David Kelley of IDEO: Reinventing Innovation

James Leynse / Corbis

There was a time when it looked as if David Kelley’s design career might have been summed up in two words: “Lavatory Occupied.”

Kelley, then a fresh grad from Carnegie Mellon, was working for aviation giant Boeing when he helped design the bathroom sign that went into 747s. “I spent six months on that,” recalls Kelley, now 59. “I had a narrow role. I wanted the ability to come up with solutions that were new to the world and to see them have an impact.”

Kelley, now chairman of IDEO, one of the country’s best-known design firms, has come a long way toward that goal, designing scores of wildly successful products. Even before cofounding IDEO, he helped create the first computer mouse for Apple. (The prototype was crafted using the roller ball from a deodorant dispenser and a butter dish.) IDEO later created the first laptop (for Grid Systems) and the first portable defibrillator. The company is responsible for such contemporary creations as the Palm V handheld organizer and the stand-up toothpaste tube. Current customers include Samsung, the Mayo Clinic, and HBO.

But Kelley has moved the company well beyond designing beautiful things you can hold in your hand; IDEO also designs experiences. For Marriott’s Courtyard Hotels, IDEO installed “Go Boards” in the lobbies, screens offering helpful information and guest recommendations. While working with the DePaul Hospital emergency room in St. Louis, IDEO's designers came up with a solution for a chronic hassle: baseball cards of the doctors and nurses. “People kept asking patients, ‘Did you see Dr. So-and-So?’ They had no idea who they had seen,” Kelley says. “But if the medical people had these to hand out, the patient could just show them their cards.”

As Kelley explains it, IDEO’s current mindset is less about product design than it is about, well, fostering new mindsets. Kelley says his company’s mission is to train its clients in “design thinking,” or the ability to think as designers do, deploying similar methods to conjure new lines of business or improve existing ones. “The world seems to be good at coming up with innovations out of a new technology or a new idea in marketing,” says Kelley. “But by trying to understand people, and looking for their nonobvious needs, we find good opportunities to innovate.”

The IDEO approach is closer to anthropological fieldwork than it is to market research. Rather than poring over spreadsheets or quizzing focus groups, IDEO dispatches multidisciplinary teams to immerse themselves in the experience users are having. While doing research for Pepsi, IDEO employees spent hours watching people use vending machines, leading them to wonder about the size of the selection buttons, among other things. Ideo also worked with health giant Kaiser Permanente to improve the flow of information from one nursing shift to the next. Employees stationed themselves in four hospitals around the clock, observing shift changes. The team developed software that helped nurses capture patient information throughout their shifts.

Kelley’s approach is a step beyond listening to customers, who can’t always articulate—or may not even know—what a product or experience lacks. Collecting that kind of qualitative data, the thinking goes, can help companies take the kind of creative leaps that designers learn to make. To shape the raw material, IDEO practices skilled brainstorming. (Among the goals: go for quantity, defer judgment, and encourage wild ideas.) The company also believes in prompt prototyping (for Amtrak, IDEO built a full-scale railroad car out of foam and aluminum). “We’re helping our clients develop creative confidence,” says Kelley, who is a tenured professor at Stanford, where he founded the Hasso Plattner Institute of Design five years ago. “Having that feels good to those companies. This took off because it resonated with people.”

It wasn’t an easy sell. Harry West, CEO of Continuum, an IDEO competitor based in suburban Boston, says that “it has taken a decade for IDEO to clearly articulate their story that design is not only a craft skill but also a way of thinking.” IDEO’s ability to spread the word, he notes, has been bolstered by the fact that deep-pocketed office-furniture giant Steelcase has been a company investor since 1996. West estimates his $30 million business is roughly a quarter the size of IDEO, which does not share its financials. “IDEO’s marketing has been great for the entire industry. We have benefited enormously from it,” West says.

Kelley has so successfully positioned IDEO as an innovation consultant that he now sees it as vying for clients against powerhouses like McKinsey. “IDEO is at the forefront of promoting what designers have been pushing companies to do, which is to make design a strategic element of the business,” says Marco Perry, a founding principal at Pensa LLC, a boutique design firm in Brooklyn. “The same methods that we use to invent products, we can use to come up with business strategy.”

Kelley doesn’t object to other designers following in IDEO’s footsteps. “We give away our methods to everybody,” he says. And why not? His best ideas are yet to come. He’s sure of it.