ShopWell, Ideo’s First Big Spinoff, Says Better Health Starts at the Supermarket

Researchers at the Centers for Disease Control shocked the nation two weeks ago with a study projecting that by the year 2050, as many as one fifth to one third of U.S. adults could have diabetes, up from just 10 percent today. Part of this increase is inevitable—a side effect of the swelling population of people at high risk for the disease, such as the elderly and Hispanics. It’s also a result of the fact that diabetics are living longer thanks to better treatments. But the CDC researchers also offered evidence that key “preventive interventions” could considerably reduce the future prevalance of diabetes and the resulting burden on the healthcare system.

It’s no mystery what those interventions might be, and they aren’t expensive or high-tech. The most effective way to prevent adult-onset diabetes, by far, is weight control through exercise and healthy eating. And diabetics aren’t the only ones who could benefit from a better diet: 34 percent of U.S. adults are obese, according to the CDC.

Unfortunately, choosing healthier foods is easier said than done. The huge stakes involved in those choices—and the opportunity to help simplify them—are among the reasons why team members at ShopWell, a recent spinoff of Palo Alto, CA-based design consultancy Ideo, are so passionate about their business: a Web-based service that helps consumers make smarter grocery buying decisions. As its name implies, ShopWell shows consumers which products on supermarket shelves mesh best with their health goals, and which are non-starters.

Nutrition Facts Label, personalized by ShopWell“Before I came on board here, I asked, ‘Is this just a Palo Alto problem that you’re trying to solve at Ideo?,’ because I really want to solve a big problem,” says Jasmine Kim, who joined the startup as CEO in September. “Well, when one in three children under 17 are overweight; when Americans don’t even recognize what overweight is now, because it’s the new normal; when you have Michelle Obama tackling childhood obesity on a national level; when Jamie Oliver is trying to get schools to go from chocolate milk to regular milk—that all tells you that this is a big problem, and that’s the kind of problem we want to solve.”

The first challenge ShopWell is biting off: the sorry state of nutrition labeling on food packaging. It’s been more than 70 years since Congress mandated that food makers list ingredients on their labels, and 20 years since the advent of the familiar “Nutrition Facts” chart. But while these labels are packed with information, it’s largely a contextless, one-size-fits-all deal—the percent daily values, for example, are based on a 2,000-calorie diet, which may be more or less than you really need, depending on your age, weight, gender, and activity levels.

Using ShopWell is like getting a Nutrition Facts label made just for you. At the ShopWell website, you start by entering personal details like age and gender, along with information about your health goals and conditions—whether you have high blood pressure or diabetes, for example. That allows ShopWell’s behind-the-scenes algorithms to spit out personalized ratings for thousands of common products. If you’re trying to lose weight, foods with lots of added sugar will obviously score low (bye-bye, Betty Crocker Cookie Mix). But on a subtler level, ShopWell will also bump up the scores of high-calcium foods for people with osteoporosis, or those with high levels of fiber and potassium and low levels of fat and cholesterol for people with heart disease. Armed with this data, you can build a shopping list that speeds your trip through the nutrition minefield that is the typical supermarket.

ShopWell’s executives and investors see the service as the missing link between nutrition labeling and personal health. “There is a groundswell of interest in the connection between food and wellness,” says Robert Rosenberg, a partner at New Venture Partners, the San Mateo, CA-based venture firm that backed ShopWell’s launch. “But if you look at where the rubber meets the road, in the supermarket, day after day you are going to see a consumer holding a box of this in their right hand and a box of that in their left hand, trying to figure out, ‘What does this mean for me?’ The world needs a personalized food rating engine that can connect this impenetrable mound of scientific data about nutrition and ingredients with my personal preferences or medical needs as a consumer.”

Of course, Silicon Valley is humming these days with Web startups and apps promising to help consumers with one challenge or another, from monitoring their finances to keeping track of their kids to buying a car. What makes a food website with only a dozen employees so interesting? Quite a few things, actually.

