Video 1-1 (3:03): Three Innovation Challenges

To start working on innovation I find it really useful to think about three dimensions, three
different challenges that make products and services successful if they're truly innovative.
These three dimensions are the people dimension, the technical dimension, and the
business side of it. So let's start with the people.

So we have an idea that there's some problem out there that customers have and we think
they'd be willing to maybe pay something to have us help them to solve it and so the people
dimension is the product, the solution, has to be desirable. People have to feel and know
they have that need. Sometimes that takes some work before they can actually recognize
that they have that need but it's got to be addressing some need or people will not buy it,
they will not desire our product or service.

The second dimension is the technical dimension. We have to be able to solve this problem
in a technically feasible way. Some technical, technically feasible solutions are very, very
difficult to do and maybe we don't have the resources to solve them and others we can. So
we have to be able to solve it in the way that's technically, that technically works for those
customers in the, whatever the use environment might be. And now the third dimension is
there has got to be a viable, sustainable business around it.

So if all we have is a business that doesn't, that can't have enough revenue in order to pay
for the costs, we can't do that for very long. So by a viable business we mean generally one
that can make some profit in order to pay back all the investment and there's got to be
some business model, some business model that explains how that works. And so these
three dimensions together give us innovation.

If we only do one or two of them we generally can't have a successful innovation. On the
other hand, you don't need to solve them all at once. You need to solve them all eventually,
that is, you might start from the people dimension or maybe you start from a new
innovative business model and you're pretty sure you can make that work, and then
eventually you solve the other dimensions. And each of us might naturally come at this from
one of these dimensions, so I'm, for example, an engineer.

I often think about technical solutions and if, but if it doesn't solve a real customer need, if
there's no desire from the market, then it won't work. Or if there's not a business around it
then it can't work either. So I might start from one dimension and then eventually solve all
three and then we really have something. So this is the framework that we use to think
about what is truly successful innovation.

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Video 1-2 (2:31): Three Innovation Challenges - NEST Example

So let's look at some examples of successful innovations. The Nest learning thermostat
came out of an understanding of a key customer need. Programmable thermostats had
been in the market for quite a long time, and the folks at Nest found that nine out of ten
programmable thermostats were not being programmed. Customers simply found them too
complex, too hard to actually create the program, even though programming the
thermostat would save lots of money, saves a lot of energy in our heating and air
conditioning in our homes.

And so what the folks at Nest did is they thought about how can we make it easier to
program? And, in fact, the interesting technical solution they came up with was, well, let's
make it so the customers don't need to program it at all. In fact, it's a learning thermostat.
So the way it works is you install it, and then every day you turn up the heat if you're cold
and you turn down the heat if you're warm or change the air conditioning according to
whatever your lifestyle, whatever your needs, whatever your patterns might be, and over a
period of two weeks, it learns your behavior. It learns when you're home.

It learns when you're away. It learns what temperature you like to have your home set, and
then it creates a program automatically. And you could go online to the web interface or the
mobile app and tweak that program, change it if you don't like it. You could turn off the
learning. You could change any other settings that you like.

So what they did is they came up with a great solution that people love because it has the
interfaces and the connectivity and the programmability and the learning, and then they
came up with a way to solve that technically, which involved some, you know, special
technology, sensing, web and programming applications, and finally a business model
around it.

And the business model maybe isn't all that special or clever. They simply sell this at what I
think is a fairly high price, and then they worked with certain utilities in order to give rebates
in places where they want to encourage people to be more energy efficient. So this is the
Nest learning thermostat. I think it's a great example of a successful innovation.

Video 1-3 (1:11): Three Innovation Challenges - Airbnb Example

Airbnb is a relatively new business in the hospitality industry. In fact, it's changing the way
many people travel. So Airbnb is a way to connect guests and hosts in order to give people
accommodations in cities all around the world. So if you have an extra space in your
apartment or maybe you're willing to rent out your apartment to out of town guests, it gives
the guests a very nice homey alternative to hotels.
And many of you have probably used Airbnb. So they found a market where people were
not being well served by the existing hotel and bed and breakfast industry. They developed
a really interesting solution, both on web and mobile applications. They developed a
business model around it where they take a little bit of money from the host for every
booking and that pays for this business. It's been tremendously successful, still growing and
we'll see where this goes in the future.

