Innovation wasn't always a hot topic in the Silicon Valley. More than a decade ago, when our firm was just a small group of product designers working over a dress shop in Palo Alto, we became very interested in why companies looked outside for product development. We hired a professional services firm to help answer that question, and after interviewing many clients (and nonclients) we distilled the answers down into four key reasons: One was just raw capacity. Companies had a bigger appetite than their in-house resources could satisfy. The second was speed. If they couldn't find anybody in-house to sign up to some incredibly tight deadline, they would look outside. The third reason was the need for some specific expertise outside their core competencies. And the fourth was innovation.

Well, a funny thing has happened in the ensuing years. Innovation has risen from the bottom to the top of the list. During that time, IDEO has broadened its client base to include some of the best-known and best-managed companies in the world. I personally have met with executives from more than a thousand companies to talk about their organizations' emerging technologies, market perceptions, and, of course, product development plans. With more than a thousand firsthand experiences, it's hard not to spot emerging trends unless you are truly asleep at the wheel. The biggest single trend we've observed is the growing acknowledgment of innovation as a centerpiece of corporate strategies and initiatives. What's more, we've noticed that the more senior the executives, the more likely they are to frame their companies' needs in the context of innovation.

To those few companies sitting on the innovation fence, business writer Gary Hamel has a dire prediction: "Out there in some garage is an entrepreneur who's forging a bullet with your company's name on it. You've got one option now—to shoot first. You've got to out-innovate the innovators."

Today companies seem to have an almost insatiable thirst for knowledge, expertise, methodologies, and work practices around innovation. The purpose of this book is to help satisfy some of that thirst, drawing on IDEO's experience from the "front lines" of more than three thousand new product development programs. Our experience is direct and immediate, earned from practical application, not management theory. We've helped old-line Fortune 500 companies reinvent their organizations and bold young start-ups create new industries. We've helped design some of the world's most successful products, everything from the original Apple mouse, once called "the most lovable icon of the computer age," to the elegant Palm V handheld organizer. Whether you are a senior executive, a product manager, an R&D team leader, or a business unit manager, we believe this book can help you innovate.

One of the advantages of our front-lines experience is that we've collected a wealth of contemporary success stories from leading companies around the world. We've linked those organizational achievements to specific methodologies and tools you can use to build innovation into your own organization. I think you'll find that this book will help you to arrive at insights that are directly relevant to you and your company.

I joined IDEO in the late 1980s, when it was reaching that critical stage at which many start-ups either stall or implode. Since that time, however, IDEO has grown dramatically in size and influence, and Fast Company magazine now calls it "the world's most celebrated design firm." The Wall Street Journal dubbed our offices "Imagination's Playground," and Fortune titled its visit to IDEO "A Day at Innovation U." 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 ten years running.

What's unique about IDEO is that we straddle both sides of the innovation business, as both practitioners and advisers. Every day we work with the world's premier companies to bring innovative products and services to market. Even the best management consulting firms don't enjoy that hands-on, in-the-trenches experience. Yet, like the best consulting firms, we sometimes host teams from multinational companies who want to learn from our culture and steep themselves in our methodology. In others words, we don't just teach the process of innovation. We actually do it, day in and day out.

As I was completing this book, Tiger Woods was winning the U.S. Open golf tournament at Pebble Beach, dominating the field as never before. He seemed both intense and utterly calm. His dedication was complete, and his swing and putting were nearly perfect. In spite of what looked like masterful putting in his first round, he insisted that the balls weren't going into the hole smoothly enough for him. They were just "scooting," he said, not rolling. He stayed on the practice green till they rolled beautifully. Butch Harmon, his swing guru, said Tiger was playing better than ever. "He's confident. He's mature," said Harmon. "We've built his swing together, so it's pretty easy to tweak if something goes wrong." I found that a wonderful, enlightening statement. The greatest golfer in history, who appears to be the ultimate solo performer, is actually the product of a team effort, and when the occasional bumps in the road arrive, the going is easier because of that fact.

