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HUMAN RESOURCES DEVELOPMENT PROGRAM
Working Paper 05-Clardy-01 ______________________________________
IDEO: A Study in Core Competence
Alan Clardy
Towson University
November, 2005
© Alan Clardy. All rights reserved.
This is a draft paper intended for commentary and is not for quotation.
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IDEO: A Study in Core Competencies
IDEO is a firm that specializes in product design and innovations; it also provides
services in packaging design, product research, executive training and education on innovation,
and strategic consulting services (IDEO, Inc., 2005). In IDEO’s own words, it “helps
companies innovate. We design products, services, environments, and digital experiences”
(ideo.com, 2005); with rare exceptions, IDEO does not manufacture or distribute its creations.
IDEO is headquartered in Palo Alto, California and has offices in Chicago, Boston, London and
Munich (Nussbaum, 2004). While the company is privately owned, Steelcase (the office
furniture manufacturer) has a controlling interest but allows IDEO to run independently. In
2004, IDEO had sales of $62 million, down from its 2002 peak of $72 million; in 2004, 20% of
revenues came from work in the health care field (Nussbaum, 2004). It has approximately 350
employees, and while more than half of its employees are engineers, IDEO prides itself in
employing a number of people from wide variety of eclectic backgrounds, including
anthropologists, medical school dropouts, and psychologists (ABC, 1999; Nussbaum, 2000;
Nussbaum, 2004).
In terms of both sales and employee head count, IDEO is more than twice as large as
its next largest competitor “frog design”; Hoover (ideo, inc., 2005) indicates that IDEO has six
additional main competitors, all of whom are smaller. Perhaps even more impressive is IDEO’s
resume of more than 4,000 new product development programs for a who’s who list of clients.
For example, IDEO designed a computer notebook for Japan’s NEC, a cordless office phone
for Dancall of Denmark, and the following products for American firms: the Palm V handheld
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organizer for Palm, a child’s toothbrush (Oral-B), the Neat Squeeze toothpaste tube for Crest,
Polaroid’s i-zone instant camera, the interiors of Amtrak’s Acela Trains, and a device by which
surgeons can open blood vessels (Kirsner, 2004; Kotelnikov, n.d.). Other clients include
Hewlett-Packard, ATT Wireless, Nestle, NASA, and the BBC (Nussbaum, 2004). More
recently, IDEO has been helping companies attempt to remake their corporate cultures in order
to become more innovative. In this manifestation, IDEO begins to tread on the traditional
management consulting turf of such powerhouses as McKinsey, the Boston Consulting Group,
and Bain. But unlike the more business-school, hands-off and button-down methodology of
these management consultancies, IDEO’s emphasizes hands-on learning about the customer
through a partnership between IDEO staffers and members of the client organization; this active,
immediate and fun process of engagement gives IDEO a distinctive selling proposition and niche
presence in the traditional management consulting marketplace. The fact that clients love
working with IDEO also helps (Nussbaum, 2004).
Cultural Roots and Company Distinctions
IDEO was formed in 1991 from the merger of four firms, David Kelley Design, Matrix
Product Design, ID Two and Moggridge Associates of London (IDEO, the company, 2005;
Kelley and Littman, 2001; Peters, 1992). David Kelley Design (DKD) was the business outlet
of Stanford mechanical engineering professor David Kelley. Kelley is a tenured Stanford
oddity, holding the Donald Whittier endowed chair without a Ph.D. (Nussbaum, 2004). DKD
was responsible for the Apple computer’s first mouse. More recently, Kelley was on Esquire
Magazine’s list as one of the “21 most important people of the 21st century” (Kotelnikov, n.d.).
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ID Two was an industrial design firm specializing in human factors work (Winograd, 1996). ID
Two designed the first laptop computer.
IDEO bears the imprint of Kelley, its founder, and embodies his own unconventional
character. As an electrical engineer, Kelley worked for NCR and Boeing before affiliating with
Stanford University. He formed DKD in 1978 with colleagues from Stanford. One of his first
clients – and a role model, of sorts – was Steve Jobs and Apple Computer. DKD and its
progeny IDEO are very protective of its almost counter-cultural sensibilities. Status distinctions
are avoided, employees go to the work they find interesting, the entire atmosphere of the office
is eclectic, personalized and non-rectangular, with public work areas (or “parks”) adjacent to
office cubicles. “My brother David hates rules,” says his brother Tom (Kelley and Littman,
2001). “He hates them because he knows that when you start making rules, you sew the first
seeds of bureaucracy. We reject titles and big offices because they impose mental and physical
barriers between teams and individuals” (p. 243). The culture of the workplace is honed even
more by the methodology of innovation they use (described more fully below). A keystone of
IDEO culture is learning, exemplified by an early principle of Kelley at DKD: he would not take
on projects – and business – unless they could learn something from it.