One is the undeniable scale and importance of the problem: some 100 million Americans have food-related health problems, from annoyances like lactose intolerance to life-threatening conditions like heart disease. Another is the fact that ShopWell is, in essence, a multi-million-dollar experiment testing the power of Ideo’s user-centric design philosophy: it represents the first time that the firm—which is famous for helping other companies come up with well-designed products, from Handspring’s Treo phone to Amtrak’s Acela trains—has conceived and launched a company of its own.

What’s also intriguing about ShopWell is the way the startup plans to make money: by turning its user base into the world’s largest focus group, thereby easing a market-research crisis that’s almost as vexing for food producers as the inscrutability of nutrition labels is for consumers.

It’s an ambitious vision, and one that ShopWell, which was born just a year ago and didn’t come out of stealth mode until September, is still a long way from accomplishing. But if it succeeds, the upside—for Ideo, for New Venture Partners, for ShopWell’s founders, and for average shoppers—could be big.

“There is an enormous amount of passion around Ideo for our purpose, which, we feel, is to create impact through design,” says Brendan Boyle, the Ideo partner who shepherded ShopWell out the door. “This question of how people can be more mindful about what they’re eating seemed like a great design challenge, and a great spot to build a business.”

Perhaps so. In this special, three-part Xconomy case study—which is based on interviews with Boyle, Kim, Rosenberg, and ShopWell co-founder Brian Witlin—we’ll delve into the startup’s origins within Ideo and look more closely at the consumer-side and industry-side challenges the company thinks it can profitably solve. We’ll also look at how Ideo assembled the ingredients it needed to build the company and how it managed the spinoff. We’ll take a close look at how the startup innovates, how the ShopWell website and the brand-new ShopWell iPhone app actually work, and how the company hopes to score big not just with consumers but with food makers. Finally, we’ll assess the risks and as-yet-untested hypotheses in ShopWell’s business model.

ShopWell's officeBy the end, we hope to have presented a comprehensive picture of one of the most intriguing entrepreneurial ventures to come out of Silicon Valley this year. So please read on, and come back tomorrow and Wednesday for Part 2 and Part 3.

Writing the Recipe

If you ask the folks at Ideo where their headquarters is, they’ll demur, saying the famous product design consultancy is “global.” If you press, they’ll acknowledge that the firm’s largest office is in Palo Alto. That’s a legacy of managing partner David Kelley’s ties to the city, where he has long been a professor at Stanford and where helped to found the Hasso Plattner Institute of Design, also known as the “”

The is where ShopWell’s story started. A couple of years ago, Kelley gained a student named Brian Witlin as a master’s degree advisee. Witlin is a classic, bright-eyed Silicon Valley entrepreneur with an inexplicable excess of both ideas and energy. For messenger-bag maker Timbuk2, he developed a process for fusing polyethylene grocery bags into a tough new fabric; for his own master’s thesis project, he created a startup incubator called RootPhi and spun out a company to make rubbery shoelace replacements called Golaces, which he promptly sold to Krocs.

At some point Kelley and Witlin began talking about what it might be like to bring the rapid-fire startup launch process that Witlin was exploring with RootPhi inside Ideo. One thing led to another, and Ideo partner Brendan Boyle, who also teaches at the, hired Witlin as an entrepreneur-in-residence, charged with combing the consultancy and its staff for spinout ideas.

But even before Witlin’s arrival, Boyle himself was on the lookout for startup ideas. “One of my jobs is to look for opportunities throughout the firm to apply our purpose,” that is, creating impact through design, Boyle says. “One that kept coming up was this question around health and wellness”—an area where Ideo does lots of brainstorming, due in part to its relationships with big food and beverage clients like Kraft and ConAgra.

