How to design breakthrough inventions

The following script is from "Design Thinking" which aired on Jan. 6, 2012. Charlie Rose is the correspondent. Katherine Davis, producer.

Tonight we're going to introduce you to one of the most innovative thinkers of our time. He is a man who has had an enormous impact on our everyday lives.

David Kelley is the founder of the Silicon Valley global design firm IDEO. His company has created thousands of breakthrough inventions including the first computer mouse for Apple, the stand-up toothpaste tube, and a better Pringle for Procter & Gamble. IDEO may be the most influential product design company in the world.

Kelley was a longtime friend and colleague of Steve Jobs and he is a pioneer in something known as "design thinking" -- an innovative approach that incorporates human behavior into design.

David Kelley: The big thing about design thinking is it allows people to build on the ideas of others. Instead of just having that one thread, you think about it, I come up with an idea, and then somebody from somewhere else says, "Oh that makes me think we should do this and then we could do that." And then you get to a place that you just can't get to in one mind.

If you follow David Kelley around IDEO, you can see how he has infused that thinking into the legendary Palo Alto firm he founded more than 20 years ago. Breakthrough ideas happen every day here.

The key to unlocking creativity at IDEO may be their unorthodox approach to problem-solving.

They throw a bunch of people with different backgrounds together in a room.

[Charlie Rose: So you're in the business end?

Man: Yes.

Woman: My background is in software engineering.

Woman. Journalism.

Man: Aerospace engineer.]

Doctors, opera singers and anthropologists for example, and get them to brainstorm.

Charlie Rose: But you gotta have a certain culture. You gotta have collaboration, you gotta have diversity, you gotta have an anthropologist, and a business person and an engineer and a computer scientist. All of those kinds of--

David Kelley: You got it. You got it. That's the hard part is the cultural thing of having a diverse group of people and having them be good at building on each other's ideas.

They encourage wild ideas and visualize solutions by making actual prototypes. But the main tenet is empathy for the consumer, figuring out what humans really want by watching them.

David Kelley: If you want to improve a piece of software, all's you have to do is watch people using it and see where they grimace and then correlate that to where they are in the software. And you could fix that, right? And so the thing is to really build empathy, try to understand people through observing them.

Charlie Rose: In other words, their experience will communicate what you need to focus on.

David Kelley: Yeah, exactly.

It is a concept that had its genesis in 1978, when Kelley and some Stanford pals took the notion of mixing human behavior and design and started the company that would eventually become IDEO. One of their first clients was the owner of a fast-growing personal computer manufacturer by the name of Steve Jobs.

David Kelley: He made IDEO. Because he was such a good client. We did our best work for him. We became friends and he'd call me at 3 o'clock in the morning.

Charlie Rose: At 3 a.m.?

David Kelley: Yeah, we were both bachelors so he knew he could call me, right? So he'd call me at 3 o'clock and he'd just like, with no preamble, say, "Hey, it's Steve." First, I knew if it was 3 o'clock in the morning, it was him. There was no preamble. And he'd just start-- and he said, "You know those screws that we're using to hold the two things on the inside?" I mean, he was deep into every aspect of things.

Kelley's company helped design dozens of products for Apple, including Apple III and Lisa and the very first Apple mouse, a descendant of which is still in use today.

David Kelley: He said to us, "You know, for $17 make- I want you to-" He gave us that number $17. "I want you to make a mouse we're gonna use in all our computers." So what happened here was we're trying to figure out how to make - so you move your hand and how you make the thing move on the screen. So at first, we thought we gotta make it really accurate, you know? Like when we move the mouse an inch, it's gotta move exactly an inch on the screen. And then after we prototyped it, we realized that doesn't matter at all. Your brain's in the loop! The whole thing was make it intuitive for the human.

But even after they solved that monumental problem, Jobs still wasn't satisfied.

David Kelley: So he didn't like the way the ball sounded on the table. So we had to rubber coat the ball. Well rubber coating the ball was a huge technical problem because you can't have any seams. You gotta get it just right. And so, you know, it would be just one thing -- like that.