IDEO enjoys something of a distinctive position in the world of commerce: everybody
loves it (Nussbaum, 2004). The praises of IDEO have been sung from its inception. Recent
guru Tom Peters (1992) claimed to be first to recognize the special virtues of DKD just shortly
before the merger creating IDEO. The cultural traits of DKD, traits that Peters thought essential
for successful companies in the emerging economy, were passed along almost entirely, as the
DKD group was kept intact as the IDEO Product Development division (Peters, 1992). It has
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been featured in the 1996 book Bringing Design to Software (Winograd, 1996) and the more
recent Harvard Business School Press volume How Breakthroughs Happen: the Surprising
Truth about how Companies Innovate (Hargadon, 2003) along with its companion piece in
the Harvard Business Review (Hargadon and Sutton, 2000). Founder David Kelley’s brother
authored the book The Art of Innovation, Learning Creativity from IDEO (Kelley and
Littman, 2001).
Perhaps the best example of adulation came from the 1999 ABC Nightline episode that
showcased IDEO. In that segment, ABC commissioned IDEO to redesign an object of
common and familiar usage – the grocery shopping cart – in five days. The cameras recorded
the process as a group of approximately 20 IDEO designers observed, studied, imagined and
finally designed a new cart, using a process called the “Deep Dive”. On day 1, designers,
working in small groups, fanned out to various locales: a grocery store, a buyer of carts for a
grocery chain; one group concentrated on child safety seats. Later than day, groups reported
back on their findings. Day 2 was spent in brainstorming ideas, selecting good ideas, and
prototyping examples. More evaluation and prototyping followed. On the last night, IDEO’s
machine shop fashioned a full-scale working model that was proudly revealed on schedule.
Interspersed throughout were behind-the-scenes glimpses of IDEO’s history, workplace, design
failures and successes, employees, and culture. This was one of the most popular Nightline
broadcasts of the year and was replayed several months later (Kelley and Littman, 2001).
This adulation seems well founded. Peters (1992) rated IDEO parent DKD as the best
firm in terms of learning from clients, outsiders, and from each other in his list of bell weather
companies (that included such standouts as McKinsey, EDS, ABB, and Johnsonville Foods).
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On most any measure, IDEO seems to be a runaway success. “Every spring, Business Week
publishes a feature story on the power of design in business and includes a cumulative tally of
firms who have won the most Industrial Design Excellence Awards. IDEO has topped that list
for 10 years running” (Kotelnikov, n.d.).
Structure and Operations
IDEO is set up as a collection of studios (14 as of circa 2004) of about 10-20 people
each. This structure was formed in a characteristically IDEO fashion around 1995. Several top
employees were designated as a “studio leader.” Then, at an all-hands meeting in the Palo Alto
office one day, the studio heads made a pitch about their interests and projects; employees then
selected the studio that would become their home base. Everyone got their first choice. (This
process was repeated several years later.) Each studio is operated on a profit and loss basis,
and studio heads are not hired from the outside but come from within. Apparently, the studios
serve like a home base for employees. [What is the compensation plan for studio leaders?]
The real innovative work at IDEO is done through project teams, however. Founder
Kelley believes strongly in the value of multidisciplinary teams (what they call x-func for cross-
functional teams) (Winograd, 1996). In this capacity, IDEO has something similar to a matrix-
like structure. Projects operate across studios, drawing people from different studios. Project
teams can have as few as three or four, or as many as a dozen members. Once projects are
finished, the teams disband and employees move to other projects. The result of this structure is
a continual circulation of personnel – and more importantly, what they have learned on prior
projects – over time. Projects are assigned to teams based on the team’s desire or excitement
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for the project. There are no position titles on business cards (IDEO, the company, 2004;
Kelley and Littman, 2001).