Video 1-4 (3:15): Three Innovation Challenges - Airbnb Story

I'll tell you a little bit more about how Air B and B got started. It's a fascinating story. So, two
students of mine who were out in California, one was an industrial designer from the Rhode
Island School of Design and the other a graphic designer, also from RISD. Because the class
that I teach here at MIT is joint with MIT in RISD. So, two RISD graduates out in California,
one's in LA, one's in San Francisco.

The guy in LA had been working in that area for a while, he decided it wasn't quite exciting
enough for him. He wanted to move further north to the Bay area, San Francisco area. So,
Joe called his friend Brian up in San Francisco and said, "Brian, can I crash with you for a
while, I really want to get into that area and do something around innovation, maybe in
Silicon Valley." And there's the IDSA Conferences San Francisco, the design conference and
maybe if we can -- if we go to that I can find some interesting work in that area.

So, Brian says, "Sure, Joe, come on up, my roommate just moved out, you can stay here, I
got a place for you." So, Joe moves up to San Francisco, stays with Brian and Brian says,
"And, by the way, you know, the rent is due next week, we need $1500." So, Joe didn't have
a whole lot of money, he said, "You know, but, we are going to this design conference next
week and I notice on the website for the IDSA Conference that all the hotel rooms in San
Francisco, accept for the super expensive ones, they are all booked.

So, maybe there will be people who would be willing to stay with us and we could rent out
maybe that space over there in the corner and maybe we can put an air bed over here in the
extra side of the living room and we could rent out a couple of spaces to other designers at
the conference and that will help us maybe pay the rent. And that worked.

So, they quickly put up a website. Some designers who wanted to go to the conference too
stayed with them, they had a really nice time, they showed these folks around they just
met, show them around San Francisco. They said, "You know, we really got something
here." Maybe this could work in other cities with other people as the host, not just us. So,
then, turns out, pretty soon after that, maybe the next month, there's a big convention, the
Democratic National Convention for the US Presidential election was happening in Chicago.
And there would be tens of thousands of Democrats all going to Chicago and need to find
hotel rooms or other places to stay. Some of them are young volunteers, don't have a whole
lot of money. Maybe this bed and breakfast thing could work. So, they said, "Maybe other
people could put an air bed in their apartment and they could have an air bed and
breakfast." And that was their first website. AirBed&Breakfast.com.

They put up that website and it worked. A lot of people stayed in Chicago and they
connected guests and hosts online. And the business idea grew from that very beginning
into what is today a tremendously successful business in hundreds of cities around the
world, with millions of customers.

Video 1-5 (2:19): Three Innovation Challenges - APPLE Example

To speak about innovative products and services, it is easy to think about Apple as an
example. They've been touted as one of the most successful, innovative companies in the
world. So you think about their products, and why many of us use and love their products.
There is something special about them. They've addressed a key customer need, which is
ease of use. And they've done that in a really smart and innovative way.

Think about their laptop computers, or maybe their iPhones. They didn't create the first
smart phone. They didn't create the first MP3 player. They didn't create the first tablet
computer. What they did is, they identified how is it the customers would like to use the
product, and delivered a solution that makes it easier to use it, and really, for the most part,
better than anybody else on Net One dimension.

Now, technically, Apple's products are as sophisticated as they come. Think about what
does it take to make this product so light, so thin, and such a nice finish? It is actually really
hard to integrate all the technology that is in some of the latest gadgets. And to do that in
such a way that is seamless and successful is really hard work.

So that is the technical side of it. And now the business model on this, Apple, as you know,
has got both products they sell as well as services. Web-based services, music services,
database services, and so forth, that support their products. And they did that largely in a
more connected and seamless, and I think nicer from an interface perspective, than anyone
else had done.

