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100 Forest Avenue
Palo Alto, California 94301
Telephone: (650) 289-3400
Toll Free: (800) 600-4336
Fax: (650) 289-3707
Web site:

Private Company
1991 as IDEO Product Development, Inc.
Employees: 380
Sales: $62 million (2003 est.)
NAIC: 334119 Other Computer Peripheral Equipment Manufacturing; 541330 Engineering Services; 541420 Industrial Design Services; 541490 Other Specialized Design Services; 541512 Computer Systems Design Services; 541710 Research and Development in the Physical, Engineering, and Life Sciences; 541720 Research and Development in the Social Sciences and Humanities; 541910 Marketing Research and Public Opinion Polling

IDEO Inc. is a leading design and innovation consultancy. Companies turn to IDEO to create and deliver innovative new products, services, and environments. IDEO is the design force behind such familiar products as the Palm V PDA, Humalog/Humalin Insulin Pen, and the thumbs-up/thumbs-down innovation on TiVo's digital video recorder remote control.

The firm takes a multidisciplinary approach to design, including human factors experts, architects, linguists, and business and manufacturing specialists in its teams. IDEO has gone beyond developing leading edge products to designing customer "experiences" for clients such as lingerie manufacturer Warnaco.

IDEO's Palo Alto, California headquarters is furnished in true eclectic genius style with such ornaments as a DC-3 wing and a coin-operated hobby horse. IDEO also has offices in San Francisco, Chicago, Boston, London, and Munich; half of its work is done abroad. Office furniture giant Steelcase Inc. owns a majority holding in IDEO.


David M. Kelley was born in Barberton, Ohio. After graduating from Carnegie-Mellon he worked as an engineer for National Cash Register (NCR) and Boeing. Kelley then entered a graduate program in design at the Stanford University School of Engineering. (In addition to serving as IDEO's chairman, he is also the Donald Whittier Professor at Stanford and directs the school's unique design program. He was elected to the National Academy of Engineering in 2001.)

After earning a master's degree, Kelley formed his own design firm in 1978, partnering with fellow student Dean Hovey. Their first four employees were all friends from Stanford. The group's first studio, recalls Tom Kelley, David's brother, was a fly-infested office above a dress shop in nearby Palo Alto. They made their own furnishings and covered the floors with green patio carpet.

Kelley had met Apple Computer Inc. founder Steve Jobs at Stanford, and by 1983, the group had designed the first commercially available computer mouse for Apple's Lisa computer, later used on the first Macintosh. A butter dish and the ball from a bottle of roll-on deodorant were among the building blocks for the first prototypes.

In mid-1991, David Kelley Design merged with ID Two and Matrix Product Design to form IDEO Product Development, Inc. ID Two, led by Bill Moggridge in San Francisco, had nine years earlier designed the first laptop computer, the GRiD Compass. Moggridge had expanded his design business into the United States from the London office founded in 1969. Matrix Product Design, based in Palo Alto, was led by Mike Nuttall, another London designer who had amicably left ID Two. According to the Independent of London, both Moggridge and Nuttall had gone to Silicon Valley in the late 1970s as computer technology was emerging. The three companies had first collaborated on the second, award-winning "Dove Bar" mouse for Microsoft, Matrix priding industrial design, ID Two providing human factors expertise, and David Kelley Design providing engineering design.

Moggridge was the one who picked the name out of the dictionary, according to The Art of Innovation. "IDEO" is the combining form of the word "idea," as in "ideology" or "ideogram." The company had 125 employees in six offices in Europe and North America and clients in 19 countries. IDEO's multidisciplinary approach called on psychologists and manufacturing engineers as well as designers.

1990s Expansion

In 1990, offices opened in Boston and Chicago. Within a few years, the headquarters was spread across several buildings in Palo Alto, and IDEO had offices in San Francisco, Chicago, Boston, Tokyo, and London, as well as an affiliate in Tel Aviv.

Although the firm did have a president and CEO, David Kelley, the rest of IDEO's organization chart was pure flatland. There was virtually no hierarchy, no advancement, no promotions. Project management duties were rotated. A staff of ten was dedicated to administrative functions. To keep bureaucracy small, the size of each office was limited to about two dozen people.

There were five steps in IDEO's high-speed innovation process: understand, observe, visualize, implement, and evaluate. Extensive research began the process, followed by observations of end users. The visualization step leaned towards producing a series of inexpensive prototypes, rather than poring over lists of specifications. IDEO carefully researched consumer behavior through the eyes of its social scientists to find out what was truly required. The company also asked clients to participate in the role of their own customers, shopping for services and products from rival companies as well.

After implementation and evaluation, the trial-and-error cycle repeated. Speed was key: the company expected brainstorming sessions to produce 100 ideas per hour, one staffer told the Boston Globe. To stimulate creative thinking in the brainstorming phase, the offices maintained "Tech Boxes," or cabinets of props containing innovative ideas: Hawaiian flip-flops, toothbrushes, holographic candy, etc.