Our approach to innovation is part golf swing, part secret recipe. There are specific elements we believe will help you and your company to be more innovative. But it's not a matter of simply following directions. Our "secret formula" is actually not very formulaic. It's a blend of methodologies, work practices, culture, and infrastructure. Methodology alone is not enough. For example, as you'll see in chapter 6, prototyping is both a step in the innovation process and a philosophy about moving continuously forward, even when some variables are still undefined. And brainstorming (covered in chapter 4) is not just a valuable creative tool at the fuzzy front end of projects. It's also a pervasive cultural influence for making sure that individuals don't waste too much energy spinning their wheels on a tough problem when the collective wisdom of the team can get them "unstuck" in less than an hour. Success depends on both what you do and how you do it.

The Innovation Decathlon

Here's the good news. Neither you nor your company needs to be best of class in every category. Like an Olympic decathlon, the object is to achieve true excellence in a few areas, and strength in many. If you're the best in the world at uncovering your customers' latent, unspoken needs, the strength of your insights might help you succeed in spite of shortcomings elsewhere. Similarly, if you can paint a compelling visualization of the future, maybe your partners (suppliers, distributors, consultants, etc.) or even your customers can help you get there. If there are ten events in creating and sustaining an innovative culture, what counts is your total score, your ability to regularly best the competition in the full range of daily tests that every company faces.

A Method to Our Madness

Because of the eclectic appearance of our office space and the frenetic, sometimes boisterous work and play in process, some people come away from their first visit to our offices with the impression that IDEO is totally chaotic. In fact, we have a well-developed and continuously refined methodology; it's just that we interpret that methodology very differently according to the nature of the task at hand. Loosely described, that methodology has five basic steps:

1. Understand the market, the client, the technology, and the perceived constraints on the problem. Later in a project, we often challenge those constraints, but it's important to understand current perceptions.

2. Observe real people in real-life situations to find out what makes them tick: what confuses them, what they like, what they hate, where they have latent needs not addressed by current products and services. (More about this step in chapter 3)

3. Visualize new-to-the-world concepts and the customers who will use them. Some people think of this step as predicting the future, and it is probably the most brainstorming-intensive phase of the process. Quite often, the visualization takes the form of a computer-based rendering or simulation, though IDEO also builds thousands of physical models and prototypes every year. For new product categories we sometimes visualize the customer experience by using composite characters and storyboard-illustrated scenarios. In some cases, we even make a video that portrays life with the future product before it really exists.

4. Evaluate and refine the prototypes in a series of quick iterations. We try not to get too attached to the first few prototypes, because we know they'll change. No idea is so good that it can't be improved upon, and we plan on a series of improvements. We get input from our internal team, from the client team, from knowledgeable people not directly involved with the project, and from people who make up the target market. We watch for what works and what doesn't, what confuses people, what they seem to like, and we incrementally improve the product in the next round.

5. Implement the new concept for commercialization. This phase is often the longest and most technically challenging in the development process, but I believe that IDEO's ability to successfully implement lends credibility to all the creative work that goes before.

We've demonstrated that this deceptively simple methodology works for everything from creating simple children's toys to launching e-commerce businesses. It's a process that has helped create products that have already saved scores of lives, from portable defibrillators and better insulin-delivery systems to machines that help grow sheets of new skin for burn victims.

Innovating with an Audience (and without a Net)

Part of the reason this book came about is that we actually got firsthand evidence that people believe in our approach to innovation. A year ago, ABC's Nightline came to us with a unique proposition. They wanted to "see innovation happen" and said that, if we were willing to show how we'd reinvent a product category, Nightline would be there with its cameras to capture the action.

Perhaps you're one of the almost 10 million people who stayed up late to watch the broadcast.

The show was great entertainment, but it was also a wonderful short course in our methodology. ABC had asked us to compress our method for creating successful products into a TV-sized package, and the steps we went through before a national television audience are the very steps that I'll take you through in the rest of the book. As a quick preview, let's dive into what ABC called "The Deep Dive. One company's secret weapon for innovation."

The Deep Dive

Nightline's show began with Ted Koppel asking how the process of designing a better product works. He went on to describe the toughest problem the network could think of to toss our way. "Take something old and familiar," he said. "Like, say, the shopping cart, and completely redesign it in just five days."

That's exactly what we did.