At first, people have said well how would you make money selling, well, songs for 99 cents,
when they only get a small chunk of that? Well once you've sold several billion songs for 99
cents, you can make a lot of money. And so thinking about all three of these aspects again
together, the people, the technical, and the business dimension has been what is successful
about Apple as well.

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Video 1-6 (4:37): Design Thinking Skills

Now we've talked about what makes successful innovation. Here, I'd like to describe what
makes designers themselves successful. So, designers, people who innovate new products
and services, have a certain set of skills, and these skills, I believe they transcend the
different types of design. So, I think successful software designers, hardware designers,
graphic designers, mechanical engineers, people who are good at creating successful
innovations have a certain set of skills, or habits that have been lately, "design thinking."

So, these are behaviors that they use, and it's useful to identify what they are so that you
can pick them up. You could practice them, and they can become your habit too. So, the
first thing about design thinking is, success designers know they can't do it all at once. So,
we talk about different phases, or stages, and here we'll describe three stages.

The first one is the explore phase. The second, creation, and the third, implementation of
those solutions. And, I'd like to call your attention to, in the explore phase, there are a
couple of skills that designers have that are really important. And, the first skill is what we
call, "go and see" and what that means is, while most people, if they're given a problem, if
you're smart you say, "Well, I can understand that problem."

But, what designers do is they go check it out for themselves, because they know that even
though they personally understand that problem their understanding is only from their own
perspective, and that customers may have many other perspectives. In fact, they may have
many other problems, or aspects of the problem that they don't truly understand.

So, what they do is, they go out in to the real world, to the use environment and they meet
customers, and they see how exactly they use the product, or what they do for a solution,
and they try to develop some connection which we call empathy, with the customers so
they can really understand their problem, their situation. And, the second phase which we
call the "create phase" is where we take what we learned in the "explore" and try to
develop solutions that will solve those problems in a new and innovative way.

And, I'd like to identify a couple of skills in the create phase that are really important. What
most people do when their faced with a problem that they now understand, is they can
think of a solution. But, what designers do is while they have a solution, they set that aside
and develop another solution, and then another, and another, until they've developed a
whole set of solutions. And, by exploring this set of solutions and reasoning about it in terms
of the different aspects of the different designs, they can put them together in ways that
solve the problem even better than their first idea, or than any of the ideas.

And, by exploring many designs through a process of building and testing which we call,
"prototyping" we can create much better solutions. And, even in the third phase, the
implementation phase which is, of course, is where you have a lot of detail of engineering
and implementation work, there are a couple of special skills that are important too.
So, the first one is just recognizing that we won't solve it right the first time. That it's going
to take a lot of trial and error, or iterations, or repetitions of the design process in order to
solve it right.

And then finally, that a lot of details matter. It's not just getting it roughly right on a few
dimensions, but right on every dimension takes a lot of attention to quality and detail, and I
think really good designers pay attention to the kind of details that most of us may never
notice, but really matter in the end to create an integrated and successful user experience.
So, these are what we call "design thinking skills."

They're actually behaviors that you can pick up, and you can practice, and if you're good at it
and you do it for a long time, it'll actually become a habit where you'll always behave this
way, and this is what I think makes some innovators particularly successful, and then they
can innovate in a reliable way.

Video 1-7 (4:02): IDEO Case Introduction

To explore this process of innovation, I'd like to introduce you to an example that we can
look at in some depth. So this is going to be sort of a case example. By a case I mean, we'll
look at one company and how they operate and try to understand what it is they do in order
to understand the aspects of innovation that we can practice. So the company I'd like to
discuss is called IDEO. IDEO is a product design consultancy.

So it's a company that works with clients who present to them challenges, innovation
challenges, or business challenges, they need some innovation around. And IDEO uses a
process of innovation, they use it in a pretty reliable way, which we're going to understand
in order to solve those challenges for their clients.

