TECHNOLOGY AND GLOBALIZATION ARE LEADING TO MORE AND FASTER DISRUPTION THAN EVER. TO STAY AHEAD, SMART COMPANIES ARETURNING TO DESIGN TO BETTER CONNECT WITH CUSTOMERS AND FIND THEIR COMPETITIVE ADVANTAGE. HERE, WE FEATURE 25 COMPANIES FROM A RANGE OF INDUSTRIES THAT ARE GETTING DESIGN RIGHT. (YES, WE'RE INCLUDING APPLE.)

56 FORTUNE.COM // JAN.1.IB DESIGN

WHEN AIRBNB'S FOUNDERS tell their origin story, they poring over data and revamping often hark back to the moment in 2009 when Paul the website. After a promising start, Graham, head of startup incubator Y Combinator, revenue had flatlined at $200 per gave them four crucial words of advice. week. To figureou t what wasn't At the time, Airbnb had fewer than a thousand working, Graham pressed the trio registered hosts. Founders Brian Chesky, Joe Geb- for information about Airbnb's us• bia, and Nate Blecharczyk were hunkered down in ers. Where were they, exactly? Silicon Valley, scrambling to scale the business by In The Airbnb Story, Fortune's

57 F0RTUNE.COM // JAN,1,IB BUSINESS BY DESIGN

Leigh Gallagher recounts Gra• ers. The rise of China and other these days to include in one issue ham's reaction upon learning that emerging economies, combined of the magazine.) But all of the the largest concentration of them with newfangled technologi• companies that made the cut are resided in New York City: "[He] cal developments like big data, at the forefront of the movement paused and repeated back to them the Internet of things, platform to create smarter, more thoughtful what they had just told him: 'So, economies, A.I., and automa• products and experiences. you're in Mountain View, and your tion are combining to flatten and No company tops Apple for users are in New York?' he asked. commodify traditional back-end demonstrating the strategic power They looked at each other, then defenses. A second reason is of great design and learning to back at him. Yeah,' they said. What complexity. Design can help bring "think different." While there is a are you still doing here?' Graham order and coherence to the chaos raging debate about whether or not said to them. 'Go to your users.'" of our hyper-connected world. Apple has lost some of its design That exhortation—to fly across In this new landscape, smart mojo in recent years, as the story the country and hang out with corporate leaders are embracing preceding this one explores, the customers—defied a fundamental the idea that design—channeling world's most valuable company tenet of Silicon Valley wisdom: that insight to delight and truly con• continues to push boundaries. data and technology are the solu• nect with customers and users- Meanwhile, a host of other leading tion to every problem. And yet, for can be a crucial differentiator. companies, including Alphabet, Airbnb, heeding Graham's advice The result is a major design Amazon, and Nike, have achieved led to key breakthroughs. Among moment. Fortune 500 companies success by expanding design them: Helping hosts produce bet• are hiring chief design officers and capabilities. The phrase "design ter photos of their properties would investing heavily in design centers thinking," coined back in 2003 by boost business. (For more on and innovation centers. Profession• IDEO cofounder David Kelley, has Airbnb and design, see Gallagher's al services firms,too , have joined become synonymous with taking a Q&A with Gebbia on page 66.) the fray. In 2013, Accenture ac• user-centric approach to creating A decade on, "user experience" quired Fjord, a leading design firm, products and services. is among the tech industry's most while PwC snapped up BGT, a digi• The sudden enthusiasm for overused buzz phrases. But the tal creative consultancy. In 2015, design and design thinking has its underlying idea—that there is McKinsey & Co. purchased Lunar, detractors. Pentagram partner Na• power in empathy—has never a Silicon Valley-based design firm. tasha Jen sparked a lively debate been more profound. In October, Indian software giant at a New York design conference That's true for at least two rea• Wipro acquired design agency early in 2017 with a presenta• sons: One is that the great forces Cooper, adding to its 2015 purchase tion titled "Design Thinking Is of the modern age, globalization of Designit. Meanwhile a host of Bullshit." Her main complaint: and digitization, are removing top business and design schools that practitioners too often neglect traditional barriers to entry. Large have introduced interdisciplinary to call out bad design. Gadi Amit, firms can no longer rely on great programs to help MBAs think more a technology designer who has manufacturing capacity, a superior like designers and vice versa. worked on Fitbit trackers and the supply chain, and established dis• In the "Business by Design" Lytro camera, frets that design tribution networks to defend their package on the following pages, thinking's obsession with empathy market position from challeng- Fortune highlights some two leads to wasted time and is out of dozen companies that have turned step with the breakneck pace of a commitment to design into a modern product cycles. competitive advantage. To identify It's a debate worth having. And them, Fortune surveyed the design one that Fortune will continue this community, grilled executives, March in Singapore, in collabora• Design can help and searched for evidence of true tion with colleagues at Time and corporate commitment. The result Wallpaper*, at a new conference bring coherence is not a completely scientific list. we're launching called Brainstorm tothechaos (Design, for the most part, is not Design. of our hyper- quantitative.) And it's not a truly One thing is clear, though: comprehensive list. (Too many Business is almost always better connected world. companies are betting on design by design. —Clay Chandler

