“People at IDEO believe it's how innovation and much of business take place in the world. Quite simply, great projects are achieved by great teams,” says Tom Kelly, the author of The Art of Innovation.

The organizational structure at IDEO is very flat. There are definitely people who aspire to lead teams, but the company’s goal was to create an environment where hot teams formed on their own. So IDEO created a Hollywood-like system – hot studios – for quickly building teams around projects and disciplines. When IDEO get a new project they give to a team that's going to be excited about it.

Design firms seldom exceed a hundred people because when talent can't find enough places to blossom, it generally splits in new directions. As the company matured, David Kelley, CEO of IDEO, realized he couldn't have a personal relationship with each person at IDEO and couldn't be mindful to everyone's individual needs.

So as the company approached the 100-person mark he took a chance and threw things open, designating some of the best people as studio leaders and giving them an opportunity to make their pitches to prospective members. No one at IDEO was going to be assigned to a studio. They reversed the routine where players wait to be selected. IDEOers got to pick their team leaders, not vice versa.

At the company's Monday morning "all hands" meeting each leader described the type of work they favored, and what was exciting and challenging about their approach to product innovation. Everyone gave David a "secret ballot" with their first and second studio choices. Amazingly, they were able to juggle studio sizes so that everyone got their first choice. Each group ranged from 10 to 20 people. After a couple of years, they opened it all again and gave everybody a chance to reshuffle studio membership if they wanted. It's worked. IDEO have not only grown but also developed hot teams with very unique capabilities.

The hot studio system is the IDEO's biggest sustainable competitive advantage. A hot team works together for a period of time. There's a lot of movement at IDEO between teams and among studios. If someone wants to gravitate to another studio, that's encouraged. Each studio has a head who is responsible for the profit and loss of that group. It's like running a small business. There are also opportunities to be discipline leads -- people who oversee best practices for their discipline across the whole firm.