Charlie Rose: And suppose Steve had said to you "I'd like to have a ball that's not steel but rubber coated" and you said "No, you can't do that Steve." What would he say?

David Kelley: Well the expletives that I would have- are probably are not good on camera, but it was basically, "I thought you were good," you know? Like, "I thought I hired you because you were smart," you know? Like, "You're letting me down."

Since then, design thinking has led to thousands of breakthroughs from redesigning Zyliss kitchen tools so they're easier to use, to coming up with a heart defibrillator that talks to you during an emergency. And they came up with TiVo's thumbs up, thumbs down button.

David Kelley: It makes your TV smarter because you give it thumbs up or thumbs down and the TV learns what you like and what you don't like.

It's why Steelcase, a company that has been building furniture for 100 years, turned to IDEO to reinvent the classroom chair.

David Kelley: This is one of my favorite things. I want you to sit in this chair.

Charlie Rose: Oh I love this.

David Kelley: This is for kids, right?

Charlie Rose: Well, I'm a kid so there you go.

David Kelley: That's right. You're perfect. So when we looked at that old wooden thing with the dog leg kind of stuff and if you just watch kids and see what they need. What do they need? Well the main thing they need is a place to put their backpack.

Charlie Rose: Yeah right.

David Kelley: So you got a place to put your backpack.

Charlie Rose: Right there.

David Kelley: And then they need-- They're fidgety. They want to move around. So you put in wheels, right? And then you- getting in and out of it, you know, you need to do this--

Charlie Rose: It's not rocket science, it's what?

David Kelley: It's empathetic.

Charlie Rose: Empathetic?

David Kelley: It's empathetic to people. Like really like try to really understand what they really value.

Now IDEO is working with clients all over the globe. They're using that same intuitive human point of view to improve access to safe drinking water in India and Africa, redesigning school systems in Peru and helping North Face expand their brand into China.

Kelley has always been good at coming up with ingenious solutions to everyday problems. His first job was at Boeing. He was part of a team that designed the lights around the passenger windows, as well as a "milestone in aviation history": the lavatory occupied sign.

But he says the seeds of who he is today can be traced to his childhood in Barberton, Ohio, "the passenger tire capital of the world," where he learned the value of building with his hands.

David Kelley: In my family, if the washer broke, you didn't go order the part, you went down, tore the washer apart, and tried to make a new part to fix it. Because that was part of - that was part of the game - that you know, you were capable of fixing things.

Charlie Rose: And that was something that was part of you too. You were a tinkerer who wanted to take it apart and put it back together?

David Kelley: Yeah, one of the best stories my mother tells, I took the family piano apart but it wasn't that interesting to put it back together so it just kind of - the piano sat there with this big harp kind of thing hanging out for most of my childhood.

He was in his 20s, working unhappily as an engineer, when he heard about Stanford University's product design program. What he learned there would transform his life as a design thinker.

Charlie Rose: And so what happened when you came to Stanford?

David Kelley: So I get to Stanford and it was heaven. Stanford was the synthesis of kind of art and engineering and it was wonderful.

It was shortly after that that Steve Jobs came into the picture. For over 30 years they worked together and were close friends.

Charlie Rose: What's the biggest misconception about him?

David Kelley: I think the big misconception is around that he was kind of like, you know, like malicious. He was like, trying to be mean to people. He wasn't. He was just trying to get things done right and it was-- you just had to learn how to react to that. He did some lovely things for me in my life.

Jobs introduced Kelley to his wife KC Branscomb. And Steve Jobs was also there for Kelley when the unthinkable happened. In 2007, Kelley was diagnosed with throat cancer - and given a 40 percent chance of survival. Jobs, already suffering from his own deadly cancer, gave him some advice.

David Kelley: He came over and said, "Look, you know, don't consider any alternative - go straight to Western medicine. Don't try any herbs or anything."

Charlie Rose: Why do you think Steve said, "Don't look for alternative medicine, go straight to the hard stuff?"

David Kelley: I think he had made- in his mind, he had made the mistake that he had tried to cure his pancreatic cancer in other ways other than, I mean, he just said, "Don't mess around." You know, when we both had cancer at the same time was when I got really close to him and I was at home, like sitting around in my skivvies, you know, waiting for my next dose of something and I think it was the day after the iPhone was announced. And he had one for me, right?