IDEO has won more design awards than any other firm, more than Apple, more than
Samsung, and more than all the other design firms out there. And they've done this, well
partly, because they're one of the largest design firms out there, and they apply for a lot of
design awards, so maybe that helps them you know win a lot of awards, but also they're
really good at it. They take this process, this design thinking approach we've described, and
they use it for pretty much any client that comes along, they use largely the same process,
and that's one of the things I'd like you to really understand.

What is the process and how do they operate around that. So, two key players here. One is
Dave Kelly, so he's the founder of IDEO, and you'll see him in the video I'm going to show
you. So he created IDEO 25, 30 years ago out in Silicon Valley in California. And he, he
started it in order to work, use the design skills that as an engineer he had learned, and
picked up what he'd come to, to learn from other types of designers and put them together
in, an integrated and cross functional operation, which came to be called IDEO.
Tim Brown, who wrote the article that we've referred to, he's currently the CEO of IDEO.
You won't see him in the video. He was running their London office at the time. But he
started to frame this approach that they're now calling design thinking, and a lot of other
people have caught on to that terminology. What I like about IDEO is they've applied largely
the same process to a lot of different kinds of challenges.

For example, here are some of the products that they've developed in a number of
industries. So you see they've done white goods, home appliances, they've done sports
equipment, you see that's a, on the top right image, it's a bicycle trainer we use it in the
winter when we're cycling indoors. They've done, done medical equipment and devices.

They've done components for automobiles, for example the instrument cluster display on
this Ford Motor Company automobile that won a bunch of design awards as well, it's one of
their hybrid vehicles. They've done seating, lighting, toys, all kinds of other kinds of
products. They've also worked on services.

Service innovations are really important to many of their client businesses. They've worked
on things such as retailing spaces, hospitality spaces, even communication programs to get
the word out around important public issues.

So they've worked on a huge variety of products and services for many, many clients around
the world. And what I'd like you to understand is how can they do it? How can they have a
process that's so robust, so reliable, so systematic, that it can apply to all of these different
challenges. And you'll see just how they do it.

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Video 1-8 (5:18): IDEO Assignment Setup

Now to see how IDEO operates and how they innovate, what I'd love for you to do is to be
able to visit them. In fact, they're right up the street here in Cambridge, in their Boston
location. But you can't visit them live; instead I've got a video to show you that shows IDEO
in action. Let me tell you a little bit about where this video came from.

It was actually done here in the U.S. for a network television news program called "ABC
Nightline," and they went to IDEO; they thought it would be interesting to create a
documentary around IDEO's development process, because perhaps TV viewers might be
interested to see how does design and innovation take place.

So they took a film crew off to IDEO in Palo Alto, California and they said we'd love to be
able to see this process live in action. And IDEO thought that would be wonderful; it would
be great for their you know awareness, public relations, get new customers out of that and
so forth. So they were on board with this project; they loved the idea. And they said well if
you could just watch what we do for maybe several months you could see a whole project
from beginning to end, but it might take six to eight months.
Of course, "ABC News" said well we don't have six or eight months we have maybe a week.
We could give a film crew for a week and watch what you do and maybe that will be
interesting. But of course you wouldn't be able to see a whole project; you'd see a little bit
of this run and a little bit of that, and a little bit of something for another client.

And they didn't think that would be interesting enough; you wouldn't see the whole process
beginning to end. IDEO came up with this-- an idea to solve that dilemma, and the idea was
we'll take a group of designers and put them on a special assignment, create a project just
for the TV news just for the purpose of creating this video.

And they did, they came up with a product that they could work on. There's no client behind
it, which you'll see is really one of the kind of artificial aspects of this. There's no client
behind it, but it's a realistic project. So what you'll see is real group designers tackling the
redesign of a shopping cart for a grocery store.

So this is a product that hopefully you've seen and used and interacted with on a regular
basis, and when you think about it, it really hasn't changed in a very long time. Now what I'd
like you to do is to watch how they do it. And I'd like you to understand both the process
that they use and how are they organized to sustain that process.