More recently, IDEO may have been set up in terms of practice areas, such as
technology-based areas, a "smart spaces" practice (for redesigning places like hospital
emergency rooms or the women's lingerie area in department stores) (Nussbaum, 2004). [It’s
not clear whether in fact this occurred or how it is different than the studio system]
The IDEO way
The Nightline segment focused on IDEO’s signature process: learning about customer
needs and experiences as the basis for innovative and rapid product design. This process,
known as the “IDEO way”, is the centerpiece method to IDEO’s madness. Three values seem
to infuse the learning and evaluation process throughout: user desirability, business viability, and
technical and manufacturing feasibility (Winograd, 1999).
The IDEO design process begins with understanding the product’s history and uses,
and observation of consumer experiences, a step owing more to anthropology than conventional
market research. Here, IDEO's staff and client partners move into the field to see how
consumers experience and use the product of interest. For example, a product development
team will shadow consumers and observe how they use a product, or how they go about
shopping, or how they experience a hospital emergency room. They take photographs of the
spaces and how people occupy them. They keep track of all the interactions consumers have
with the product or service or space. They may interview consumers and ask them to describe
their personal experiences (their stories) about using the product. In the ABC Nightline (1999)
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example, the product development team was organized into subgroups of about four or five
people each. Each subgroup pursued its own special perspective in learning about grocery
shopping carts, such as the shopping experience in the store, how children factor in, and so on.
They may also call together “unfocus groups" of diverse and extreme users of a product. For
example, on a different project, to understand how sandals were used, they formed a group that
included an artist, a body builder, a podiatrist, and a shoe fetishist. In this vein, Kelley (Kelley
and Littman, 2001) notes that one can learn more from the consumer who doesn’t follow the
instruction manual or who invents new uses of a product. “You learn from people who break
the rules” (p. 39).
Once information has been gathered, the team(s) convenes for brainstorming sessions
(what they call “brainstormers”). Such sessions, because they can be so intense, should last no
longer than one hour. There are strict rules for brainstorming, posted on walls. Rules are fairly
standard for brainstorming: Do not judge or dismiss ideas, build on the ideas of others,
encourage wild ideas, go for quantity, stay focused on the topic, and only engage in one
conversation at a time. In the ABC Nightline (1999) demonstration, the initial meeting involved
the different teams reporting on what they learned from their field visits, including abuses and
problems. Character maps are an interesting tool that can be used at this step of the process
(Winograd, 1996). These are a biographical characterization of a market segment that highlight
how different users interact with a product. Character maps "detailed personality and activity
descriptions for a small set of envisioned typical users" (Winograd, 1996, p. 167).
Step three involves rapid prototyping of ideas. This means developing actual working
models or images of their ideas. These physical representations and models help the product
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development team visualize and experience their conceptions more directly. The mockups
should be built cheaply and quickly and without obsessing over details. The purpose of the
prototype is to demonstrate a design idea, not execute it fully. Another type of technique here is
called "body storming" where different types of consumers are identified and their potential use
of the product is acted out. In the ABC Nightline (1999) demonstration, the teams developed
prototypes in line with their themes. For example, one group looked that how consumers find
price information about a product. They created a prototype scanner that was on each
shopping cart that could give price information and then demonstrated that use in a body
storming session.
Products are not the only things that can be prototyped; services and spaces can be,
too. For example, "for Amtrak, they built a full-scale railroad car out of foam core and
aluminum. The IDEO designers wanted their clients to experience what it would be like to bring
luggage through the doorways, work in the cafe car, and negotiate the bathroom while seated in
a wheelchair" (Kirsner, 2004). Similar efforts include using floor layouts for health care spaces.
Another way to give prototypical substance to the intangibles of product or service usage is by
storyboarding and scenarios. Storyboards are visual depictions of a sequence of consumer
uses, almost in a comic-book visual format. Scenarios are more verbal, text-based stories of
usage. Either way, they give a concrete illustration of usage that can illuminate hidden issues or
problems that otherwise might stay hidden until after the product has been rolled out (Winograd,
1996).
In stage four, this broad variety of ideas are narrowed down. In the ABC (1999)
project, each subgroup presented their prototypes, and all participants on the team offered
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reactions, feedback and assessments. This evaluation process helps critique ideas and narrow
them down to ones that seem to have the best solution. By involving clients at this stage of the
process, the better the chances for effective acceptance and implementation. In the ABC video,
a small group of decision makers met to select the best direction for the new cart design. Kelley
sees that his teams undergo something of a natural process of narrowing down over the course
of a project: the initially large and diverse group of participants reduces over time until near the
decision stage, a fewer number remain. “The appropriate prople remain interested in the
problem and it continually narrows down as you move towards implementation. It’s important
to have fewer people as you make decisions” (Winograd, 1996, p. 159)
Finally, the last stage involves product refinement and implementation. Here, IDEO has
a skilled workshop for actually engineering and developing their real prototype for product.
