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Ideo: the Organization and Management Innovation in a Design Firm and the Role of Alliances and Collaboration

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Introduction Schumpeter (1949) wrote of the individual and collective embodiment of the “entrepreneurial spirit” – the “Unternehmergeist”. One company that channels this “geist” is the Sillicon Valley, California-based design and consultancy firm, IDEO. Founded in 1991, this self-styled innovation and design firm balances process and product innovations grounded in a human-centred design philosophy. Through this approach IDEO elided the pitfalls of the technology push versus demand-led innovation dichotomy to produce products and services that feel just as good as they work.

In the latest rankings IDEO was listed at no. 10 on Fast Company’s Top 25 Most Innovative Companies (2009) and no. 15 on Fortune’s 100 most-favored employers by MBA students (Universum 2009).

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This paper attempts to analyse the principles and practices at IDEO using two frameworks namely: 1. the organisation and management of innovation and research and development (R&D) and 2. strategic alliances and collaboration. The discussion on organisation and management would be focused primarily on innovation since R&D as a portfolio at IDEO is still emergent.

As a consequence also, its alliances and collaboration strategies and activities are described in the context of IDEO as a highly sought-after development partner. Analysis of the responses of senior business managers to what they considered to be the top three challenges of innovation management revealed that creating an innovative culture, attracting and maintaining diverse talents and finding the right balance of the incremental and the radical were uppermost (Tidd and Bessant 2009).

Smith (2008) identified nine key factors that impact on an organisation’s ability to manage innovation: management style and leadership, resources, organisational structure, corporate strategy, technology, knowledge management, employees and the innovation process. The Oslo Manual defines ”Innovation” as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations. ” (OECD 2007). This definition encompasses the common elements of innovation as proposed by arlier authors such as Schumpeter, Freeman, Rothwell and Gardiner, Drucker, Porter, Schumann, Merrifield etc. (Tidd and Bessant 2009; Innovation Zen 2006) Organisation and management of Innovation Since the introduction of ‘creative destruction’ Schumpeter (1942), there has been a growing confidence that the basic elements of successful innovation can be distilled through careful observation, and that they can be adopted and managed by firms to create and sustain competitive advantage. A number of authors (Abernathy and Utterback 1978; Teece 1986; Henderson and Clark 1990; Tushman and Anderson 1990; Christensen 1997 etc. have proposed various bivariate frameworks for assesing possible innovation types (incremental, radical, modular, architectural, product, process, market, organizational, complementary, disruptive etc). See Figure 1. Despite the variety, a basic conclusion however is that this mode of analysis can adequately inform strategic and organizational decisions and that different kinds of innovation require different kinds of organizational environments and managerial skills (Tushman and Anderson 1986). Figure 1: Component and architectural innovation (Henderson and Clark 1990) Source: Tidd and Bessant (2009)

Models of the Innovation process and the dynamics of its articulating phases have been proposed by a number of authors (Myers and Marquis 1969; Von Hippel 1976; Tidd et al 2001 etc. ). Tidd and Bessant (2009) detailed a linear model with four phases (search, select, implement and capture). The authors made the distinction that innovation management is essentially about creating conditions within an organization to increase the likelihood of a successful resolution of multiple challenges under high levels of uncertainty (Ibid, p. 70).

This view reinforces Tushman’s (1977) assertion that organization and management of the process is characterized by different types of decisions, coordination challenges and patterns of communication. It is important to note here that though the innovation process is commonly depicted as a linear unidirectional sequence, in practice, the activities are inherently iterative and often occur in parallel (Rothwell 1992; Weiss 2002; and Brown 2008). Innovation and R at IDEO IDEO’s approach to the organization and management of innovation and R&D can be summarized by the phrase: “design thinking”.

Tim Brown (2008), CEO of IDEO, explained that it is centred on meeting people’s needs in a technologically feasible and commercially viable way. Design thinking is an example of the systemic and integrative approach to innovation highlighted in Hughes (1983) and Rothwell (1992). The model attempts to understand the innovation challenge as a dynamic interplay of human, business and technology factors. See Figure 2. Figure 2: Designing thinking at IDEO Source: adapted from Weiss 2002. IDEO’s variation of the innovation process (cf.

