Designed Chaos - An interview with David Kelley, founder and CEO of IDEO


With a formula for innovation and a hands-off management style, David Kelley and his teams at IDEO have developed some of the most commonly used products in America.


Walk into any bookstore, and you'll find countless numbers of books on innovation. In many of them you'll find chapters detailing a man named David Kelley, and his company, IDEO Product Development. Kelley has become somewhat of a poster child for innovation in America for two reasons: His engineering firm serves as the brains behind many of today's most innovative products, and IDEO (Greek for idea) has been a trendsetter in modern-day corporate management. With a uniquely un-structured approach, corporate leaders around the country are citing the Palo Alto, Calif.-based company's success as evidence of a new way to enhance creative thought and increase productivity in its workers. Called "employee empowerment," this new management style is taking the corporate world be storm.


Kelley, the founder and CEO of IDEO, is a forty something man who serves as a tenured professor of engineering at Stanford University, while overseeing his seemingly unorganized company. At IDEO, there is no corporate hierarchy and no management structure. Employees are invited, not ordered, to attend meetings. Those same employees can also decide where they want to work and can tell the CEO what they really think of his ideas. However, out of this chaos has come products that have made a deep impact on society. That mouse you're using to scroll through this story is a Kelley-and-friends invention. That squeezable toothpaste container you used when you brushed your teeth today came from IDEO minds. Those new Nike sneakers you just bought also have the IDEO stamp on them.


With all this success and a rapidly growing reputation as a master innovator, suddenly, everyone wants to be like Kelley.


"[Innovation] is where America's self-image comes from," says Kelley. "I was thinking the other day, you have Italian shoes, French wines, Japanese electronics and American what? American what, always comes back to something creative movies, inventions, etc. So, I think it's a good fit for the U.S. to focus on [innovation]. America is feeling confident [in the economy], and that's a really good time to start feeling innovative."


With American industry looking to turn more creative, they are naturally turning to Kelley, who has been creating many of the products you use for more than 25 years. Today, he and IDEO are a hotter property than ever, not just for the products they can develop, but for the corporate organization model that seems to inspire such richly creative people.


Flight of Fancy

Kelley started IDEO without even knowing that he was starting it. A Midwesterner, he came to the San Francisco Bay area in 1975 to enroll in Stanford's doctoral product design program with the idea of teaching and escaping his frustration with his past corporate life. After graduating from Carnegie-Mellon University in Pittsburgh, he worked as both an electrical and mechanical engineer with The Boeing Company and National Cash Register.


"I could see that I wasn't going to be successful in that environment," he recalls. "[Corporate life] was oppressive. You had to sort of stand in line and you could feel the weight of the organizational chart. My boss was a person I didn't know, who was making decisions about my life. You work 10-and 12-hour days and end up spending most of your life with people you don't really choose to be with. I couldn't stand the structure of big companies."


While he studied at Stanford, he became enamored with the concept of creative engineering. He was particularly drawn to the notion of using his skills in various types of projects, instead of one specific field. "It became really exciting," he says. "They'd be doing some kind of medical product, then a reading machine for the blind, and then computers."


In the late '70s, Silicon Valley was emerging as a heaven for creative engineers. Full of small upstart companies, the budding computer industry was in dire need of people who could help develop innovative products that could give each company a leg up on the

competition. Many of those companies began soliciting cheap help from the Stanford students. Kelley was pleased to oblige.


"They always needed somebody to help with making electronics or mechanical

designs," Kelley remembers. "I thought, this would make a great business."


Kelley started consulting for several of the companies and gained a reputation as a creative thinker. Eventually, the phone was ringing off the hook. One of the companies that came calling was a startup named Apple Computers. The company's CEO, Steve Jobs, a virtual unknown at the time, asked Kelley to design a computer hardware device that could control a cursor. Kelley solicited help for the project from a friend at Stanford,

and both the mouse and IDEO were developed. Kelley and his friends went on to do more work for Apple, including the Macintosh.


"When you've got a guy like Steve Jobs, who is incredibly demanding, you end up

doing really good work," Kelley admits. "So it was a big break for us, and the phone started ringing with offers from companies in all types of industries. From a design standpoint, everybody wanted to know who was doing the work for Apple."


Eventually, the work got too demanding for Kelley to concentrate on his school work. Luckily, Stanford offered him a teaching position before he received his doctorate, allowing him to teach and find free time for consulting.


When he began teaching, which he still does today, he started to build IDEO into a formidable product design firm. In the early days, he hired only a few of his friends from Stanford, and ran the company out of a one-room office atop a clothing store in Palo Alto.


Today, the company has more than 300 employees and offices scattered throughout the world. While still privately held, Kelley says that the company has revenues estimated at about $50 million annually.


Just the Right Chaos

When Kelley began his company, he was determined to forego the structural demands of the corporations for which he had worked. His first order of business was to create an environment in which his workers would be happy and free to think creatively. So he refused to install a management hierarchy. Mostly, Kelley's style is hands-off, allowing employees to become their own bosses.


"For the self-motivated people, [this approach] allows them do much more spectacular things than if you 'manage' them," he theorizes. "Why would I be smarter at figuring out what they ought to do than they would be?"


Why does his theory work? Mainly it's because of Kelley's hiring practices and the companies overall culture. IDEO doesn't hire just anyone. Kelley insists that employees be known and respected by their peers. "When your problem is a fit into the company culture, then you tend to hire people you know," he says. "The problem with a super-loose, hands-off management style is that if you don't fit in, you can hide and float and not be productive. So we have to be careful about hiring."