In 1995, the company was developing 90 different products a year with a staff of just 180, reported Research Technology Management. Products ranged from electronics to medical equipment to toys. IDEO's Edge Innovations unit even produced a 3.5 ton mechanical orca whale for the movie Free Willy. The company's revenues at the time were between $40 million and $50 million.

In January 1996, office furniture manufacturer Steelcase Inc. made an equity investment in IDEO. At the same time, IDEO CEO David Kelley was designated Steelcase's vice-president of technical discovery and innovation. IDEO had been working with Steelcase companies on various projects since 1987. IDEO helped design the company's ergonomically advanced Leap Chair.

The company became known as simply IDEO, Inc. in 1998. IDEO was a huge force in the world of design throughout its first decade. Products it designed ranged from a stand-up Crest toothpaste tube for Procter & Gamble Co. to a portable defibrillator for HeartStream Inc. In 1999, 3Com tasked it with updating the Palm Pilot, which had already created a new category of portable computing devices. Including the 1980s output of David Kelley Design, IDEO had worked on thousands of products in all.

Nightline in 1999

The company picked up numerous design awards along the way and, according to Business Week, began to rival management consulting companies as it focused on its clients' interactions with their customers. ABC's Nightline news magazine profiled IDEO in a highly popular episode in 1999, giving the firm the assignment of redesigning the common shopping cart in four days.

In 2000, the firm formed "IDEO U" to teach clients to be more innovative. IDEO later designed Procter & Gamble's own innovation center, called "The Gym." An office in Munich, Germany, opened at the end of 2000. IDEO had also added branches in Tokyo and Milan. IDEO opened an office in the tech center of Boulder, Colorado, in early 2001.

In April 2001, the company unveiled "Dilbert's Ultimate Cubicle," created in partnership with that chronicler of corporate confinement, cartoonist Scott Adams. Features included a hammock and a "boss monitor" trained on the supervisor's door. Tim Brown of Great Britain, previously head of the San Francisco and then the London office, became IDEO's new president in July 2000, and CEO in January 2001.

Company Perspectives:

IDEO helps companies innovate. We design products, services, environments, and digital experiences.

IDEO identifies opportunities for innovation by understanding latent user needs, technology factors, and business requirements for success. We evaluate potential solutions through user observation and iterative rapid prototyping. Our multidisciplinary teams include specialists in human factors research; business strategy; industrial and interaction design; environments design; mechanical, electrical, software, and manufacturing engineering; design validation; and more.

IDEO's renowned culture and process of innovation has attracted the attention of academics, companies, and journalists worldwide. At the request of our clients, we offer IDEO U Innovation Workshops, an array of customized workshops created to catalyze and enhance our clients' own design processes.

For more than a decade, IDEO has topped Business Week's list of all-time winners of the Industrial Design Excellence Awards, an annual feature celebrating the strategic value of design. In 2001, David Kelley and IDEO were honored with the Smithsonian Cooper-Hewitt Museum's National Design Award for Product Design, recognizing our outstanding contributions to the field of design. In 1999, ABC's Nightline dedicated an entire episode to IDEO's process for innovation, following a multidisciplinary team as they redesigned a consumer icon, the shopping cart, in four days.

In a 2001 interview with the Boston Globe, General Manager Tom Kelley, brother of the company's founder, described innovation as the next big wave for corporations to embrace after quality control and cost cutting. IDEO was extending its innovative process beyond product development to the design of consumer interactions. It set out to make the rail experience attractive again and relevant when hired by Amtrak to design interiors for its high-speed Acela train.

IDEO also ventured into the world of fashion, helping design a high-tech New York showroom for Prada Group NV. Revenues reached $72 million in 2002, reported Business Week, before the tech bust was felt. The magazine noted that Internet and other startups had accounted for more than a third of revenues in the boom years. Revenues slipped to $62 million in 2003. In 2004, IDEO was reorganized around "practices," or specific fields of expertise such as Technology-Enabled Experiences (TEX) and Smart Space. Health was the company's largest practice.

Principal Divisions

Health; Consumer Experience Design; Technology Enabled Experiences; Service Design and Innovation; Transformation Services; Zero20 (design for youth); Smart Space.

Key Dates:

Bill Moggridge launches London design firm Moggridge Associates.
David Kelley forms Silicon Valley design firm.
Kelley's group designs first computer mouse for Apple.
IDEO Product Development is formed by merger of David Kelley Design with ID Two (Moggridge's second, U.S.-based business) and Matrix Product Design.
ABC's Nightline documents IDEO redesigning the shopping cart.
IDEO U is formed.

Principal Competitors

Design Continuum Inc.; frog design inc.; Lunar Design Incorporated; Ziba Design, Inc., McKinsey & Co.

Further Reading

Brown, Tim, "Nurturing a Culture of Innovation," Financial Times (London), November 17, 1997, p. 12.