So in particular, I'd like you to look at what they do in those first two phases of that design
thinking process in the explore and the create phase. You won't actually see anything
around implementation because they don't implement this; there is no client.

But you will see a bit about how they develop the concept through both the explore and the
create phase. I'd like you to understand that, and in particular to identify what steps do they
take, what techniques do they use in that process.

Then I'd also like you to understand what is the organization, who are the people, how are
the teams formed, how are the teams led, what's the management and leadership around
it. And then finally, and this is really critical, what is the culture of the place?

The video is pretty rich in describing IDEO and the people, and the process, and you'll really
understand, I think, the culture around it that really makes it work. Now the way I'd like you
to go about this is to while you're watching the video, take some notes. And here's an idea;
this is like a simple grid.

It's got the process on the left, on the first two boxes the process for exploration and the
process for creation. I'd like you to take some notes around that. So in explore, how do they
do? They go and see. Why do they do it? How do they do it?

And really what do they learn by getting out into the real world with customers. In creation,
how do they do the brainstorming? How do they do the process of creating solutions and
then developing that into a winning concept?
On the right-hand side I've got the organization and culture. For organization who are the
people on the teams and how are the teams organized and led and run? And then finally,
what's the culture; what makes them tick?

What makes this whole process work so well? So I'd like you to watch the video carefully,
take some notes around each of these aspects, and then we'll discuss it. Now after you have
your analyses of these four aspects (explore, create, organization, and culture) you should
take your assignment and upload it into the platform.

Video 1-9 (6:32): Ideo Debrief/Wrap Up - Explore, Create, Organization, Culture

Now the first aspect of IDEO's process that I asked you to identify is, how do they execute
the exploration phase? So, this is the go and see part. This is out in the field, how do they
learn from customers some really important needs that we can solve?

And you saw them do this, really in two parts. First, a project kick off; they formed the team,
and you probably noticed this is a pretty interesting type of team. It's interdisciplinary,
different people from different backgrounds, including some of the kind of soft skills that
you wouldn't normally expect to be on a project like this.

Of course you expect to have engineers, and maybe someone from marketing or something
like that, but you saw a much broader range of skills. Second, they had a design brief; and
normally a customer that is a client would come to them with a design brief, here they kind
of made it up themselves. Let's redesign this shopping cart, bring it into the modern day.

But it's some description of the opportunity that's compelling. Third, you see somebody did
some background research; that is, there's some work you can do without ever, shall we
say, leaving the office.

So, basically online research; you can understand what's the market, how big is it, who are
the key players in that market, do some bench marking, what products, services,
competitors are out there, and all that is in, what we call the kickoff. The next thing you saw
is the field research. So, how did they get out into the environment to understand from
customers what the real problems are?

So, the first thing you noticed is they had to get out there. They split the group up into sub-
teams and each team looked at different customers and tried to understand what's going
on. Some people talked to actual users, and there were different types of users, and we'll
talk more about how do we identify the different types of users and use cases that would be
relevant, in particular their different stakeholders.

So, there are users, that's one type of customer. Then of course there are owners and
purchasers. And this is the kind of product, the shopping cart, where the owner, the
purchaser is not the user.
Of course there are many products where those are one and the same. And yet there are
other stakeholders involved. People at the stores who are maybe have to maintain the carts,
or clean the carts, or gather them from outside and stack them up in the store in order to be
used.

Two particular types of customers that we'll talk about are; who are the lead users and what
are the extreme cases, or the extreme users? And we'll talk more about that in the next
module; how do we find them and learn something special from them?

And then the way we go about this, by observing and talking to customers, it's really
important to think about, there are some aspects that the customers will describe to us,
simply in a conversation, we call that voice of the customer, and one of the things we find is
that some nuances of the experience are not easily described, but you can learn about them
through observation.

So, we'll talk about methods of observing customers and what we can learn. Now, this
phase doesn't really end until we've solidified the learning. And we usually do that in what
we call a customer needs list, and we'll talk about that in the next module.

