the contents of the paper and print on it straight away if required – is a
slightly modified version of a regular model. Xerox is investigating how quickly it can bring both paper and
printer to the marketplace.

Innovation and strong product design are, Smith says, Xerox’s lifeblood: “Xerox was born through innovation –
the invention of xerography – so there is an internal belief that innovation is vital to the company’s health.”
Xerox hasn’t always been as healthy. Apple boss Steve Jobs said, in 1996, that Xerox could have “owned the
entire computer industry today”. He should know. When Palo Alto invented the PC, laser printer and Ethernet in
1979, Xerox sold the technology to Jobs for a song, believing the paperless office was incompatible with its core
business. Existing patents were allowed to run out, allowing rivals to gain a foothold in the copier market, and
many of the company’s best scientists followed the PC technology to Apple.

By 2000, the 102-year-old company was $19bn in debt. Incoming CEO Anne Mulcahy soon recognised that
raising R&D’s profile was central to the company’s recovery. Today, every designer and scientist at Xerox
averages two ‘invention proposals’ a year, put before a technical advisory panel of their peers that marks them
for feasibility. The corporate side of the business is only involved further down the line, says Smith, to ensure
innovation flourishes unhindered. “There are mechanisms for rewarding people who have ideas,” he says. “But
in reality we just employ people who love inventing.”
Toyota Prius

The eco-friendly Prius is a technological marvel so hip it has a page on MySpace.

The day after the Oscars, newspapers are usually full of stories about frocks or sobbing actors. But in 2004 a new
star hogged the front page: the Prius. Toyota’s energy-efficient hybrid car made headlines as Hollywood
husband-and-wife team Tim Robbins and Susan Sarandon stepped from the vehicle on to the red carpet. Since
then various celebrities – Leonardo DiCaprio, Sheryl Crow and Google co-founder Sergey Brin to name but three
– have driven these fashionable hatchbacks.

Toyota Prius, the first vehicle to offer a viable commercial alternative to the internal combustion engine since
1924, when a steam-powered model called the Stanley Steamer ran out of puff, was first introduced in Japan in
1997. And for Toyota, traditionally regarded as a reliable, risk averse company where process – epitomised by its
legendarily efficient production system – normally triumphs over trailblazing product, the fact that the Prius
ever made it to market is a corporate miracle.

Using the Hybrid Synergy Drive, the Prius combines a petrol engine and electric motor for power, minimises
emissions and is so fuel efficient that you can drive 600 miles on one tank. At that rate, even the most absent
minded motorist would find it hard to lose their petrol cap. A process called ‘regenerative braking’ turns the
kinetic energy generated when braking into electrical energy. This energy is then stored in the car’s battery. And
this means the Prius emits up to 90% less smog-forming emissions than conventional cars.

Though the Prius’s glamorous debut made it seem like an overnight success, Mark Hall, Toyota’s UK marketing
director, says the car was the fruit of 40 years of R&D. “In 1965 we started investigating the feasibility of using
gas turbines to power an electric drive system for cars,” he says. “That led to us showcasing some futuristic
thinking in the 1977 Sports 800 gas turbine hybrid. This imaginative approach to environmentalism created the
concept that evolved into our Hybrid Synergy Drive.”

Plenty of car manufacturers had invested in hybrid technology but Toyota beat them to market by breaking with
its own corporate culture in its determination to innovate.

When the Prius was launched, such a small volume of vehicles were produced that cynics said it was generating
more column inches than actual sales. But production has quickened since Toyota introduced a second model in
2004. This vehicle was roomier, had better handling and used second-generation Hybrid Synergy Drive
technology. Other new features included a Smart Key for added security.

Hall says the evolution was absolutely essential: “Design is a key factor when consumers buy cars and the Prius
is no exception. The first Prius, a saloon, was not particularly attractive. The second-generation car has much
stronger styling, looks modern, technologically innovative and has grown from a saloon to a bigger hatchback.”