58 FORTUNE.COM // J AN.1.18 WHEN ISA HAIR DRYER COOL? WHEN ITS THE PRODUCT OF POWERFULR&D AND LASER-LIKE FOCUS.

• BRITISH INDUSTRIAL DESIGNER James Dyson has spent his career marrying disruptive technology with an Apple-esque minimalism to transform drab everyday appliances such as vacuum cleaners, fans, and hairdryers into products with cult followings. Case in point: the Dyson Supersonic hair dryer pictured at right. Developed over four years and through 600 prototypes, it features a digital motor half the weight and eight times the speed of a traditional dryer. Such rigor is no anomaly. Dyson is the U.K.'s biggest investor in robotics and artificial intelligence research. In Sep• tember, the company launched the Dyson Institute of Engineering and Technology, a university within its office grounds, to feed its growing headcount of engineers and scientists, which Dyson predicts will double to 6,000 by 2020. Dyson also plans to invest $2.6 billion into develop• ing battery-operated vehicles in the same time frame. —Debbie Vong

FEEDBACK LETTERSIIIF0RTUNE.COM BUSINESS BY DESIGN

SAMSUNG HUAWEI HOLISTIC, BUILDING A STRATEGIC BASEOF CONVICTION INNOVATION • IT WASN'T so long ago • WHEN CHINA'S tech IN SEARCH OF CONSUMER that Samsung found itself giants looked to markets GOOGLELECTRONICS AND E in a courtroom defend• beyond their own shores, ing its creativity against it was clear that many SOFTWARE WITH SOUL Apple. But the company's wouldn't be able to make decades-long bid to move the trip thanks to dubi• beyond its reputation as ous intellectual-property a budget brand has paid portfolios. Not Huawei. off. Today Samsung is The Shenzhen [but not tech's largest spender on shanzhai] gadget maker R&D. And Its TVs, phones, is a leader In International appliances, services, and patents for software and offices? Covetable. —A.N: hardware alike. — A.N.

AMAZON HUMAN- DESIGN CENTERED FORTHE CAPITALISM 99%

GOOGLE IS ALL GROWN UP. As with • GOOD DESIGN isn't • THERE'S MUCH to be many tech companies—Apple, Ya• i limited to aesthetics; it said about Microsoft's hoo, even Amazon—Google's design is equally about function. whiz-bang Interfaces, language has come a long way since And what could be more modern design its kaleidoscopic early days, when functional than the store language, and interactive every color, typeface, and punctua• that sells everything? Fluent Design System. But tion mark was used with abandon. From its bulletproof what sets this titan apart [Seriously—just look at that 1998 website to its cashier- is Its emphasis on inclu• homepage.] Over time, most of less stores to its family of sive design that makes Google's peers matured by shedding speech-enabled devices, products as accessible to their quirks and shades in favor of Amazon's customer focus people with disabilities as minimalist forms and a restrained cannot be ignored. —A.N. to those without. —A.N. palette, best embodied by the sleek, futuristic, Braun-influenced stylings of Apple. Not Google. In the wake of its 19th birthday, the company, now part of the conglomerate known as Alphabet, has retained the personal• ity of its youth by wedding sophisti• cated industrial and software design [have you seen Google Home and Android 8.1?] with strange shapes, novel fabrics, and pops of bright color, such as the power button on its new Pixel 2 phone. In a world where today's angular machines are plastic and glass, black and white, and altogether expressionless, Google's products burst with the exuberance of, well, humans—a sig• it's 6:30 AM nal to its peers that they shouldn't take themselves too seriously. —Andrew Nusca JL* :

> Google Pixel 2 A Musical.ly A Snap MUSICALLY THE SECRETTOTHIS WILDLY POPULAR SOCIAL VIDEO APP? A DESIGN THAT'S ENGINEERED TO GO VIRAL.

