Procter & Gamble’s standing toothpaste tubes. The Palm V personal digital assistant. Bank of America’s “Keep the Change” program. For decades, the innovative wares invented inside IDEO were considered the leading edge of product design. At the core was the idea of “design theory,” an approach to developing new products or services that puts customer needs, instead of business or engineering needs, first. The design agency, founded in 1991, eventually grew beyond pure product design to, for example, revamp Ford’s EV factories.
Human-centered design defined the San Francisco-based agency’s approach for almost four decades, shaping its pitch to boardrooms and its approach to products. But with AI threatening to change what it means to be innovative in the first place, Peng isn’t sure that’s enough anymore.
“Customer centricity, the thing that IDEO has always stood for, just seems like it’s table stakes now,” Peng tells Fortune. “Just saying that you’re customer centered alone isn’t enough. So many companies, over 50%, already believe they are customer-centered.”
Peng’s response is to revamp IDEO’s value proposition. Instead of designing individual products or services, he wants the agency to teach clients how to design products on their own.
“The type of projects IDEO is involved in now feels a lot bigger than just these one-off projects,” he says. “They’re very much in the ‘teach the person how to fish, not just fish for them’.”
While he’s currently based in San Francisco, he’s still paying attention to design trends across Asia.
In China, IDEO is tapping the trend of the country’s companies “going global,” breaking out of the domestic market to serve a global customer base.
“It used to be that so much of the work we did was for multinational companies that were trying to make it in China,” Peng recalls. “But the majority of projects now are helping Chinese companies in China, and helping Chinese companies break through and go global.”
Peng sees a different story in Japan. “One of the toughest challenges Japan is having is how it breaks into North America,” he says. “There’s not really a solid understanding of what it’s going to take to break through into some of these markets: the speed, the talent, how much you need to invest, the cultural differences.”
The typical approach, dispatching a small team to build an innovation lab in Silicon Valley and hoping the insights flow back to headquarters, has rarely worked. “They really need to think about new models to be able to break through in North America,” Peng says.
Yet while more than half of companies claimed they were customer-centric, only about 30% of surveyed leaders strongly agreed their teams had the autonomy to experiment or effectively balance short- and long-term goals, and just 21% said they consistently tested ideas with customers.
Peng thinks companies will spend years using AI for efficiency gains before they realize that the technology has far deeper implications. “We replaced steam power with electricity, yet the belt-and-shaft model of the factory lasted for 30 years because no one thought we could redesign what a factory was.”
But once companies have gotten the efficiency gains from AI, what comes next? “My hunch is that it’s organizational transformation,” Peng says. “What is a new business organization structure going to be like? How is it going to work? With the surplus of human creativity and energy we gain through efficiency, what should we them on?”
The risk AI poses to design, in Peng’s view, isn’t that it will replace designers, but that it will make everyone’s output look the same. “Everyone is going to have access to the same technologies, and everything is going towards the average” he says. “If companies are going to innovate, they’re going to need to find that edge that’s going to help them compete and help them outperform. I don’t think models are going to be able to do that right now.”
“The act of finding that edge is, to me, a very human activity,” he adds. “IDEO has always been about designing for the human in the loop; it’s just that the loop we’re talking about is much more in the broader ecosystem.”