"Maybe we should acknowledge it's kind of insane to do an entire project in a week," began Peter Skillman of IDEO as ABC's cameras rolled. It was 9:00 Monday morning, day one, and the youthful Skillman was a walking metaphor for the IDEO way. Status at IDEO is about talent, not seniority, and Skillman had proved an able facilitator under fire, great at leading brainstorms and bringing disparate teams together. The team that day at our Palo Alto offices also came from many disciplines. Beyond our usual talented engineers and industrial designers we had IDEOers with backgrounds in psychology, architecture, business administration, linguistics, and biology.

The shopping cart was an ideal and imposing challenge. The cart is an American cultural icon, as familiar as the Zippo lighter, and just as equally frozen in time. It offered a rich opportunity for new design, but at the same time we knew that it was inexplicably stuck in a sort of innovation limbo.

"Let's go!" Skillman cheered at 10:00 A.M., and we were off and running. We split into groups to immerse ourselves in the state of grocery shopping, shopping carts, and any and all possibly relevant technologies. Blending our "understand" and "observe" phases into a single day's work, we were practicing a form of instant anthropology. We were getting out of the office, cornering the experts, and observing the natives in their habitat. Some members of the team trotted down to Whole Foods, a popular grocery store in downtown Palo Alto, and began wandering the aisles, watching with a fresh perspective how people shop. They saw safety issues and watched parents struggle with small children. They noted how professional shoppers from an Internet buying service used their carts as a base station and ran up and down the aisle "cartless" for better mobility. They saw traffic jams where shoppers had to pick up the back of their carts to slide by other slow-moving or oncoming ones.

I interviewed a professional buyer who purchases carts for a large store chain, and discovered the trade-offs of steel versus plastic, as well as the surprisingly high cost of lost and damaged units. Another group caught up on the latest designs and materials by cruising a local bike store. A "family" team poked and prodded a dozen children's car seats and baby buggies. Anticipating that we'd "cyberize" our cart, we perused a local electronics store for gadgets. One group managed to track down a cart repairman named Buzz who drives from Safeway to Safeway in a little truck, rewelding broken baskets and popping on new wheels.

By the end of day one, three goals had emerged: make the cart more child-friendly, figure out a more efficient shopping system, and increase safety.

Focusing on those themes, we spent the morning of day two brainstorming possible solutions. The classic brainstorming principles were printed on the walls, and we spread giant Post-it sheets with lots of colored markers about and plenty of toys to lighten the mood. We didn't fret if an idea was dull or even goofy, and we encouraged everyone to join the show-and-tell. The wacky concepts cracked everybody up and kept people from editing their own thoughts, like the privacy shade someone sketched (in case you're buying six cases of condoms) or the Velcro seats with matching Velcro kid diapers to keep unruly toddlers safely stuck in place.

By 11:00 A.M., the focused chaos started winding down, hundreds of crazy ideas and sketches crowding the walls, as well as plenty of solid ones, like a cart that nobody would want to steal or a cart with its own scanner to check prices. We voted for the "cool" ideas. They couldn't be too far-out, because they had to be buildable in a couple of days. Everyone stuck brightly colored Post-its on their favorites, creating flowerlike clusters around the best concepts.

Over lunch, the team leaders reviewed the concepts and the group's votes and made a series of quick decisions on where to focus prototyping efforts. The fastest development teams in the world can't win the race to market if the decision process bogs down, so by the time the pizza was finished, the Deep Dive team had a plan for going forward.

We split into four smaller groups that would have three hours to build mock-ups, each team focusing on a separate concern—shopping, safety, checkout, and finding what you're looking for.

The groups sketched their ideas for half an hour and then took off running. Many jammed the aisles at the local Ace Hardware store searching for ideas and materials. One of our master model makers pursued an idea from the brainstorm to make a shopping cart that tracks sideways. By 3:00 P.M. on Tuesday, sixteen IDEOers were jammed into our shop along with the dozen machinists and model makers who work there every day. They were feeling the intense time pressure to crank out the first round of sample shopping carts, and three hours later the crude prototypes were ready for review. One featured an elegant and voluptuous curve; another was modular, designed to stack up with handbaskets. There were high-tech twists—a microphone to query customer service and a scanner so you could skip the checkout line.

Again, we selected the best features of each prototype and divided the tasks. Next, it was Lego time—everyone started bending wire-welding rods to build tiny model carts. We knew it had to be modular, child-safe, and nestable for easy storing. While one person was laying out the frame assembly on a CAD machine, someone else was examining the basket concepts. The design team called it a day at 3:00 in the morning, but the shop kept at it a little longer.