Charlie Rose: An iPhone?

David Kelley: You know, your own iPhone, delivered by Steve Jobs, right after it comes out, was a lovely feeling. Anyway, so he decides to hook it up for me. So he gets on the phone to AT&T and he's gonna hook up my phone and it's not going well.

Charlie Rose: This is such good news for me.

David Kelley: And eventually he pulls the "I'm Steve Jobs card" you know, he says to the guy, "I'm Steve Jobs." I'm sure the guy on the other end says, "Yeah buddy, I'm Napoleon." You know, like get outta here. But anyway-- so never did really get it hooked up.

Charlie Rose: He never hooked it up?

David Kelley: No. Not that day.

Charlie Rose: But he was close. What did he teach you about living with cancer?

David Kelley: Steve focused more on his kids, I think, than anything. And it made me fight more to survive and so that focus on family you know was something that he taught me.

Charlie Rose: You care deeply that you watch your daughter--

David Kelley: Yes.

Charlie Rose: As she continues to grow.

David Kelley: It's about her-- what was her life gonna be like if I died? That's really motivating.

It was around that time that Kelley decided to commit himself to something even bigger...and why he approached Stanford university and a wealthy client named Hasso Plattner with the idea of setting up a school dedicated to human-centered design.

David Kelley: He thought that was a great idea and he said he'd help me. And I said, "Oh thank you" and then I went back to the development.

Charlie Rose: You had no idea what he meant?

David Kelley: No, the development office at Stanford said, "When a billionaire says 'I'll help you' you should call him back right away." So turns out, Hasso funded the whole thing.

Charlie Rose: $35 million?

David Kelley: Yeah, yeah. He said, "How much do you need?" And I wish I had said $80 million. He said yes to whatever I said I think.

Kelley now runs the groundbreaking and wildly popular Hasso Plattner Institute of Design at Stanford, the "d. school." It is recognized as the first program of its kind dedicated to teaching design thinking as a tool for innovation -- not just to designers -- but to students from all different disciplines.

[David Kelley: I think you can follow your noses a little bit around that. Where's the big idea? Where's the excitement?]

Twice as many Stanford grad students want to take classes as are seats available. The lucky 500 students in the program augment their master's degree studies in business, law, medicine, engineering and the arts by solving problems collaboratively and creatively, and immersing themselves in the methodology Kelley's made famous. But there are no degrees. It is something Steve Jobs talked him out of.

David Kelley: He said, "I don't want somebody with one of your flaky degrees," right?

Charlie Rose: I don't want them working for me.

David Kelley: Yeah. I don't want them working for me if they just have your flaky degree but if they have a computer science degree or a business degree and then they've come and have our way of thinking on top of that, I'm really excited about it.

Today his cancer is in remission. He spends more time doing the things that he cares about most, including tinkering in his workshop with his 15-year-old daughter.

Charlie Rose: So Clara, tell me this, what happens here?

Clara: Everything. Really everything.

David Kelley: Yeah, so Clara and I come here to do projects together. Our big project is right over there presently which is to make a 3D printer. It's called a printerbot and it's a little machine that makes 3D objects like a printer that puts ink on a page, this makes something three dimensional.

His love of making things is as much a part of his DNA as his appreciation for the car which he calls the most important object in our lives.

Charlie Rose: So why do you like it? What does it mean to you?

David Kelley: Well, you know, it's about the same vintage as me. And it just, it just makes everybody smile.

[Charlie and David in car: "I like the sound of the motor - isn't it good? A little space 6."]

Almost every day, you can find David Kelley driving his '54 Chevy pickup truck between Stanford and IDEO, inspiring the design thinkers of tomorrow and quietly shaping the future.

Charlie Rose: My theory is that sometimes life squeezes out the best of us.

David Kelley: I've never heard that but that really resonates with me.

Charlie Rose: So if I could write the first line of your epitaph it might be "David Kelley helped people find the confidence in their creativity."

David Kelley: That would be lovely.

Charlie Rose: And changed the world.

David Kelley: Yeah.