IDEO considers this group, made up of master machinists and model builders, one of its best
kept secrets; “it’s a competitive advantage that our clients have come to rely on” (Kelley and
Littman, 2001, p. 141). For example, the shopping cart that emerged from the design process
was built as a full-scale, actual working model or prototype overnight.
The IDEO Way and Core Competencies
If it’s as simple as following those five basic steps, why doesn't everybody do it? What
is remarkable in this story is the taunting gauntlet (unintentional as it may be) that IDEO tosses
before corporate America. As is obvious from the prior section, the secrets of IDEO success
are well codified and in plain view. For example, the IDEO web page (ideo.com, 2005) clearly
lists and demonstrates the standard innovation procedure that characterizes how IDEO goes
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about doing its work. That methodology has been published in Business Week (Nussbaum,
2004), reported in books (Kelley and Littman, 2001) and demonstrated on national television
(ABC). It would appear that its “core competencies” are available for any and everyone to
follow. Yet, while any number of firms have tried to conjure up the same magic, "most fail.
That's because although IDEO's magic includes its particular way of organizing, it depends as
much on the firm's dedicated strategy as a technology broker" (Hargadon, 2003). Other factors
are also involved.
Consider an analogy from recent professional football: if the book of plays from a
reigning championship team like the New England Patriots was given to a perennial losing team
like the New Orleans Saints, would the Saints become a contender overnight? In all likelihood,
no. Any a number of other factors, including player talent and experience, morale, coaching
capabilities, abilities to learn and make adjustments, and team self-confidence (to name just a
few of the more obvious factors), also contribute to the longer term success of the Patriots.1
Even so, professional athletic teams do not share their play books, as far as I know.
The IDEO Way is IDEO's playbook, and has been noted, this playbook is open for all
to see and copy. While copying has apparently been tried, it has not been successful, though
(Nussbaum, 2004). Why not? Obviously, just as the football examples suggest, there must be
something more going on at IDEO than a simple list of steps. Otherwise, the competition would
have simply copied these steps, undercut IDEO’s price and performed the same tasks in
creating comparable outputs. What other factors can explain not only IDEO's success in design
but its apparent immunity from duplication? This question can be answered in at least two
ways. First, the literature on core competencies would predict that there is an enormous
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accumulation of tacit learning that is now embedded in IDEO routines and practices. This
learning would be very hard to codify and replicate. Second, there are a number of related,
ancillary practices and conditions that surround and embed the IDEO way, supporting, aiding,
maintaining, and amplifying it. These conditions, once codified, can also be replicated to varying
degrees and should increase the chance of being successful replication and transfer.
The following is an initial listing of likely ancillary practices and conditions, drawn from
various in-house and other published reports. This list is suggestive, though, being compiled
selectively from the documentary sources written for other purposes. So, it is not clear from this
list whether in fact the practice and condition is present, and if so, how important it is. Such an
assessment can only come from a direct examination of IDEO conditions. Thus, these factors
should be taken as hypotheses, keeping in mind that certain important practices may not have
either been identified or published. One additional lesson here is that the IDEO way cannot be
separated from the larger socio-cultural context of IDEO as an organization in which it is
embedded.
The amount of tacit learning embedded as knowledge at IDEO is substantial. Tacit
learning seems to be one of two intentional goals of the project work, the other
being the creation of an innovation ready for production and marketing. The
primary vehicle for tacit learning is project work, carried out in a broad diversity of
industrial segments. Indeed, founder Kelley believed that this diversity of
experience is a strength of the firm. Two other factors are involved here. First, the
circulation of personnel among studios and across projects literally results in the
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cross-pollination of ideas. Second, learning has been captured in one type of
knowledge management procedure known as the Tech Box; it is a method for
stockpiling ideas, literally.