• MTV IS SOOOOO hit app Musical.ly. calculus how-tos its user base much LAST MILLENNIUM. The founders of the early on. Another faster. All of this has Today's tweens China-based, DIY lesson? Small but helped the booming produce their own lip-synching service, significant design music video maker music videos by originally launched tweaks—like moving generate 60 million accessing librar• as a platform for the Musical.ly logo monthly active users ies of 15-second educational tutori• so that it wouldn't and get snapped up song clips—not to als, caught on to the be cropped out by the Chinese Inter• mention a plethora fact that kids prefer when snared on net firm Toutiao f or of ridiculous face copying Taylor other apps—helped as much as $1 billion. "lenses"—on the Swift to watching the company grow —Michal Lev-Ram

MEITUTHE MOST INTUITIVE MAKEOVERS IMAGINED • TOUCHED-UP PHOTOS never looked so good. Yet another China-based app maker, Meltu [the name means "beautiful picture" In Chinese], is enabling millions of young people to enhance their selfies—brighten eyes, smooth out skin, tweak and enhance features, or whatever their mobile-first heart desires. The company's series of apps [think BeautyCam, SelfieCity, and MakeupPlus] have been downloaded and Installed on more than 1 billion phones worldwide, making complex tech• nologies like augmented reality and machine learning accessible to regular people. Meitu's secret sauce? Tapping Into the current demand for mobile apps that do one thing and do it well—plus catering to narcissistic tendencies, — M.L. BUSINESS BY DESIGN

DIITTIMI2 A 10\tV MOTC O M TUC Oil^TfiYdiFD TO WIN IN THE AGE OF COGNITIVE COMPUTING AND CYBERSECURITY, THE VENERABLE TECH GIANT IS BETTING BIG ON DESIGN THINKING. HOWBIG? IT NOWBOASTSTHE IBM WORLD'S LARGEST DESIGN TEAM.

62 FORTUNE.COM // JAN.1.IB A PHOTOGRAPHS BY SARAH LIM still makes them.) Or a venerable technology power trying to find its way in the era of Google and Ama• zon. Or, if you've seen the TV ads, the company behind the artificial intelligence platform Watson. But a design leader? Probably not. Think again. Today IBM has some 1,600 formally trained de• signers operating out of 44 design studios in over 20 countries—the IF YOU WANT to track the fast- largest such team in the world. And moving design transformation those are just the official designers. happening at IBM, try following IBM has offered training in the Post-it notes. design thinking to tens of thou• "I see it everywhere," says Diane sands of employees like Paulenich. Paulenich, a managing director at What's even more remarkable A Members of IBM's design leader• the technology giant who started is that IBM has built virtually all ship team photographed at the her career at the company work• of this capacity in just the past six offices in Austin, from left: Nigel ing in a call center 32 years ago. years, since Ginni Rometty took Prentice, Joni Saylor, Jeff Neely, Liz "Sounds silly. But when I go into over as CEO in 2012 and the next Holz, and Phil Gilbert, the general the different offices I see teams of year tasked executive Phil Gilbert managerof IBM Design. people getting together and col• with teaching the 380,000-person laborating with sticky notes." organization how to look at busi• The stickies are a hallmark of ness through the prism of design— Given a mandate by Rometty to "design thinking" exercises, in or, actually, to relearn that skill. move fast, Gilbert began recruit• which participants often jot down In fact, IBM has a storied ing aggressively in 2013. At the thoughts on the brightly colored history in design. After Thomas time, IBM had one designer for pieces of paper and place them on a Watson Jr. became CEO of the every 72 coders; today that ratio is whiteboard as part of creating, for company in 1956, he built a 1 to 8. The company began hold• example, an "empathy map" to un• first-of-its-kind corporate design ing design "boot camps" for new derstand the perspective of the user program at IBM, which elevated hires, then moving them into mul- or customer by imagining what she both its products and its reputa• tidisciplinary product teams—for or he thinks, feels, says, and does. tion. In 1973, Watson Jr. famously everything from A.I. to cybersecu- Paulenich herself has become declared in a speech, "Good design rity to Internet of dungs—where a convert to the design tliinking is good business." But over the they served as evangelists. process, even when she's just brain• years, the focus had faded. In 2017 the company launched storming with her team. Asking Today, IBM's design operations the IBM Design Thinking badge people to write down their ideas, are run from two floors—totaling program. More than 90,000 she says, suppresses what she calls 50,000 square feet of whiteboards IBMers, like Paulenich, have "meeting bullies," those who domi• and open office—on an IBM already earned their "practitioner" nate conversation. And Paulenich campus in Austin. Why there? badges by completing an online regularly makes empathy maps to Because Austin is where Gilbert, course, and another 21,000 have prepare for client meetings, com• 61, was based when IBM bought done extra work to earn at least plete with a picture at the center. his B-to-B software company in one of three advanced badges. "I actually do a little stick figures o 2010. Gilbert isn't trained as a The ultimate aim of such pro• that they're real," she says. "It's just designer. But he got religion about grams, says Gilbert, is to help IBM to remind me, 'Don't think about the potential of design to help scale to better serve customers—with a you, Diane. Think about them.'" businesses at his first startup in the goal of winning. "Businesses don't Perhaps you perceive IBM as 1980s: "Ever since then I've been care about design thinking, per an engineering company, collect• pursuing this notion that the magic se," he says. "Businesses care about ing patents and manufacturing in any product or service is how it's outcomes." That's a Post-it worthy mainframe computers. (Yes, it experienced by the end user." motto. —Brian O'Keefe

