3M must learn from its $850 million mistake

"We've always been storytellers and inventors at heart," the 3M Co. says on its website, reminding folks how much it cares about its tradition of innovation. And 3M has had great stories to tell, too.

Maybe you have heard the one about a lab accident with some new canvas tennis shoes.

In the 1950s, someone slopped a chemical mix on these tennis shoes that just couldn't be cleaned off, no matter how hard anyone tried. Soap and water, solvents, they all bounced right off. Out of this accident a scientist had the presence of mind to stop, think, and ask … what if?

That led to a popular fabric protector called Scotchgard, used to keep canvas shoes, carpets and other things looking like new. Along with Post-it notes, Scotchgard is maybe the best invention story 3M has. It takes up several pages in a corporate history the company published in 2002 called "A Century of Innovation."

By now you may have already guessed that Scotchgard contained a fluorochemical from the same family of chemicals that ultimately led to years of litigation against 3M and regulatory action over their presence in the environment. In Minnesota that dispute with the state culminated last week in 3M agreeing to pay $850 million.

That's what is so interesting about this lawsuit story. It arose out of the traditional strengths of an enduringly excellent company, now operating under a global tagline of "Science. Applied to life."

In announcing the settlement, 3M reiterated that it believed there was no public health threat related to its handling of a chemical class usually called PFCs. That assertion might be due in part to pending legal disputes on past environmental practices, nearly three dozen according to a note last week by research analysts at RBC Capital Markets.

The appeal of the Scotchgard story in the official corporate history is obvious, and not just due to the serendipity involved in the creation of the product. It's also a chance to highlight the work of one of Scotchgard's inventors, Patsy Sherman, the first woman named to the Carlton Society, 3M's scientific hall of fame.

It was also a story of perseverance, of a corporate commitment to just keep trying with a technology that looked very promising. 3M had acquired some rights to a fluorochemical process in 1944, but eight years into development, there was little to show for the company's efforts.

The first Scotchgard protection product was introduced in 1956, but it wasn't until a 1960s formulation hit the market that Scotchgard turned into a big commercial success.

The company developed lots of other ways to use this basic technology, too, including coatings for grease resistance in paper packaging and fire retardants.

A lot of what 3M sold was produced at its manufacturing complex near the Mississippi River in Cottage Grove, not far from 3M's Maplewood headquarters. 3M disposed of manufacturing waste at several sites in the east metro, and water from the plant ended up in the river.

Regulators in Minnesota grew active as well, and in 2010, Minnesota Attorney General Lori Swanson filed the lawsuit against 3M that just was settled.

Swanson's office created a website of background materials on the dispute, including links to documents from 3M. It's clearly unfair to form an opinion about a now-settled case solely from reading the plaintiff's website, but there's one document that's going to stick with me. That's a copy of the Cottage Grove Megaphone, a 3M employee newsletter.

It's from early 2002, at the time of the Winter Olympics in Utah. It gave a hearty congratulation to the Cottage Grove team for helping to produce four times the old volume record of a fluorochemical product a year after the company said it would phase them out.

What was memorable, though, was on the inside, a simple note from a plant manager that showed how much 3Mers believed in the legends of their own company.

It ran under the headline "3M — A Gold Medal Company." No one could have imagined it appearing in the same document cherry-picked by a lawyer to show that 3Mers were the bad guys.

"We all have the opportunity," he concluded, "to push and pull our company through challenge, adversity and difficulty to keep 3M a Gold Medal company."

That's where the company seems to be right now, pushing through adversity in which a single lawsuit cost at least $1.10 per share in after-tax earnings in its first quarter.

The bigger challenge yet to come is reimagining its own legends of innovation. 3M was clever enough to invent ways to make fluorochemicals into products that were genuinely useful. It wasn't clever enough, or maybe careful enough, to later keep some of those chemicals out of the groundwater.

The stories companies tell about themselves really matter. The company found itself featured in the classic business book "Built to Last" because the authors recognized it as a company organized around an ideology of always coming up with new things, rather than being centered on market opportunity or just trying to make money.

3M shouldn't ditch Patsy Sherman's story because of environmental problems she had nothing to do with. It's still a great story; it just needs to be put into a broader context.