IDEO has made a science of accumulating junk. . . . . Six IDEO offices in
scattered locations have cabinets known as Tech boxes in which designers have
placed a shared Treasury over 400 materials and products: tiny batteries,
switches, glow-in-the dark fabric, flexible circuit boards, electric motors [and so
on.] . . . It became a status game as people at IDEO competed to contribute
cool new stuff. . . . Each tech box is now maintained by a local curator and
each piece is documented on IDEO's intranet. Designers can find out what
each product or material is and who knows most about it inside and outside
IDEO. Engineer Christine Kurjan, head curator of IDEO's Tech Boxes, hosts a
weekly conference call with the local curators in which they talk about new
additions and the uses to which items are being put in new projects. (Hargadon
and Sutton, 2001, p. 160-161)
[The only mention I’ve seen so far of a more formalized knowledge management
system, like the one reported for Arthur Andersen (Davenport and Hansen, 1998), is
the intranet system just noted. The presence, structure and operations of this intranet
system could be a potentially very important factor about which I have essentially no
information now.]
For Hargadon (2003), the key to IDEO's success goes beyond its "Way" to its position
as a "technology broker". Consider this problem, presented to IDEO by a bicycle
manufacturer: they wanted a water bottle that could be used easily by bicyclists.
IDEO's solution was a bottle with a spill-proof nozzle that did not need to be opened or
closed. Rather, by squeezing the bottle, the nozzle pops open, and then closes when
released. This solution had been developed five years earlier by a different team that
had used a similar solution for a shampoo bottle that could hang upside down in the
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shower. That bottle application came about after working with a medical products
company in the design of an artificial hearts. Thus, technology brokering really involves
transferring technologies from one setting and use to another. IDEO seems to be
particularly well suited in this regard because of their wide-ranging experience with more
than 50 different industries developing more than 4000 new products. In short, IDEO
has a particularly strong history of learning about technology applications and usages.
Tacit learning is also enabled by the configuration and lay-out of IDEO’s workplace and
office spaces. Like a college campus at its best, IDEO offices afford spaces for both
serendipitous meetings as well as for more private work. In the office architecture used,
informal communication and work visibility are high. Three principles – or metaphors –
in space design seem to be operating (Kelley and Littman, 2001). First, the workspace
should be like a greenhouse that incubates innovation, providing the right kind of
“climate” and nutrient soil for performance. Office equipment is mobile and modular,
allowing easy reconfiguration and movement. Second, the plan seems to center on
neighborhoods with their own parks. For example, a studio may have a set of office
cubicles located around an odd-shaped desk in a central public area (the park). On the
table sit prototypes, blueprints, sketches and so on, available for any and all to see.
"IDEO's studios are laid out so that everyone sees and hears everyone else's design
problems" (Hargadon and Sutter, 2000, p. 162), making it possible for engineers
working on other projects to overhear conversations, realizing they can help and
offering ideas. Third, there are clubhouses in the neighborhood. Not strictly space per
se, clubhouses are the play times of teams and departments where they can engage in
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non-work activities like going to a movie or a ball-game. IDEO considers its office
space architecture to be one of its greatest assets (Kelley and Littman, 2001).
In addition to the internal transfer of technology, IDEO has also developed linkages with
a network of vendors, suppliers, and manufacturers that are themselves innovative, easy
to work with, and very knowledgeable. Thus, IDEO’s competencies involve more than
their internal innovation procedure to include a position in a network of innovators and
developers.
The climate of operations at IDEO comes from the top. Founder David Kelley and his
brother Tom, now General Manager, seem to have clearly defined values that are
consistently communicated to the staff. That is, the values are authentic expressions of
their character, not some carefully crafted, artificial vision or value statement. These
values seem to characterize the culture of IDEO. One value seems to be having fun
and playing. A second is allowing employees freedom and discretion in their work.
Learning would be an obvious other value. Kelley also appreciates that risk,
messiness and failing are normal in the context of innovation. For example, Peters
(1992) reported the FLOSS philosophy of design Kelley articulated for DKD: Fail
sometimes, be Left-handed, get Out there, be Sloppy, be Stupid. In the ABC (1999)
video, the slogan "Fail often to succeed sooner" is noted as a neat sacrosanct norm of
practice. In short, IDEO seems to have a culture that is very strong and very much
aligned with the nature of the business: innovation.
Another key value of IDEO is speed, minimizing the time between conception and sale.
