IDEO: The Starbucks of Product Design

IDEO is now one of the biggest design consulting firms in the world, but it competes with companies such as Accenture and McKinsey in influence if not in economic scale. IDEO is a design firm for giants such as Procter & Gamble, Hewlett-Packard, Eli Lilly, and Pepsi and little-known companies such as Zinio, ApproTEC, and Picaboo. An

ABC Nightline show titled “The Deep Dive” exposed the company to the world at large, featuring IDEO’s redesign of a shopping cart in one week’s time. IDEO has also worked on sophisticated medical equipment, designed special effects for movies, and developed toys for children at all cognitive levels and types of activity.

IDEO, now an international consulting company with offices in Munich and London, has its world headquarters in Palo Alto, a city a short distance from san Francisco, where many design consulting firms started in the 1970s and 1980s to support the rapidly exploding digital age in Silicon Valley. IDEO was founded by David Kelley in 1978 with an engineering focus. The company soon found itself in the middle of three-way product trade-off negotiations between itself, its clients, and the industrial design firms that were also hired for pro­jects. The focus of many of these battles was the tradeoff between aesthetics and technology. The clients finally turned to Kelley to ask him to just deal with the whole issue. At the time, he was good friends with Bill Moggridge, head of ID Two, an industrial design consulting firm. Moggridge was a pioneer in the new field of design for digital products. He coined the term interaction design, which has since evolved into one of the biggest new areas of design, involving the fields of computer science, human-computer interaction (HCI), and communication design. Kelley and Moggridge were also friends with Mike Nuttall, another industrial designer who had spun off his own firm from ID Two. Kelley’s view, and the one he used when first start­ing his business, was that if he were going to expand his capabilities, he would work with friends and enjoy the process. In 1991, he approached Moggridge and Nuttall with his idea, and together they formed a left brain/right brain combination that would lead to the biggest design consulting firm in North America. The combined effect was far greater than the sum of the parts. This was one of the early examples of merging engineering and industrial design into a comprehensive product development consulting firm. Over the past several years, IDEO has evolved beyond product design into a con­sultancy that designs services, environments, and digital interactions.

IDEO provides qualitative market research, helps companies talk with their users, and teaches companies how to be more innovative. One of its biggest clients is P&G. Not surprisingly, P&G’s CEO A. G. Laffley is one of IDEO’s biggest fans.

Raised in a blue-collar town in Ohio, David Kelley studied elec­trical engineering in college. Like Kapur, Jones, and Harmon from Chapter 1, Kelley has a balanced comfort between art and science. He chose to study at Carnegie Mellon because the school had a top engineering program and a top art program. He was a generalist who never wanted to dig narrowly deep into a field of engineering. Instead, he took many art classes and was exposed to the multidisci­plinary atmosphere that has been the hallmark of the university (again, the theme of innovators having that balanced left and right brain). After finishing school, he worked at Boeing and then National Cash Register and then went to Stanford for a unique (at the time) master’s degree program that combined engineering with an indus­trial design-balanced creative approach. The program stressed cre­ative qualitative problem solving and gave Kelley an entirely new dimension to add to his engineering education to date. He then became a doctoral student during the Silicon Valley boom. He found himself consulting with all the high-tech companies and soon decid­ed that product development practice was more his calling than an engineering Ph. D., so he formed IDEO.

Soon after forming his new company, Kelley and his team designed the first mouse for Apple. The core technology had been invented at SRI (Stanford Research Institute), but it was too unwieldy to use, too expensive, and too prone to failure to be sold in high quantities. Kelley’s group focused on interaction of use and pro­duction and developed a mouse that could be cost-effectively manu­factured with subtle ergonomic features, such as covering the ball in rubber. No one had ever held an interface to a computer in their hands before, so it was a new world. Today, IDEO has more than 400 employees and has designed thousands of products.

There are many reasons for IDEOs success. Kelley says that real innovation comes from understanding humans and their needs as individuals and groups. IDEOs approach is to understand how peo­ple interact with the world around them and to balance that with technology and business points of view. IDEO hires a wide mix of people with a variety of backgrounds. Social scientists, for example, are key to understanding real users and real needs. At IDEO, the cul­ture of innovation is above all else.

To enable that culture, IDEO hands over responsibility to the work teams. IDEO is divided into small groups, each of which is responsible for its own profit and loss, which directly affects bonuses. In IDEO s view, the more decisions that teams can make themselves, the better. People need to control their own decision space and understand those parts that they cannot control. If a boss dictates the rules, the team cannot understand them or be part of them, prevent­ing buy-in to the philosophy of the rules. When IDEO is called in to a client organization to audit its innovation capabilities, hierarchical structures are often the main deterrent. As Kelley says, “Creative people don’t like the boss’ boss’ boss affecting their lives.” Rules lead to less creative cultures. Put differently, giving teams responsibility sets up the proper incentives for them to perform. In IDEO, for example, a team is responsible for its own rules on coffee clubs. If coffee is free, the team’s profits are down, but free coffee is a benefit that encourages interaction. On the other hand, if the team charges for coffee, that money can be used to buy equipment, improve the office environment, or be donated to charity. Although this example is seemingly trivial, this and other more far-reaching decisions are made by each group, empowering the team members to create the environment in which they want to work.

IDEO also believes in an innovation process that provides a framework for design without precisely dictating each step. The team does need to work through specific steps to accomplish the process goals laid out. But each step cannot be so precisely specified that there is no, or even little, room for exploration and change. The process IDEO uses must be as dynamic and innovative as the results. This does fly in the face of most companies, which look for and try to lock onto one process that must replicated. IDEO even finds itself adapting the best practices from its client companies and others to improve its own innovation process.

Finally, Kelley says that the biggest deterrent from innovation is fear. If everyone is afraid of being fired, of having your boss or even colleagues chastise you for mistakes, you move to survival mode with layers of protection. When you are in survival mode, where you don’t want to make mistakes, you are no longer innovative, because inno­vation requires risk.