You didn't see in detail how they wrote it out in IDEO's case, but what I'm showing you here
are there are different types of customer needs. So, for example, there are some needs that
are pretty easily understood, and let me just say, they're obvious.

A grocery cart has to carry all the food, all the items in the store that a customer purchases.
Those needs are pretty well known. In fact, before you even went out and talked to
customers, you would have known that. But there are other needs that are not so well and
so easily understood.

For example, some needs, such as protecting the fragile items that the customer purchases,
those are pretty well understood needs, but what we notice is they're not necessarily well
handled. And if we can solve that better, that would be a real innovation. Child safety is
something we knew in advance, but it wasn't being well fulfilled.

The next type of needs that I want you to focus on is what we call latent needs. So, latent
means hidden. There are some needs that are hard to identify because in fact they're
hidden. And they're hidden, but we can uncover them by doing the right interviews and
observation.

So, for example, theft; it's not obvious why people steal grocery shopping carts and how
they're useful to those who steal them, but if we can understand that and if we can solve
that maybe that's a need that needs to be addressed in our innovative cart design.

And then finally, convenience; there's several aspects of convenience that you know when
you think about it, maybe it's not the job of the shopping cart to make grocery shopping
easier, but if we could solve that problem it would be amazing. So, if somehow the cart
itself, our solution, could make shopping more convenient or more quick, more efficient,
that would be a really important innovation.
Now the reason that we focus on the customer needs is because these needs, if we can
solve them, and maybe we can't solve them all, but if we can solve some of them, and in
particular if we can solve some of the unfulfilled or latent needs, we could have the
beginning of a really important innovation. So, this phase ends with a clear articulation of
what are the needs that we'd like to solve with our innovation?

Video 1-10 (5:21): IDEO Debrief/Wrap-up - Create

Now the second phase of the process, recalling the create phase. So this is where IDEO
developed solutions. And what you saw is I'd say a pretty standard brainstorming approach,
and brainstorming as you probably know, you probably practiced it; it's been around for a
long time. But what you saw is they did it pretty well. In the span of actually just a half a day
they came up with not just a few, not just a dozen, but maybe hundreds of ideas, or pieces
of ideas, fragments of solutions that they can then put together into maybe innovative
integrated solutions.

The second thing you probably noticed about the brainstorming is that they had a process
for doing it. They had rules; it was written around the room and you probably-- hopefully
you noticed them and wrote some of them down. The most fundamental rule of
brainstorming is around what we call deferring judgment. Don't be critical to someone else's
idea in order to encourage everybody to participate. We want to support the ideas that
come out.

And so there are rules to the brainstorming session which is kind of maybe a little bit hard to
understand how is it that we can be so creative if we constrain it with rules when in fact that
works, and it works very well.

Next you saw that they had a lot of ideas and they had to choose a few directions that
would be really interesting and promising to pursue, and we call that process down
selection. You saw the way they did that is with a certain technique called multi voting. In
fact the certain type of multi voting that's open multi voting where you can see what
everybody else votes for, and that, and in fact, influencing each other is part of open multi
voting.

It's interesting to think about why exactly that works. Multi voting is a pretty quick method
of down selection, and by seeing who votes for what we can understand that behind their
vote is that particular person's sensibility; it's their opinion that this might be an interesting
direction.

And if that person who voted for that has a certain perspective, maybe they're a great user
interface designer, or maybe they have their pulse on marketing or markets or something
like that, then we know probably that idea for which they're voting is good from that
perspective. And based on the multi voting they chose a few directions to pursue.

It's interesting that the directions they chose to pursue happen to be directions that address
some of those latent needs, for example, making shopping easier or improving child safety.
And so connecting our solutions to the unmet or the latent needs is a really important
approach. Next what you saw is they built some focused models, not one, not two, they
built four of them very quickly.