63 F0RTUNE.COM // JAN,1,IB HOWTHE SEATTLE COFFEE GIANT IS CREATING CUSTOM EXPERIENCES WORLDWIDE.

also are Inadvertently Billy bookcases, which IKEA buying into the Swedish cut down on materials by SELLING furniture giant's mission 20%. Ikea's design work to reduce the footprint of is also helping custom• MORE, BUT everything it sells. ers use fewer resources Ikea views its envi• at home. All of its kitchen USINGLESS ronmental impact as faucets now have an aer• a problem that can be ator. The feature mixes solved with design. Take in air with the pressure wood, which shows up flow to achieve the same • THERE'S AN irony in in about two-thirds of feeling of wetness while how Ikea—a company the company's home using 40% less water. whose business is selling furnishings. In Its fisca The green design stuff, and lots of it—Is 2016, Ikea used 2% less mindset has paid off turning the millions of of the material than It too. Sales of sustainable customers who visit its did the previous year, de• products were around S2 stores every day into spite selling more wood billion In fiscal 2016, and accidental environmen• products. One way was Ikea is targeting about talists. By buying Ikea's by using dual-density S3 billion by the middle products, consumers particleboard In its iconic of 2020. -BetfjKovwtt

FORTUNE.COM //JAN. 1.1 PEPSICO INFUSING CAPITAL ONE THIN KING PRODUCTS WITH FIZZ OUTSIDETHE BRANCH

• GOOD DESIGN Is about more than picking • BANKING AND out fresh digital features, out the right shade of blue for a soda can. cutting-edge design from an emoji-enabled That's why PepsiCo CEO Indra Nooyi recruited don't automatically go SMS chatbotto GPS- chief design officer Maura Porcinifrom 3M in together. But Capital tracked transaction his• 2013 and made design thinking a strategic One has adopted design tories, In early 2018 it will O o priority for the food and beverage giant. The thinking as a mantra unveil its 1717 Innova• creation of a Design and Innovation Center to reinvent itself as a tion Center in Richmond, in New York swiftly followed in 2011. And software company and a £i2,000-sguare-foot PepsiCo's new emphasis on design has led innovation incubator, facility housing an expe• to a pipeline of creative products. Earlierthis ratherthan a traditional rience design research year, for instance, PepsiCo launched Lifewtr, bank. After acguirlng de• lab and, through a a premium-priced bottled water featuring sign firms Adaptive Path partnership with an incu• labels that are designed by artists and change and Monsoon, Capital bator program, some 50 several times per year. — D.Y. One has recently rolled startups, —D.Y.