Tidd and Bessant 2009 etc. ) comprises five phases: Understand the market, the users, the technology, the constraints; observe people in reallife situations; visualize new-to-the-world concepts and the potential users; evaluate and refine the prototypes; and implement for commercialization (Kelley 2001). Empathetic research, brainstorming and rapid prototyping are core routines developed in the execution of the IDEO innovation process. Brainstorming is the idea engine of IDEO’s culture.

It is used to generate multiple and varied ideas about possible solutions to the innovation challenge. A session lasting no more than sixty minutes is conducted under the following rules: defer judgment; build on others’ ideas; one conversation at a time; stay on topic; encourage wild ideas; go for quantity; be visual (Kelley 2001). Rapid Prototyping involves early development of a wide range of low-fidelity prototypes from which to learn. Teams evolve and refine ideas, answering multiple detailed questions through rounds of successively higher-fidelity prototypes.

This routine permeates the company’s design practices in all spheres (Coughlan et al 2007) and is universally codified in two IDEO mantras “build to learn,” and “fail forward” (Kelley 2001). The company organizes its R&D portfolio into 19 Focus Areas supported by 13 teams as shown in Table 1. Teamwork is an imperative at IDEO. For each project a number or relevant teams would be assembled from persons within the company, or externally from persons within their ‘talent ecosystem’. The teams meet regularly to exchange information on progress and to make sure each other’s activities remain focused and complimentary (Hawthorne 2002).

Table 2 summarizes some of the human-centred research work undertaken at IDEO. The popular Method Cards is result of this kind of research and development work at the company. The collection of 51 cards is used to evaluate and select the empathic research methods that best inform specific design initiatives. How and when the methods are best used are explained together with demonstration of how they have been applied to real design projects (www. ideo. com). Table 1: IDEO Focus Areas and Teams Source: Adapted from www. ideo. com Table 2: A sample of research at IDEO

Source: Adapted from Venkatraman 2005 The ten personas shown in Table 3 were developed by Tom Kelley for enhancing innovation at IDEO. Consideration of these personas influences the company’s policy of recruitment of T-shaped people ”with at least one deep area of expertise and a broad reach of other skills and experiences. ” (www. ideo. com). “We’ve found that adopting one or more of these roles can help teams express a different point of view and create a broader range of innovative solutions” (Kelley 2001, p. 7). Table 3: IDEO’s innovation personas

Source: Adapted from Kelley 2001 At IDEO the Ways to Grow tool (Figure 3) is a framework used to a) identify the type of growth intended, b) scope the challenge and deploy an appropriate innovation process, and c) assess the effectiveness of the portfolio of innovation efforts. It identifies four possibilities for growth and three basic archetypes of innovation outcomes: Incremental, evolutionary, revolutionary (Jacoby and Rodriguez 2007). Cf. Henderson and Clark 1990 etc. Figure 3: IDEO’s Ways to Grow and Innovation Outcomes cf. Figure 1. Source: Jacoby and Rodriguez 2007

The model suggests that an incremental project requires execution-focused process and people while a revolutionary project would require exploration-focused processes and people (Jacoby and Rodriquez 2007). Ways to Grow is employed in this manner by IDEO to track, understand, and assess its in-progress portfolio of innovation projects using measures of innovation effectiveness. The projects can be mapped onto this tool creating a dashboard of initiatives that can be updated and referenced. All these organizational and management approaches mean little without a way of integrating them in a creative and sustainable organizational culture.

Culture is difficult to define, but for IDEO it’s probably: the not infrequent managers’ informal chats with their carefully selected T-shaped employees (Brown 2007); the company-wide Monday morning meetings and Friday afternoons show and tell; the playful open layout of the workspaces decorated with personal eccentricities (Kelley 2001); the formal and informal reward systems where some compensation decisions are based largely on reputation among fellow designers and formal peer reviews (Hargadon and Sutton 1997); or just the personal satisfaction of the team members knowing that they are part of something big and exciting and creative.