Michelle Lee, a senior designer in Ideo’s Palo Alto office, was assigned to lead a six-week project to look for a commercializable concept within the health umbrella. “Michelle put together this multidisciplinary team, just like we would on any client project, except that we funded it ourselves,” says Boyle. “There were six concepts that emerged, and one of them was this concept for ShopWell”—a website for personalized nutrition recommendations.

Witlin joined Lee’s team toward the end of the six weeks. “I though that ShopWell could not only be a viable business but could also have a significant positive impact on this growing problem in the U.S. and the world,” Witlin says. He was also excited about the opportunity to work with Lee—whom he calls “the best of the best at Ideo.” His challenge, as a business development guy, was to help the team flesh out a business model and make the idea feel real.

So in true Ideo style, Witlin and Lee decided to make a video. Not a line of software code had yet been written, but the video “illustrated in a smoke-and-mirrors way what the site could be,” says Witlin. The video helped Lee and Witlin get buy-in not just from Ideo and from outside investors, but from potential food industry customers. “We were able to present that to some of the most senior food executives in the world, just to get their feedback, which helped us to shape a business plan,” Witlin says.

ShopWell would not be Ideo’s first experiment with launching a company. In 2007 the firm had helped physician-entrepreneur Larry Weiss create a line of herb-based, non-toxic hand sanitizers under the CleanWell brand. But it would be the first venture born from an idea conceived entirely within Ideo, so the team wanted to get it right.

“We are very interested in doing more of this—creating businesses,” says Boyle. “But we are careful about it. It’s a lot of investment, so we think a lot about it.”

Surveying users and potential customers during the idea-formation stage is a big part of the process at Ideo—just as it is for a growing number of startups that subscribe to philosophies such as Steve Blank’s customer development methodology. At Ideo, this was the key step that validated Lee and Witlin’s ideas. Says Boyle: “We got some feedback from users and had some strong responses, and at that point it felt like it was something we could create a business around.”

What was that something, exactly? It starts with the consumer-facing site. Witlin draws a triangle with vertices labeled H, T, and V, for health, taste, and value. “We believe we can differentiate our site by leading with health as the starting point—the notion of how people make decisions around food,” he says. “We know that value and taste or experience are also factors, and that for any given purchase decision, one person might give more weight to one of these areas.” But at least to start, the ShopWell team wanted to create algorithms, with the help of registered dietitians, that would translate complex ingredient lists and nutrition data into drop-dead-simple recommendations: a literal green light, yellow light, or red light, with green reserved for the products that best match an individual users’ health goals. Over time, the team thought, such a service could help consumers to build shopping lists consisting entirely of green-light items—or at least to be more conscious about the tradeoffs when they choose yellow- or red-light products.

But that was only half of the idea. The other half relates to a completely different problem: the difficulty faced by food manufacturers trying to bring new products to the supermarket. It’s a bizarre fact, given the huge profusion of food choices in U.S. grocery stores, but 99 out of every 100 new food products fail in the marketplace, meaning that manufacturers are wasting billions of dollars every year on doomed ideas. Thanks to supermarket scanners, manufacturers have plenty of information about what people buy; the main problem, Kim and Witlin argue, is that they don’t understand why people make the choices they do. By analyzing, in aggregate, which products from the ShopWell database get placed on actual shopping lists, and how those choices correlate with users’ health goals, the ShopWell team believes it can provide food makers with much richer market data than they are able to collect through traditional focus groups.

The dual-sided nature of the business model, Witlin says, was what ultimately got Ideo’s executives and ShopWell’s investors to sign off on the spinout. “What interested them was the fact that it wasn’t just a consumer-facing business that would help consumers understand the food they buy, but it’s also a great platform for food manufacturers to learn what to make, so that they aren’t always looking in the rear-view mirror and have a way to interact directly with consumers.”

Coming tomorrow in Part 2: How Ideo assembled the ingredients needed to turn the ShopWell concept into an actual company, and how the startup is cooking up a working product.

Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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