Since corporate clients may drag their feet after the presentation of a consultant’s
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report, IDEO insists that members of the client company participate in virtually all
phases of the research, analysis and development process. When the development
cycle is finished, clients are ready to go; another time-consuming step for obtaining client
buy-in is avoided. “Unlike traditional consultants, IDEO shares its innovative process
with its customers through projects, workshops, and IDEO U, its customized teaching
program” (Nussbaum, 2004). In the ABC (1999) video, Kelley points to a meeting
with new clients, noting how they haven't been "trained" yet in IDEO's ways.
The performance unit at IDEO is the project team, or what they call “hot groups”. The
membership of these groups is drawn from across the entire organization, and
participation seems to be recruited rather than assigned. There is a defined team leader,
and the teams have both clearly stated goals and specific deadlines. [While no
information yet on the last point, it would be hypothesized that IDEO has mastered skills
in forming, leading and operating temporary project teams. How are team leaders
picked? What kind of power do they have? Another hypothesis would be that team
leaders have little position power (and probably don’t need it, anyway) but would have
personal power, perhaps in the form of technical expertise, but more likely in the form
of facilitative and interpersonal power.] Kelley indicates that a “strong, fair leader”
often naturally emerges to guide a group. The distinguishing characteristic of such an
effective leader is an indifference to a specific outcome; that is, the leader is primarily
driven by the desire to facilitate the group’s process, not to achieve a specific type of
outcome (Winograd, 1996). [As this is true, leaders are followed because they are
perceived as being good at facilitating group process; that is, personal power comes
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from group facilitation skills. Finally, it is likely that when team members join the teams,
the members already have high motivation and high self-confidence. Some amount of
these qualities would be hired, and some would be inculcated through the IDEO
employment experience. So the problem team leaders face is not to manage motivation
but to channel high talent and energy.] The IDEO way becomes the default structure
for running the team; this blueprint or game plan would be known by all members, which
would make teams almost self-directing.
Kelley (Kelley and Littman, 2001) notes that many innovations occur because of
chance or unexpected events, like the water bottle for cycling. Thus, he notes another
IDEO value of “looking cross-eyed” or seeing things in new or different ways. Using
metaphoric thinking and searching for solutions in new and different fields is an example.
Gathering information from a plethora of sources is part of this; IDEO subscribes to
more than 100 magazines of various kinds. In this same vein, Kelley recommends an
attitude of humility and openness to new ideas. [Whether such an attitude does in fact
exist and how it is manifested would need to be researched.]
According to Peters (1992), Stanford University has an elite product design program in
its Mechanical Engineering Department. Early on, the DKD and then IDEO offices in
Palo Alto were apparently very close (within six blocks?) to the university. Given
Kelley's position at both Stanford and at DKD as well as the proximity of the two
locations, DKD and presumably IDEO benefited from a ready supply of trained
personnel that could easily be prescreened and recruited on campus. [I don’t know
what percentage of employees was recruited this way. Nor is it known the other ways
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by which people are recruited or attracted. The entire recruiting and selection process
would be very useful to know.]
Beyond the mix of industries served, diversity is appreciated in another way as people
with a variety of backgrounds are hired. That is, a technical, scientific and/or
engineering background is not essential for being considered for employment. [If true,
this point raises a number of questions: (1) how are staffing/manpower needs identified;
that is, how are decisions made about what kind of background (technical or not) to
request? How are job specifications determined? (2) Is there a manpower planning
process in place? (3) Is there any formal training process, perhaps outsourced through
a university, to increase technical abilities in non-technical personnel? (4) Is there any
type of sorting process in using skills on projects, such as: are liberal arts majors given
the lead in the consumer sensing steps and the technical people, in prototyping?] Kelley
(Winograd, 1996) indicated that he (or more likely, IDEO) has had luck teaching
artistic types engineering and technical basics.
Co-founder and IDEO general manager Tom Kelley believed that by hiring people he
liked and respected, two things would result: people would have fun at work and also
be more productive. The hiring process involves interviews with a dozen people.