Carrns, Ann, "Workspaces: Imagination's Playground," Wall Street Journal, October 18, 1996, p. B14.

Crainer, Stuart, "A Success in Design Minus the Capital D," Times (London), Features Sec., May 17, 2001, p. 4.

Eckhouse, John, "3 Product-Design Firms to Merge," San Francisco Chronicle, June 10, 1991, p. B1.

Grimes, Ann, "An Idea Firm Finds Growth in Recession," Wall Street Journal, March 7, 2002, p. B7.

Grothe, Sam, "Silicon Valley 'Secret Weapon' IDEO Drawn to County's High-Tech Surge," Boulder County Business Report, January 26, 2001, p. A1.

Hales, Linda, "Creating an Experience," Washington Post, Style Sec., May 12, 2001, p. C2.

Hamilton, Joan, "Now, That Didn't Hurt a Bit," Business Week, June 3, 1996, p. 84.

Hargadon, Andrew, and Robert I. Sutton, "Building an Innovation Factory," Harvard Business Review, May/June 2000.

, "The Innovation Factory," Australian Financial Review, August 14, 2000, p. 30.

IDEO, Inc., Extra Spatial, San Francisco: Chronicle Books, 2004.

Johnson, Cecil, "Mouse Innovator Shares Secrets of Firm's Success," Seattle Times, May 21, 2001, p. E2.

Kazakoff, Lois, "Doctors of Design; Medical Market Is Booming for Industrial Designers," San Francisco Chronicle, November 15, 1997, p. D1.

Kelley, David M., "Performing Rapid Innovation Magic: Ten Secrets of a Modern Merlin," Straight from the CEO, Diane Publishing Co., 1998.

Kelley, Tom, "IDEO Was Wacky, But Got Things Done," Washington Times, January 7, 2002, p. D2.

Kelley, Tom, and Jonathan Littman, The Art of Innovation: Lessons in Creativity from IDEO, America's Leading Design Firm, New York: Currency, 2001.

Kirsner, Scott, "1. Come Up With Innovative Ideas. 2. Turn Them Into Cool Products. 3. Make Tons of Money. Apple and Ideo Excel in Steps 1 and 2. The Trick Is Getting to #3," Boston Globe, January 5, 2004, p. C1.

Koch, John, "The Interview: Tom Koch," Boston Globe, Magazine Sec., March 25, 2001, p. 8.

McGhee, Tom, "IDEO Has Designs on Boulder; Creative Firm Has Quirky Reputation," Denver Post, January 15, 2001, p. E1.

McGrane, Sally, "For a Seller of Innovation, a Bag of Technotricks," New York Times, February 11, 1999, p. G9.

Myerson, Jeremy, IDEO: Masters of Innovation, New York: Te Neues Publishing Company, 2001.

Nussbaum, Bruce, "The Power of Design; IDEO Redefined Good Design by Creating Experiences, Not Just Products. Now It's Changing the Way Companies Innovate," BusinessWeek, May 17, 2004, p. 86.

Perry, Tekla S., "Designing a Culture for Creativity," Research Technology Management, March 1995, pp. 1417.

Peters, Thomas J., and Tom Peters, Liberation Management: Necessary Disorganization for the Nanosecond Nineties, New York: Knopf, 1992.

Pham, Alex, "At IDEO, Thinking Out of the Box Is Good Design," Boston Globe, May 29, 2000, p. C2.

Prendergast, Kimberly, "The Ideal Setting for Ideas: Brainstorming Sessions in Business Can Be Productive If Done the Correct Way," Press-Enterprise (Riverside, California), September 29, 2003, p. A7.

Reeves, Hope, "Building a Better Bra Shop," New York Times Magazine, November 30, 2003, pp. 44+.

Rosenberg, Ronald, "By Design, These Firms Take on Other Companies' Products," Boston Globe, May 11, 1997, p. C1.

Schupp, Katja, "IDEO's Product Development Is Second to None; Evanston-Based Firm Rakes in Design Awards," Daily Herald (Arlington Heights, Illinois), Bus. Sec., November 30, 2000, p. 1.

Sickinger, Ted, "Innovating Ideas," Oregonian (Portland), May 21, 2003, p. B1.

Teresko, John, "R&D Serves Dual Purpose; Steelcase Uses Its Innovations to Transform Its Own Practices As Well As Its Customers'," Industry Week, August 21, 2000, p. 103.

Trapp, Roger, "No Mystery Why IDEO Became the Home of Good Ideas," Independent (London), Bus. Sec., May 9, 2001, p. 4.

Vasilash, Gary S., "Developing (Manufacturing) Winning," Production, March 1995, pp. 89.

Ward, Sharon, "Scots Firms Must Do More to Innovate," Scotland on Sunday (Edinburgh), December 8, 2002, p. 5.

Watson, Lloyd, "Palo Alto Product Designer Finds Business Booming," San Francisco Chronicle, August 3, 1992, p. C3.

Frederick C. Ingram

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