A few weeks ago, I saw an article in Fast Company about the layoffs at IDEO, one of the world’s most respected Design Thinking firms.

In fact, IDEO was one of the pioneers of Design Thinking back in the late 1970s, but the process of using Design Thinking as part of innovation work really exploded in the 1990s and 2000s.

The rise of Design Thinking and IDEO

Back then, Design Thinking was seen as a way to incorporate more human insights into the innovation process, which often struggled when R&D teams or product designers would create new products and not know if there was really a problem they were solving. As a result, thousands of large companies invested hundreds of millions of dollars into training their staff in Design Thinking techniques, hoping that this would result in them improving their innovation success rate.

It also became the basis for a lot of innovation labs within large companies, set up to try and spur creativity and new innovation projects outside of the normal bureaucracy found within existing business operations.

Design thinking was not only a specific set of techniques which could be used by the people in these labs, but it was also a way of identifying new employees with an innovative mindset, different from the efficiency-optimising employees which are often sought in large companies.

Additionally, companies which had design as a cornerstone of their business, most notably Apple, were flourishing, leading many other companies to believe that if they incorporated more design into their business and products, they too would succeed.

IDEO rode this wave it helped found, making hundreds of millions of dollars in revenue helping companies solve challenging innovation problems, but also by being the face of spreading Design Thinking as a framework and training corporations in how to do it best.

The fall of Design Thinking and IDEO

However, over time the flaws in Design Thinking have emerged.

While very good at getting to understand some of the fundamental needs which customers might have, and at bringing a structure to the sometimes chaotic front-end of innovation, it was often primarily focused on developing an idea into a prototype which might have desirability in the market.

What is was almost never good at was:

  • Assessing the feasibility and viability of those innovations (vital for the innovation to bring value)
  • Helping to manage the innovations once the initial idea or prototype is developed, and execute the innovation project
  • Dealing with all of the hurdles and blockers which prevent innovation from succeeding at the company in the first place

As companies began to see that the innovations developed with such fanfare by Design Thinking teams internally and with the help of companies like IDEO were struggling to execute and actually have a business impact, frustration grew.

In many circles, design thinking teams were just performing innovation theatre, more focused on doing their own thing than impacting the business which was supporting them.

This is where the cracks in Design Thinking began to split the foundation of the business model.

Revenues at IDEO have dropped from $300m to under $100m

Revenue at IDEO has been falling steadily. According to the Fast Company article, revenues have fallen from $300m in 2019 to under $100m in 2023, a more than 2/3 drop.

The recent news about layoffs at IDEO continues a trend of decreasing fortunes for the firm.

While they had a headcount of over 725 in 2020, this had fallen to below 500 last year, when another round of 25% of its staff (125 people) would be laid off. This means it has lost nearly 50% of its workforce in only 3 years.

The future of the firm is uncertain, yet it is unlikely to resemble its glory days of a decade ago.

The decrease in investment in innovation

We have already seen from other 2023 research that investment in innovation teams and innovation projects is falling.

This may be partially down to the economy changing, but it also reflects a dissatisfaction with the performance of dedicated innovation units within large companies.

Today, more than ever, there is an emphasis on the investment in innovation beginning to result in projects passing from the front-end into actual project execution, delivery and revenues.

As a result, more and more companies are asking themselves how they can best use frameworks which take into account not just the front-end of innovation, but also the management of individual innovation projects and an entire innovation portfolio.

This allows a pipeline of multiple ideas (where the skills of design thinking can still be hugely beneficial) to be managed and integrated into management structure so they do not become lost.

Design Thinking had its time being the darling tool of innovation.

Now, it is simply one of many tools in an effective innovators toolbox.

If you want to see some of the other best innovation tools and theories your team can use, check out this article: 15 most important Innovation Theories your company should be using

Did you know that scientific evidence shows your creativity decreases over time

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Creativity & Innovation expert: I help individuals and companies build their creativity and innovation capabilities, so you can develop the next breakthrough idea which customers love. Chief Editor of Ideatovalue.com and Founder / CEO of Improvides Innovation Consulting. Coach / Speaker / Author / TEDx Speaker / Voted as one of the most influential innovation bloggers.