IDEO invented ‘human-centered design.’ Can it survive an AI world where everything looks the same?

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. But, in recent years, the storied design agency has faced a crisis. Companies brought design in-house, copying IDEO’s approach without needing to hire the agency. Executives pressured design teams to deliver results. Other companies saw design as a costly distraction amid an even costlier push to adopt AI. Last year, job postings in product design fell by 18%, and graphic design by 57%, according to Fast Company. Before IDEO’s current CEO, Mike Peng, took over the agency last year, it had reportedly cut a third of its workforce, closed its Munich and Tokyo offices, and seen its revenue decline to less than $100 million, from $300 million four years prior. 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.