“Given the late arrival of this meeting invitation on your calendars, many of you will no doubt be asking the question, Will there be layoffs at Ideo? Unfortunately, the answer is yes.”
These were the opening remarks of Derek Robson, CEO of Ideo, on the morning of October 2 as he announced widespread layoffs, office closures, and a restructuring of operations at what’s been one of the world’s most storied design firms for the last three decades, collaborating with companies ranging from Apple to Coca-Cola.
Streaming to an all-hands meeting across the globe, Robson, having donned a blue cardigan and polka-dot scarf, read his notes in a somber timbre. He said the official number of layoffs will reach 125 people by the end of the year, or roughly 25% of an estimated 500 global workers. But Ideo has been shedding employees since 2020 when its headcount was 725, and this is the second round of layoffs in 2023 alone. Ideo has since confirmed to Fast Company that it’s eliminating 32% of its headcount this year, and says that “all levels of the company are impacted” by cuts. Employees laid off will receive severance “commensurate with their experience.”
Alongside the layoffs, Ideo is closing offices in Munich and Tokyo and reducing its footprint in three U.S. locations, London, and Shanghai.
While Ideo didn’t announce the layoffs publicly, the news slowly leaked out across LinkedIn and employment sites. Fast Company has spoken with several former employees and obtained the presentation given by Robson. Ideo has since confirmed the news.
“I am confident that the choices we have made mean Ideo will continue to be a place where we bring tangible solutions to the most varied, challenging, and important problems in the world,” Robson offered in a statement to Fast Company. “I regret that the brilliant and committed colleagues who are leaving Ideo will not be with us on this journey.”
Ideo was founded in 1991 by Bill Moggridge, Mike Nuttall, and David Kelley. Whereas Frog Design focused on the craft of design with early projects at Apple, Ideo focused on design as corporate strategy. It popularized the mantra, design thinking, a methodology that posited that anyone could approach problems like a designer.
It’s hard to overstate Ideo’s ownership of the creative mindshare over the past few decades. The firm has worked not just on products like the Willow hands-free breast pump and a redesigned Oral-B Toothbrush, but experiences and services ranging from colon cancer screenings to more comfortable coach air travel. It has been employed by clients from Coca-Cola to Conagra. Joe Gebbia, who cofounded Airbnb, credits design thinking with scaling his own company.
In 2016, Ideo was acquired by Kyu (pronounced Q), a collective of design, innovation, and marketing firms owned by the Japanese holding company, Hakuhodo DY Holdings. Former Ideo CEO Tim Brown—the face of the firm in the modern era, widely credited with enlisting much of its business—stepped down in 2019. He’s now a chair on Ideo’s board and a vice-chair at Kyu. Veteran Sandy Speicher was later promoted to CEO. Following a Black Lives Matter controversy, and an ex-employee’s report on prejudice inside the company, Speicher stepped down in 2022. Robson stepped in to replace her in 2023. Fresh off a nearly two-decade run at the advertising agency Goodby Silverstein & Partners, Robson notably became Ideo’s first CEO who is not a designer.
While Ideo was once in a position to turn business away, over the past four years revenue has plummeted, according to a former employee, from $300 million to $100 million now. Ideo declined to comment on revenue.
There are a multitude of viable culprits behind this revenue drop. Robson himself pointed to the pandemic and tightened global budgets while arguing that “the widespread adoption of design thinking . . . has reduced demand for our services.” (Ideo was, in part, its own competition here since for years, it sold courses on design thinking.) It’s perhaps worth noting that, while design thinking was a buzzword from the ’90s to the early 2010s, it’s commonly met with all sorts of criticism today.
Others who’ve worked at Ideo paint a more varied picture. Some argue that leadership simply isn’t bringing in the business they once did.
Most Ideo projects consist of about 6 to 12 weeks of work, which deliver research insights, design principles, corporate workshops, prototypes, and product roadmaps. Ideo offered companies strategies and ideas it had rapidly tested, a promised blueprint of success, but it left it to clients to develop the actual product or service from its sketch. The bar for companies that could afford Ideo’s services was high, but there was plenty of demand for its ideas, even if they required significant additional labor and development to bring to market.
New clients constantly called Ideo for its services, which was a result of the firm’s reputation and active design leadership. “Tim Brown would work on stuff. [Companies] would come in through that networking,” notes a former team lead. “As those people stopped going out and doing things, their relationships dried up.”