In its nearly 20-year existence, IDEO has had a very low turnover rate, according to Kelley. Mainly, he says, it is because everyone feels some type of ownership in the company and fits in well with their co-workers. Instead of specifically focused division within the corporation, Kelley has set up a new type of structure for his company, which feeds into that camaraderie. Nowadays, IDEO is broken up into "sub-divisions" called studios. A studio contains approximately 25 workers. There is a studio head for each, but that person runs it very "autonomously," says Kelley. The head isn't much different than any other worker, and Kelley says it's really just a person to organize administrative duties.


"When you get down to 25 people, you don't have to have many rules," says Kelley. "We don't have problems with mundane things like whether or not you can bring your spouse to a company function. Those questions never come up, because nobody's looking for policies. They already know the right answer."


Corporate decisions that need to be made are done by a roundtable of the studio heads. That way, he says, no one in the company is more than one step away from the process. Anyone in a studio can bring an issue to a roundtable discussion via his or her studio head. Decisions within an individual studio are made in a democratic process between those workers only, so often each studio at IDEO runs much differently than the others.


Kelley has reluctantly installed a bit of structure as his company has grown, which is manifested in a position called the project leader a move that was required because of the nature of the work being taken on. It's become the most sought-after position in the company, because the project leader generally gets to decide what the future of a product will become.


"It's because the projects are getting bigger," says Kelley of the new positions. "We used to just get the engineering or the design work. Now we get the whole project, so it requires so many people that it's necessary to coordinate with a leader." He also says it often keeps the client happy.


A project leader, however, doesn't take on much of a managerial role. In fact, it isn't even a permanent title. Employees who serve as project leader on one project often serve under another for a different project. The position rotates based upon availability and skills related to the project.


"It explodes right after the project is over," explains Kelley. "If you're a leader on one project, the person working for you may be your leader on the next project."


Helping One Another

Another alternative aspect of IDEO's structure, or lack thereof, is that employees can change positions at will. IDEO's "swap" program allows workers to avoid burnout or boredom by switching jobs, locations and, in effect, lives with another employee.


"They have to talk someone in another office into swapping with them," explains Kelley. "They can go to Tokyo and have that life experience or London. They can get see what else is out there in the world and know they can come back."


Swapping workers often switch homes, as well. Kelley says the program often makes his workers better designers because they get exposed to broader things: cultures, languages, customs. He originally thought single workers would be the ones doing the most swapping, but has found that many of the married workers with small children have taken advantage of it.


IDEO employees also get to pick a co-worker, instead of a supervisor, to dole out their annual review. Kelley believes that works realize that they can fool their boss, but they can't fool their fellow workers, so if they really want good feedback on what

they're good at and what they can improve on, it's from their peers.


Kelley admits that, in the beginning, people tended to pick the nicest person they could find. "You don't actually improve that way," Kelley says. Now, they go after the most critical person. "If you truly believe that reviews are for help, than you have to go to the people who really know and truly want to help you."


There are also no meetings at IDEO. Most "meetings" are labeled "idea sessions" that require an invitation and are usually held on spur-of-the-moment decisions. Even Kelley himself is not always invited since the sessions are intended for brainstorming and are attended only by people who can voice an opinion on that particular subject.


Becoming an Innovator

Management structure aside, people are watching IDEO more for the innovations that it has made, and the innovations it can make for other companies in the future. Kelley calls it "cross-fertilization technology brokering," and it is what has led to IDEO's success.


"Inevitably, we hear the same thing from everybody that comes into our offices. They all say to us, 'We want to become more innovative,'" he says. With the wave of innovation sweeping through the world, cross-fertilization the process of brainstorming to come up with an idea used in another project to enhance a current project has become an increasingly more important aspect of IDEO's culture.


"We have the advantage of working in multiple industries," says Kelley. "Let's say we're working on a chair, but we've learned something in the automobile industry before. Maybe we learned about a certain kind of spring in the automobile industry. We just cross-pollinate that into the chair, and now we have an innovation in the furniture industry."


Kelley says that other companies who concentrate on one area of expertise are at a disadvantage because they may not learn about useful technologies from other industries.


"It really makes you look smart, but all it is is a broad exposure," he admits. With a fast-spreading reputation for innovative work, IDEO is expected to keep growing strong, even though Kelley says it's not a goal. Although he has often been quoted as saying that his company will not grow too big, he now says that he won't purposely keep it from growing. "That would be the kiss of death," he says.


As the company continues on its path of innovation, Kelley says that the non-structure of the company will remain intact. "I believe that the breaking down into the studios has kept the culture we enjoy while we keep growing," he says. But he also believes that the culture will limit growth to a point somewhere down the road.


"We're limited be the number of really good people in our culture; we won't be able to keep up with all the work because the number of companies out there that view us as an outside innovative shot in the arm is extensive."


Success has a price, as well, and some employees have been lost to too-good-to-pass-up offers from other Silicon Valley technology firms. Kelley takes the harvesting of his work force in stride, however. He realizes that the computer companies are getting larger and more competitive, so his people are ideal targets for companies looking to become the innovation leader for one of the next century's biggest industries.


As for himself, Kelley says that he enjoys what he's doing, and it will be hard for him to get bored with it. "It's really been like I have 20 or 30 different jobs because I'm working with all types of the companies," he says.


When Kelley does finally call it quits with IDEO, he believes he will continue teaching at Stanford. In the process, he'll create a whole new breed of innovative product designers and managers.


For more on team building, don't miss Entrepreneurial Employees: Worth the Search, and the following Business Tools: Hire for Success and Build an Effective Team.


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