[There are a number of issues here: (1) is there a HR department or function that
manages or oversees the hiring process? Who is in charge of hiring? (2) How well
defined is the hiring process: are applicant criteria clearly stated, and if so, what are
they? (3) Do they use any more formalized testing procedures? (4) Since it would
appear that employee character and natural ability are so important (vs. credentials and
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experience), it would be hypothesized that IDEO follows more of a strategy for hiring
for the organization rather than hiring for the job. True? (5) How is the interview
process coordinated; how are a dozen interview results combined? (6) How structured
is the interview process; are the people doing interviews trained? Alternatively, do they
rely on hunches and impressions?] When interviewed, Kelley indicated a clear
appreciation and even preference for people who can operate creatively and flexibly
(Winograd, 1999). Indeed, he seems to believe that engineers may have a trained
incapacity: by virtue of their training in applying very specific techniques, they often
focus on fixing specific glitches rather than imagine entirely new approaches. Likewise,
he values people who feel free to wander and explore, while not being chained to a
preset, linear schedule. As these examples suggest, personality dispositions may be
major considerations in the selection of employees.
There appears to be a performance appraisal process that involves a 360 degree
process. Evidently, employees are evaluated by 3 people, two of whom they select for
a peer review process (Kelley and Littman, 2001). [More details about this process
are unknown, including whether there is any post-project review or assessment by team
leaders, as might be found with audit teams.]
Fun seems to be an integral part of the IDEO culture, where pranks are common
(Kelley and Littman, 2001; Kotelnikov, n.d.). Play is a legitimate form of expression,
and even a means of working, at IDEO.
Brainstorming is a way of life. In its earlier form at DKD, anyone could convene a
brainstorming session at any time (Winograd, 1999). "Others, no matter how busy they
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are, pretty much drop what they're doing and attend" (Peters, 1992, p. 169). Both the
ability to organize a brainstorming session as well as participation seem to be norms
strongly etched into the IDEO culture. In brainstorming sessions with clients, group
productivity is measured by IPH or ideas per hour. The standard is 100, sketched on a
piece of paper (Kirsner, 2004)
In situations like these where very creative and independent people are interacting to
generate ideas, assessments and critiques, the question of ego could be a natural
concern as people consider: “Will I be recognized as smart and effective? Will I be
given credit for my work? Will everyone appreciate my contribution?” The potential
“grab for recognition and glory” could turn interactions into competitions and conflicts,
rather than cooperation. Taming those natural impulses becomes an important issue
which IDEO seems to have mastered. According to Kelley (Winograd, 1999), egoistic
demands for idea ownership are not a problem at IDEO. Because of the group
process, either everyone thinks the idea was his or hers, or they can’t identify who the
author was. If there is an ownership issue, it belongs to the person who posed the
question (called the brainstormer). Thus, it would appear that the group/team process
diffuses concerns about ownership, while the accountability system seems to reside de
facto ownership with the person initiating the project.
[This issue raises one additional concern: how does IDEO handle low performers?
Given the nature of the work process where employees may both self-select for
participation into a project or be recruited into a project, it may occur that some
employees are simply not picked. Given the likely kinds of employees recruited, more
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traditional performance problems of poor motivation or becoming a “free rider” seem
unlikely. The open space set-ups make it likely that the studio groups will monitor on a
de facto basis the work done by all. The more likely performance problem would be an
employee who simply just does not work out, either because of interpersonal problems,
ego needs, and/or simply being slow to adapt and learn. How often does IDEO have
to terminate employees? The amount or frequency of termination would be a strong
indicator of the success of the recruiting, selection and orientation process used. How
does IDEO know when someone is not performing acceptably? What is the
accountability system in place? How do they handle the separation process?]
IDEO and Core Competencies: Lessons
On several different measures, IDEO seems to be a superior performer on an ongoing
basis. In other words, IDEO seems to have a sustainable competitive advantage. Since IDEO
has no manufacturing facilities or equipment of any note, the fixed asset portion of its balance
sheet should be relatively small, making it unlikely that the source of its sustainable competitive
advantage would be hard assets. Instead, the source of its advantage would be the intangible
capabilities found in its people, its culture and its history. These sources of advantage would be
considered core competencies.
On the surface, that intangible capability seems to be represented by the IDEO Way.
This is a series of well-defined steps, plus the various sub-routines and methods within each
step, for carrying out the process of innovation. This capability is an open book, available for all
to see; as such, it could presumably be copied by any competitor. Some observers claim that
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such copying has been tried – unsuccessfully. This leads to the conclusion that while the IDEO
Way may be a necessary condition for IDEO’s sustainable advantage, it is not sufficient. Thus,
in this case, the codification of a production process tells only part of the story of IDEO’s core
competencies. That is, there is a deep structure of linked conditions that creates the platform on
which IDEO is successful.