They say perennial clients like Google, Microsoft, Meta, and Amazon are spending less than they once did—a trend I’ve heard from small design studios, too. Ideo’s rates are not cheap, they note, trailing just behind McKinsey’s.
To add extra pressure, a lucrative contract with the Bill & Melinda Gates Foundation is wrapping up. Ford, once a big client, now has its own internal design lab modeled by Ideo to emulate the design firm’s own process. Healthcare has been a bright spot in earnings, but it doesn’t necessarily outpace other areas by head count. Meanwhile, issues that Ideo often speaks on publicly, like DEI and the environment, simply do not generate much revenue. The source estimates Ideo did all of $2 million in climate-related work in the past year.
Robson has suggested Ideo focus on two areas of growth: “emerging tech” and the “Global South.” Both seem like keen areas to invest. AI is rapidly reshaping business, and one out of four people on the planet will be African by 2050.
But these directions will create their own challenges for the company. One insider points out that Ideo simply lacks the expertise to compete in AI. It will be challenging to hire that expertise and woo companies like Google to engage in business while they struggle to find their own path forward. “We have no internal AI experts,” says the source. “Who on earth is going to go [work at] Ideo when you can go to IBM, Microsoft, or Google [and make more]?”
Meanwhile, the company is already focused heavily on the Global South—Latin America and Africa—and one higher-up points out that’s why Ideo is keeping its Shanghai office open, to ride China’s economic interests, even while losing money. But these emerging markets are not producing the business, nor the profits, of Ideo’s bread-and-butter established business consultancy.
What’s more surprising to multiple people I spoke with was the sudden closure of Ideo’s Tokyo office, which has been profitable for the company. Not only does this impending loss of revenue seem like a confusing strategy, but Japan has some of the most stringent employee protection laws in the world. Laying off employees in Japan is a difficult, involved process that has several steps of checks and balances, and tends to need a direct tie to long-term revenue losses.
Officially, Ideo claims, “We are restructuring our business in Japan to focus on supporting Design for Ventures (D4V), an early-stage venture capital firm that we are part of.” But Ideo Japan is not simply melting into D4V. In an email sent in early October with this announcement, obtained by Fast Company, Robson wrote that Ideo has “asked for the voluntary resignation of all Ideoers in Japan’s consulting and learning business.”
When asked about the fate of the Tokyo employees, the company replied, “We remain committed to supporting our partnership with D4V, but we are not at liberty to provide further details.”
Exactly how Ideo will evolve its practice from here is still fuzzy. “We will make our value proposition singular and clear. We are future makers,” said Robson in his presentation. “Simple as this sounds, it has many implications.”
Most employees will operate out of its existing locations in the U.S., which Ideo is calling “Hubs.” Managing directors that have been running sites are now “Hub leaders,” according to an employee with knowledge of the situation. Ideo appears to be moving toward a model that’s used by the Kyu consulting company, Aatölye, where instead of staffing a project with a team of Ideo designers, a single full-time employee might assemble a small external team for each project—a team built of former Ideo employees who have already been asked to enlist and other freelancers, according to former employees familiar with the plan.
This shift would make Ideo “a matchmaker of clients who need large design projects [that] pieces together design teams from a freelance network so they don’t need significant overhead,” says a longtime employee. Another one pointed to the synergy of this freelance strategy with Neol, which is ostensibly an on-demand creative-solutions network, backed by Kyu, and which Tim Brown serves as chief evangelist.
Aside from the structural shifts, one cannot miss Robson’s strategic shift of Ideo from design consultancy to some sort of media agency—a move in line with his own pedigree.
“With the right partner, we intend to build and scale a media brand, building on our legacy of thought leadership that will become a new source of revenue and drive demand for our consulting business,” he said in the presentation. “And knowing that building a media brand like this will take time, we will more immediately invest in advertising and marketing with an external partner.”
Exactly what this means is anyone’s guess. Is Ideo a designer ad firm? Or just a more modern multimedia consultancy? One insider suggests “their strategy is to essentially become advisors to CEOs.” In any case, the Ideo of tomorrow bears little resemblance to the Ideo of past decades.
“Some of these decisions may feel new and different,” said Robson. “Some may feel, for those who’ve been at Ideo for a while, like a return to something familiar. Whether new or familiar, we must make them real.”
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