Procter and Gamble’s standing toothpaste tubes. The Palm V personal digital assistant. Bank of America’s Keep the Change program. For decades, the innovative wares invented inside IDEO were considered the leading edge of product design, built around “design thinking” — an approach that puts customer needs first. But in recent years the storied agency has faced a crisis. Companies brought design in-house, copying IDEO’s approach without needing to hire the agency. Job postings in product design fell 18% last year, with graphic design down 57%. Before current CEO Mike Peng took over, IDEO had reportedly cut a third of its workforce, closed its Munich and Tokyo offices, and seen revenue decline from $300 million to less than $100 million.
Peng’s response is to revamp IDEO’s value proposition — instead of designing individual products, he wants the agency to help clients transform their entire organization, teaching them how to design on their own. In China, IDEO is tapping the trend of Chinese companies going global. In Japan, Peng sees a different challenge: companies struggle to understand what it truly takes to break into North America — the speed, the talent, the investment, and the cultural differences. The typical approach of dispatching a small team to Silicon Valley has rarely worked.
IDEO recently released its first Innovation Quotient, based on a survey of more than 250 product and innovation executives. Companies in the top quintile generated 50% higher profits than the average firm. Yet while more than half of companies claimed to be customer-centric, only 21% said they consistently tested ideas with customers. The risk AI poses to design, in Peng’s view, isn’t that it will replace designers — it’s that it will make everyone’s output look the same. “Everyone is going to have access to the same technologies, and everything is going towards the average,” he says. “The act of finding that edge is, to me, a very human activity.”
This story was originally featured on Fortune.com.
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