At 6:00 A.M. Wednesday, day three, a master welder whom IDEO works with picked up the drawings for the tricky, curvaceous frame. Meanwhile, model maker Jim Feuhrer was tinkering with the casters. The incredibly challenging deadline and shared goal had helped create a spirited "hot group," and the team pushed through another long day, fueled by energy reserves and nearby Peet's espresso. By Thursday afternoon the team was getting punchy, but beginning to think it was possible. My brother, David, founder of IDEO, came bounding through the shop with his usual infectious optimism and told everyone, "It looks great. It's awesome." They'd started to put the parts together and had these Whole Foods baskets all set up to insert into our custom frame. David's expression suddenly changed. "You're not going to use those?"

The team had focused so completely on redesigning the shopping cart frame that they hadn't had time to work on the baskets. Only hours remained, but shop leader Carl Anderson and others grabbed some acrylic panels and started cranking. Meanwhile, at every point, test assemblies were being done. The shop kept at it nearly till dawn. But the cart still wasn't done. We had to paint it before the cameras were ready to roll a few hours later.

Lifting the Creativity Curtain

At 9:00 A.M. on Friday we wheeled the cart down the street, put it in a conference room, and threw a sheet over it. Everyone gathered round for a cheer as we yanked off the sheet to a television audience of millions.

ABC loved what it saw. The old boxy cart we all know and hate had been replaced by a sleek, gleaming creation. The main frame sloped down on each side into a curve that tucked back, with more of a sports car line. Gone was the main basket—the feature that made carts desirable for black-market barbecues. The open frame was designed so that six standard handbaskets would neatly nest inside in two layers. Shoppers could use the cart like home base, darting down an aisle with a basket. At checkout, clerks would pack the groceries in plastic bags that neatly hook within the frame. As far as we know, no one had done anything quite like it before. To me that's the heart of it, a real innovation that redesigns the shopping experience.

We used ideas from roller coasters and baby seats to create the cart's child seat—it had a safety bar that snaps in like one at the amusement park as well as a fun blue plastic play surface. There was a scanner to pay for items directly, two cupholders for coffee, and a clever set of back wheels. Tug to the side and the locked wheels would pop loose so you could easily push the cart sideways. Push it forward again and the wheels would lock back in place.

With the cameras rolling, ABC's Jack Smith wheeled the cart down the aisles at Whole Foods and earned plenty of gawking looks. Clerks and managers loved the cart and even said that with a couple of modifications, they'd want one. We took the afternoon off to celebrate and get ready to return to our regular clients.

The cart was done, the show was aired, and we thought that was pretty much the end of it. But the morning after the Nightline segment aired, our phones wouldn't stop ringing. I took dozens of calls from executives around the country who'd seen the show. Most of them didn't give a damn about shopping carts. Instead, they wanted to know more about the process we used to bring the cart into being. One CEO told me that he understood, for the first time, what creativity really meant and how it could be managed in a business environment.

Nightline's Deep Dive broadcast was among its most popular of the year, so popular in fact that the network rebroadcast it a few months later. The response amazed us. But maybe it shouldn't have. The fact is, everybody talks about creativity and innovation, but not many people perform the feats without a safety net in front of a nationwide television audience.

Building in Creativity and Innovation

Why should business care about creativity? Visit your local mall or trade show and you'll see that creativity sells. We're all searching for the next iMac or VW Beetle—any worthwhile innovation that captures the public's imagination and strengthens the company's brand. But many companies shy away from novel solutions. Moreover, they tend to believe that truly creative individuals are few and far between. We believe the opposite. We all have a creative side, and it can flourish if you spawn a culture to encourage it, one that embraces risks and wild ideas and tolerates the occasional failure. We've seen it happen.

The more we thought about the success of the Nightline Deep Dive, the more it made sense to distill what we've learned in the trenches from hundreds of corporations on thousands of projects. This book aims to demystify the creative process. It isn't something we dreamed up in a business school class. It's been tried and tested through hands-on experience. It helped IDEO grow from a two-person office into the leading product design firm in the world.

It can help you too.

The Art of Innovation
by Tom Kelley with Jonathan Littman
chapter One
Innovation at the top