Strategic Alliances and Collaboration Gulati (1998) defines strategic alliances as voluntary arrangements between firms involving exchange, sharing, or co-development of products, technologies, or services. They can… take a variety of forms, and occurring across vertical and horizontal boundaries. The fundamental imperative for strategic alliances and collaboration as suggested by authors like Teece (1986) is that it is extremely difficult for one company to possess all the requisite skills and competencies to implement all the phases of the innovation process.

Among the motives for the formation of alliances and collaborations are reduction of cost, uncertainty, and time of R, response to changing customer and market need, lack of internal resources and knowledge transfer (Kogut 1988, Gulati 1998; Littler 1993 in Tidd and Bessant 2009). IDEO is not a R-intensive firm, its motivations for participation in strategic alliances and collaboration are not necessarily those of an active seeker. However, IDEO has benefited from its role as consultant and a highly ought-after collaborator. “What’s unique about IDEO is that we straddle both sides of the innovation business, as both practitioners and advisers. ” (Kelley 2001, p. 4). IDEO’s 5000+ employees in more than 20 studios on three continents do work for clients in multiple industries across the globe. The company’s website lists an astonishing diversity of products and services created in collaboration with some 300 clients in 28 different industries.

Hargadon and Sutton (1997) aggregated qualitative data which indicate that IDEO’s employees learn about potentially useful technologies through their extensive work and incorporate that knowledge into the creation of new products and services for industries where there is little or no prior knowledge of these technologies. This movement of technologies between industries is a form of technology transfer and diffusion (Rosenberg 1982; Hughes 1989).

The company recognises the potential of its network position (Conway and Steward (1998) and instructs its employees in the Methodology Handbook to “Look for opportunities to expand network and/or industry knowledge. ” (Hargadon and Sutton 1997). These integrative activities according to Hargadon and Sutton are an example of technology brokering. IDEO’s brokers in effect act as technology ‘gatekeepers’ as described in Allen (1977) and Rothwell (1992).

IDEO is uniquely positioned to facilitate R&D-intensive firms in the completion of their innovation process through to commercialization. The company’s positioning is validated not only by its rapidly expanding client portfolio but by industry outlook. Ferguson and Taylor (2004) affirmed that many innovation-focused organizations, including those with extensive R programs, are looking outside for assistance, especially in the early stages of searching for promising technologies and developing a vision based on working models.

For established firms with strong technology-focused research, the services of design firms, with expertise in user knowledge, is useful in balancing exploration and exploitation of their technical knowledge (Venkatraman 2005). Eastman Chemical, HP, Intel, P and Samsung initially sought IDEO as an exploration alliance partner. P have extended the collaboration to joint product development with product ideas mainly generated by IDEO (Ventkatraman 2005).

As IDEO continues to deliver award winning products and services to clients firms along the entire value chain it may soon have to think about if and how it should reposition itself for example mass production and marketing of high quality innovative consumer goods. Issues like these lead to considerations about the possible alternative opportunities available for leveraging a company’s resources, position and linkages to create sustainable value.

In the light of global challenges such as poverty, health, water, energy, and economic empowerment what is the role of innovation and research and their management and what sort of alliances and collaboration would be needed to deliver adequate responses? What is the future of social entrepreneurship? To deepen understanding of these challenging questions, Paul Bennett, chief creative officer at IDEO, visited Nobel Laureate Muhammad Yunus of Grameen Bank fame to get an immersive experience of this maturing entrepreneurial spirit.

Reflecting on his encounter in the Financial Times Bennett (2009) asserted that sustainability and growth for the organisations of the future demands accepting responsibility for the ”bank accounts” of purpose, people and learning. Bennett summarizes his own thinking with a quote from one of his clients: “The future isn’t going to be designed on an Excel spreadsheet. ” Whatever new tools emerge for future planning, its not hard to imagine that some of those would emerge from the studios of IDEO.