The model’s Hybrid Synergy Drive engine has won awards for offering the best fuel economy in its class. These –
and an array of awards for the engine – have established the car’s credibility in a market where buyers can be
sceptical of ‘futuristic’ technology that might prove unreliable or rapidly depreciate in value.

Some environmentalists have questioned how eco-friendly the Prius really is. But in California, Florida and New
York the vehicle is deemed green enough for it to be driven alone in car pool lanes. By April 2006 global sales of
the car had topped 400,000. The launch has made Toyota market leader in hybrid cars, even as rivals introduce
new competing technologies into their models. Toyota is introducing Hybrid Synergy Drive into more vehicles as
part of a long-term plan to double the number of models with hybrid drivetrains. In 2007 the company will
launch flex-fuel vehicles in Brazil that run entirely on ethanol.

Currently advertised as ‘Mean but green’, the Prius has made its mark in history. It’s not every car that earns the
ultimate 21st-century pop cultural accolade of having its own page on MySpace.
How Prius global sales have soared in recent years

Year Japan North America Europe Others Year's sales

1997 323 - - - 323

1998 17,653 - - - 17,653

1999 15,243 - - - 15,243

2000 12,513 5,788 709 1 19,011

2001 11,003 15,975 2,320 161 29,459

2002 6,697 20,329 841 216 28,083

2003 17,040 24,938 859 325 43,162

2004 59,767 58,419 8,136 1,420 125,742

2005 40,510 101,149 17,363 2,023 161,045

Total 180,749 224,598 30,228 4,146 439,721

Knightsbridge furniture :Sitting pretty: furniture gets a more productive rethink

The issue

Bradford-based Knightsbridge Furniture has been supplying the leisure, hospitality and public sectors with high-
quality contract furniture since 1939. The company had won a reputation for designing and making excellent
products, but its turnover of £8m was static and competition was becoming fierce.

The company’s main problem was turning good designs into finished products quickly without compromising on
quality. “Keeping up with several major markets was quite a challenge,” says chair Margaret Miller. “The risk
was that by the time a product hit the market, the market had moved on.”

Knightsbridge turned to the Design Council’s Designing Demandprogramme and joined the Immerse service for
mature businesses looking for strategic change or aiming to boost sales and profits. Miller wanted to conduct a
design review to define a new direction for the company.

The solution

Design associate Phil Taylor identified a lack of design direction and marketing focus. The business, which
supplies hotels and ‘own brands’ as well as hospitals and care homes, had over-diversified. “The brand was
confused,” he says, “with several logos and no articulation of its competitive advantage, which meant the
business was struggling to communicate effectively.”

Two key changes were needed for Knightsbridge to regain momentum. Product development processes needed
to be streamlined and the company’s identity freshened up.

Taylor suggested the company needed to change its methods: use fewer parts and alternative materials,
outsource more and reduce the number of prototype stages.

Leeds-based brand agency Lowd+Klea was chosen to shake up Knightsbridge’s image. A red interpretation of the
letter ‘K’ on a white background was chosen, as “it really stood out, and worked well not just on stationery but
across our large transport fleet,” says Miller.

A customer contact and feedback system was set up to ensure user interaction with a smaller product range,
and to identify customers’ needs. The company also decided to expand into the south of England.

The outcome

Within Knightsbridge, design is now used more strategically, and the company is more open to using external
designers for selected tasks. A marketing and design committee directs product development, obtains external
advice and implements a design strategy.

The committee also identifies gaps in the market that can be filled by new products, such as Knightsbridge’s
anti-MRSA lacquer for healthcare furniture.

Using fewer components and more outsourcing has sped up production and has already saved £25,000 a year.
And the business’s increased presence in the south contributed to a £3m increase in turnover after four years.

Knightsbridge’s fresh corporate identity has both improved the company’s image and cemented its reputation.
In particular, the company’s leaders now understand the importance of strong branding and design
standardisation.

“The strongest result has been our improved brand image,” says Miller. “It has gone from strength to strength
and really kept us at the forefront of the market.”

Reference & Courtesy: For more on Designing Demand, visit www.designingdemand.org.uk.