The analysis of these supporting conditions presented above was drawn from multiple
public sources, most of which were not written by or for organizational scientists. Some of the
sources were IDEO principals, some were academics, industry observers and reporters, some
where unknown sources off the internet. Despite the diversity, a common story was told. In its
own way, these sources do provide some sense of triangular confirmation. Their reports of
what would appear to be “factual” descriptions of IDEO were reassembled into the account
presented in this paper. I was able to pull these sources together and compile this report in a
relatively short time (five days). These reports produced a set of “deep” factors or structures
that seem to be critical for IDEO’s sustainable advantage, including organizational structure,
culture, tacit learning, physical layout, team management and operations, and human resource
practices. The authenticity and relative importance of these various factors have not been
studied directly for this paper. Further empirical investigation would be necessary to test these
observations.
However, what’s interesting in these reports is as much what is not being said as what
is. In particular, the elements of the HR process regarding recruiting, hiring and performance
appraisals are sketchy at best; I was not able to find any information to date on the
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compensation system. Given the dependence of IDEO on the qualities of the people it employs,
understanding the operations of the HR system is critical.
The full listing of factors consolidated here – the IDEO way plus all the additional
factors noted – provides a more complete playbook than the IDEO way itself. As such, it
provides a more complete model of what makes IDEO successful. This point leads to this
question: if the full package listed in this paper were copied, how much closer would the imitator
be to replicating IDEO’s core competencies? Alternatively, how much additional performance
would be added by the supplementary factors, over and above the performance that results
from simply following the IDEO way by itself? If the IDEO way explains, say, 30% of its
success, and the additional factors explain another 10%, we would still be a long way from
identifying IDEO’s core competencies. On the other hand, if the additional factors added
another 40% to the explanation, so that 70% of IDEO’s success could be explained – and
copied, we would be well on the way to locking down core competencies. Making such a
calculation in a field experimental trial would be impossible, though. Indeed, such an approach
may be guilty of a reductionist fallacy, as if it were possible to isolate each separate factor for its
unique contribution. While separate features may be noted, it seems that the power of IDEO’s
core competencies lies in the fact that they are all part of the whole; here, the whole may be
indeed be greater than the sum of its parts. So, core competencies, at least in the IDEO
manifestation, are likely to be a total system of beliefs, practices, operations, structures and
conditions that nurture an organization of high team performance under a regimen of learning,
exploration, trial and error, and play. It is probably the total configuration that is basis of core
competence, not any one single factor or even set of factors. The components of that
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configuration can be identified and its essential features described, but each factor is probably
not as important by itself as how the ensemble plays together.
To the extent that this is true, the implication is that core competencies cannot be copied
item by item but rather have to be implemented as a culture change, a change in the system of
beliefs, practices, operations, and so on. On the other hand, the principle of equifinality would
apply, too. That is, it may not be essential to copy all the elements of a culture of core
competence. There can presumably be different ways to get to the same end (an organization
operating with core competencies). Thus, in the final analysis, what may be most important is
the ability to identify sustained superior performance as the goals and work towards that goal,
rather than copying specific practices from an exemplar.
Endnote
1 This same basic principle could be extended to such consistent NFL franchise powerhouses in
the past as the Greenbay Packers (under Vince Lombardi), the Pittsburgh Steelers under Chuck
Knoll, the Dallas Cowboys under Jimmy Johnson, the Washington Redskins under Joe Gibbs,
and the San Francisco 49'res under Bill Walsh. For several consecutive years, each of these
teams was able to dominate the league. (One interesting question here is what happened that led
to the decline of each of these dynasties. I believe in all cases, the decline was due to a loss of
both player and coaching personnel. If so, it was the loss of star personnel that was decisive
which means that the teams were not successful in replacing key personnel.) Another interesting
variation here has to do with sports that are not so set-play dependent, such as basketball or
soccer. Again, examples of the Boston Celtics (both the Red Auerbach regime and the Larry
Bird era), the Los Angeles Lakers (under Bill Riley), the Phil Jackson era with the Chicago Bulls
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in basketball, and the Brazilian national team in soccer come to mind. In these cases, the
availability of a play book probably plays less of a role in success. In short, sports franchises
are probably very good sources for study of core competencies in organizations. The NFL may
be particularly good because of the policy of team parity (reducing entrenched or legacy
advantages) between franchises. (This of course contrasts with baseball’s inability to reach this
condition as exemplified by the seemingly never-ending dominance of the New York Yankees.).
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