&5 FORTUNE.COM // JAN.1.1 AIRBNB IN A Q&A, COFOUNDER JOE GEBBIA EXPLAINS HOWTHE SHARING- ECONOMY POWERHOUSE 'DOG-FOODS' TO BETTER UNDERSTAND ITS CUSTOMERS AND WHY GREAT DESIGN CULTURES NEVER REALLY FAIL.

create something that's valuable You also talk about "dog-fooding." to them. This is an old lesson from What's that? RISD when I was on a team work• Dog-fooding is using your own ing on a medical device. Through products so that you understand our research, we went out and from inside out what it is you're talked to doctors and nurses and providing the customers. It's an• patients, but the big aha moment other way to gain insights and to was when we actually had the ex• gain intelligence. You use it your• isting solution applied to us, and self; you eat your own dog food. FEW COMPANIES have emphasized we lay down on the hospital bed Every time we do that, we discover the importance of design thinking as much as Airbnb. Two of the San and got to experience what it was something diat we can improve. Francisco startup's three cof ound- like to be the patient. It was this It's one reason why we highly en• ers, chief product officer Joe Gebbia design principle, "Be the patient." courage our team members to be and CEO Brian Chesky, are gradu• Go as far as you possibly can to see hosts, and why we give out travel ates of the Rhode Island School of the world through the eyes of the stipends to every employee inside Design [RISD]—a biographical de• person you're designing for. the company. Everybody comes tail that turned off some investors at first but turned out to be a big There's also a Part 2, which is back with, "Oh yeah, I tried to advantage for the sharing-economy applying your own point of view search, and I found this bug." Or "I giant, now valued at S31 billion by to the world. Design thinking does really want to see this information investors. We spoke with Gebbia, not mean design by committee. as I'm driving to my Airbnb." who also serves as head of Samara, It does not mean that you write the company's in-house design What goes into building a creative and innovation studio, about his down every feature request or every environment? approach to design. complaint that a customer has and —Leigh Gallagher just transmit that into a one-to- One thing in particular to Samara one match. So Part 2 is, you come is that the word "failure" is not back to your studio or your place allowed. And the reason is that of creation and combine what you failure is not actually a thing. It's FORTUNE: What does "design think• learned with your own point of view such a misconception. There is an ing" mean to you? and your own creativity and your action that takes place, and you get Gebbia: To me, design thinking is own imagination as a designer. The a result that you want or that you another way of saying empathize term I use for this is "enlightened don't want. And then you label that with the customer. It's consider• empathy." And talking to somebody with whatever you want. And if you ation for the person you're design• does not mean sending them a link get a result that you didn't want, ing for. That's all it is. What it to a survey. Digital communication some people label that as a failure. means is you're going to spend the is completely different from in-per- You can do that if you want to; or time and the effort to understand son, face-to-face conversations. One you can choose to label it as an the needs of the person you're will give you surface insights and incredible learning moment. The designing for such that you can the odier really gives you depth. fact that you just figured out one

FORTUNE.COM //JAN. 1.1 less path to go down in order for us A Airbnb cofounder Joe Gebbia [right] poses for a selfie at a gathering of Airbnb to achieve the goal that we're after, hosts in Australia. well, thank you for that. Thank you for eliminating more paths. Cross it off the list, and we can now get iar to them, I would recommend been an incredible shift in inves• to where we want to go quicker. a weeklong workshop at either tors' mindset on the value of de• the d. school at Stanford on the sign. And so even the people that So many companies are now seek• West Coast or RISD on the East leaders are sometimes beholden ing to apply design thinking. What Coast. They both have executive to, they are now getting it in a way advice would you give to a big com• programs to help leaders grasp that 10 years ago, trust me, they pany seeking to do that if it doesn't the nature of design, the value of didn't. Because we met with them naturally have design DNA? design, so that they can be more and they rejected us, because they I think they need to hire more informed and more conscious didn't understand the value of designers. I diink they need to about design. design. But I feel like we, along hire design executives. And I diink with many of our contemporaries, that the leadership or the founders Can you name a company you admire have proven that design is a differ• or the CEO or whoever's running designwise? entiator, that design can help you the company needs to go through I think Pixar's done an amazing expand your business, that design some kind of crash course in the job integrating art and science. is a critical component. value of design. Because if the They really get this idea that art leader of the company doesn't get and engineering work side by side. One last question: How would you it, then nothing else you can do design, say, an IPO differently? really matters. There needs to be Has the thinking about design We'll leave that one on the white• an executive sponsorship of design changed in the corporate world? board. It's up to somebody else to philosophy. If design is unfamil- The good news is that there has rethink that whole process. 9

&7 F0RTUNE.COM // JAN.1,IB