So we call these rough models or sometimes we call them sketch models because they're
really quick, but they're focused on solving one problem. And then the idea is that maybe
we can take many of these different solution fragments and put them together into an
integrated model, which is what you saw them do next.

They took each of those directions and they tried to integrate those solutions into an
approach that worked; a detailed embodiment of the design. At that point they designed
and built what we call an alpha prototype. An alpha prototype is a model of the product that
looks just like the final product might look. Of course they'll be a lot of refinement after, but
it's an approximation of how it might work.

It also functions like the real product, and so that it can be tested by customers in the real
environment. We call that an alpha prototype, and that's different from a beta prototype,
which in fact is made using production tooling and methods and materials. An alpha
prototype is generally made one off in a workshop.

The final thing you saw in the video is they tested it. They had the guts to go out to the real
customers in a real environment and let them try it. And they got some pretty rich feedback
from customers who thought it was innovative, but of course it could use some refinement.
And that's what happens in the final phase which you didn't see, the implementation phase.

Is they pay attention to all the details to get that right. Now if IDEO had a real customer for
this product that is a client paying for it they would probably implemented the
implementation phase which you didn't see.

Video 1-11 (4:05): IDEO Debrief/Wrap-up - Organization & Culture

Now in addition to the process, I asked you to look at what is the organization and the
culture of IDEO. Now let's take a look at that here. Organizationally, this is a project-based
organization. That is they organize all the people into teams, and you saw interdisciplinary
and really focused teams. So each team is working on one project, and actually most people
are working on one project at a time.
And we call this an ad hoc team. That's Latin, and ad hoc really means it's purposed, it's
focused for one thing, and that team disbands. They separate and go on and work on other
projects when this one's finished. Interesting, the team leadership is a really important
aspect of how this works. Two things that I hope you noticed in the team leader is that he
has a set of process skills or expertise. He's really an expert at knowing and running that
process.

What he had to do is to say, OK, now we're doing the first part, and now we're doing the
field work, and now we're doing the brainstorming, and leading those transitions and
getting the group around that is a set of process skills that the team leader needs to have.

The team leader also needs a set of people skills, and I'm sure you noticed that he was
skilled at getting the group to behave and participate and do the assignment. So like it or
not, we're going to split into four groups, and we're going to do the field work, and after
you're out there for three hours, you come back and you report, and here's how I want you
to do that.

And to be able to give a group instructions that they can follow, that executes the process,
that's actually a set of critical people skills that the team leader has. And, finally, you
probably also notice that the senior leadership, you met Dave Kelly, the founder of a
company. So he was there, but he was kind of out of the way.

You know, he participated a little bit, really just for this video, but really he leads by being an
example of an innovative thinker, and with a really light touch he guides and supports that
process, and that's a really important type of senior leadership that operates an IDEO. The
last piece that you've captured is the culture, and here are some words that some of my
MBA students have used to describe IDEO's culture based on this video.

It's a culture of diversity. It's got a lot of backgrounds. On the other hand, they're really
smart people, and they're creative, and they're having fun even though it's hard work. It
feels relaxed, but everybody's participating. It's kind of an interesting mix of different
aspects that comes together to be the culture of the place.

The final thing that, about IDEO's culture is it's experimental. It's OK to try things. It's OK to
fail. As long as you learn from those failures, we respect that you're professional, and you
did your best, you did a good job, and maybe we all learn from what you tried and what
works and what doesn't work, and that kind of culture is really important for innovation. At
least it's important for IDEO in the way they run this innovative process. The last piece I'd
like you to see is how do we put all this together.

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Video 1-12 (3:07): IDEO Debrief/Wrap-up - Summary

Now I asked you to capture IDEO's process, organization, and culture in some kind of a grid,
for example, like this. So, here's how my MBA students would have answered that
assignment. So, you've got the different aspects, the explore phase, the create phase, some
of the different points that I have just made on the left-hand side.

The organization, the culture on the right-hand side. What I'd like to do now is to talk about,
how does it all work together as a system? So, for example, the organization and
interdisciplinary team of professionals with a range of skills all focused on the project, that
actually helps a lot to execute the project.

It helps, to get out and understand customers and their different needs from different
perspectives, to have those different people on the team who are able to look at it in
different ways. It actually helps in the brainstorming in a big way. Each of us individually, we
have a different set of experiences in our background.

As a result of that, we will develop, we will come up with different solution ideas. The team
leadership and how they work guiding the process, that is essential for having a systematic,
repeatable process. The culture of IDEO and how they operate, the different people and the
different ways in which they approach things, that's really part of the fabric of IDEO.

That's the way they organize and they have worked hard to build that culture. In fact, that
culture supports being innovative and executing this process. So, this is what we call a
system of innovation. It's not just a process that works separately from the organization, it's
an organization that's really designed to implement this process.

And it's a culture that was created, you could say it was cultivated, it was designed by the
leaders of this company. So, Dave Kelley, when he put this together, he said "You know, I've
got to not just hire smart and creative people, but I've got to create an environment where
they will be willing to work hard but also create innovative solutions."

Now, not every organization in which you work that is trying to be innovative in this way will
have that culture. Now, one of the things you might want to think about is, is it possible to
create some part of that culture in your own company? Or in any other organization in
which you'd like to have creative solutions? And the answer is, you can. You can put some
aspects of this in place even on a special or temporary basis in an organization. It's hard to
do that, but it's possible.

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Video 1-13 (4:09): IDEO's Systematic Innovation Process

Now, to put this all together, it can actually become what we call a systematic process. So,
first, let's be clear what makes a process systematic? Well, two important things. One is we
split it up into discreet teachable steps.

And so we talked about explore, create and implement. Those are discreet steps. In fact,
each one had discreet activities within them that you saw when we looked at the explore
and the create process.

The second thing that makes a process systematic is a way to manage it. And one of the key
aspects of managing this process is identifying what needs to be done before you move to
the next stage. And if that isn't done and done right it's actually not worth moving onto the
next stage.

So, what you do instead is you go back and repeat that phase until you get it right or you
abandon the project if you don't believe that there's any real opportunity here. So, let's look
at that in depth. So, in the explore phase you saw they executed certain activities based on
the client brief or the design brief that says, "Here's an opportunity for a new shopping
cart."

Based on the field work they learned customer needs. And that phase ends with a clear
articulation of some new insight around we have an opportunity to address needs that have
not been addressed before. So, we call those latent needs or unaddressed needs. And, you
know, without that, without achieving that it's really not worth it to move on to the second
phase.

So, if they didn't create a true understanding of latent needs and unaddressed needs that
solidify this as an innovation opportunity, they should not move on. In the second phase
they created a whole bunch of solutions and then they refined a few until they believed
they could solve those unaddressed or latent needs and so the second phase ends with a
demonstration of a useful innovation.

And useful really means from those three dimensions. That is it solves a customer need, that
is desirable and customers will pay for that, there's value there for customers. Second,
we've got a feasible innovation. We've got some solution that works in a demonstrable way.
And, finally, we believe there's a business case around it.

That is, customers will pay enough to make this at a profitable level. And the second phase
will end with a demonstration and a validation of that useful innovation. And if it doesn't
check out, if customers reject that in the concept test and demonstration, then we would go
back and execute the creation phase again until we are sure we have a useful innovation
that does check out.
In the final phase implementation, which you didn't see with IDEO, that's where all the
detailed design work comes in. We have to do detailed design of the product, of the
manufacturing process, there would be another iterative process of prototyping and testing
and working out the whole supply chain and production system.

Once that gets done typically there's a handoff package that hands it off to suppliers,
manufacturers, marketing and so on. So, this process, as you've seen here with IDEO and I
just described, can be put together into what we call a systematic process.

Meaning it can be repeated, it can be reliable, it can be taught as discreet steps, and the
professionals who execute it can get very good at each one and the organization that runs it
can pull it together into a systematic process.

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