Considering diversity as an effective innovation mechanism for growth

In 2018, no brand can ignore the calls for diversity, especially following the series of outrage for calls to action exposed to the public eye. More and more companies are finally responding by thoughtfully including a greater variety of ethnicities and racial backgrounds within their workforce.

What is diversity?

While not a new notion, the concept of diversity encompasses a very clear set of principles, including acceptance, respect and an understanding that each individual is unique and recognized for his or her differences. It is about moving beyond simple tolerance to celebrating the richness encompassing the dimensions of diversity. These differences can be along the dimensions of race, ethnicity, gender, sexual orientation, socio-economic status, age, physical abilities, religious beliefs, political beliefs, or other ideologies. By exploring these differences in a safe, positive, and nurturing environment, successful outcomes can unveil.

The business case for diversity is clear

Diversity can boost innovation and employee engagement, and statistics show companies with greater gender and racial diversity financially outperform their peers. Today, many companies have to work hard to overcome their diversity and inclusion gap, whether in leadership or other senior management roles. We also know that certain industries like tech and finance are lacking diversity at all levels as exemplified by diversity and inclusion reports—these also include the GAFAs.

Diversity is not an initiative that you can pick up one morning and expect rapid results from within the year.

In those companies, women often form approximately 30% of the workforce and 1/5 of leadership positons. They also are often in non-technical roles for 40% to 50% of them. Additionally, as non-Asian minorities often represent 4% to 5% of the overall workforce, schemes are developed to increase candidate recruitments from under-represented backgrounds. Management teams are now mandated when interviewing for open positions to understand the issue of inclusion, manage unconscious biases and prevent the exclusion of marginalized communities.

Diversity and innovation

A research study conducted by BCG, also shared in Harvard Business Review, analyzed 1,700 companies located across a number of mature and emerging markets. To assess the companies’ level of innovation, BCG looked at the percentage of total revenue from new products and services launched over the most recent past three years. 75% of respondents said that diversity is gaining momentum in their organizations, in particular employees within emerging markets like Brazil, China, and India. They also found a strong and statistically significant positive correlation between the diversity of management teams and overall innovation. One key piece of finding reported by companies within the analyzed group is that companies with above average diversity generate 45% above-average revenues or 19 percentage points above the least innovative companies. In other words, nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years. These companies are also able to adapt to change much faster than others. They also report higher EBIT margins (+9%). Another point the study made was the correlation between changes in management mix, meaning ensuring diversity at all levels of management, and innovation revenues, could drive a potential 12 percentage point difference over the least innovative companies.

Diversity as a strategy

Diversity is not an initiative that you can pick up one morning and expect rapid results from within the year. An organization which realized this is IBM. IBM started its diversity program in 1995 with Lou Gerstner. When Gerstner took a look at his senior executive team, he felt it didn’t reflect the diversity of the market for talent, customers and employees. To address the imbalance, Gerstner launched a diversity task-force initiative with eight key task forces that not only became a cornerstone of IBM’s HR but also its customer growth strategy. Each task force was supported by senior managers and employees best able to represent and comment on delivering active actions to address key issues. This was also used as a mechanism to shape each group’s thinking about possible future business and development opportunities.

One interesting initiative taken over by the women task force focused on building relationships with women-owned businesses.

A few of the learnings from the working group included that the task forces still needed to be multi-cultural. The women task force, for instance, still had a man as a key member of the task force to translate learnings to peers. The initiatives also needed to address key market issues while helping the business learn from other businesses. One interesting initiative taken over by the women task force focused on building relationships with women-owned businesses. An area of these small and midsize businesses that needed attention was around sales and support. The task force identified vendors that could fulfil such requirements, which accounted to significant increased revenues over a three-year period.

Valuing Diversity of Thought

An area that is increasingly valued within companies is the appreciation of diverse thoughts to solve complex issues and challenges. Diversity of thought is an enabling factor able to accelerate an enterprise’s innovative thinking.

Diverse groups are sometimes more successful in completing tasks because diverse team members don’t just introduce new points of view, they trigger more careful inquiries that are absent in homogenous and/or expert groups. With the advent of emerging technology, such as Artificial Intelligence, it is clear that expert thinking becomes more relevant in specialist domains rather than all. Instead, generating a great idea quickly can be done through crowdsourcing techniques where the thinking of a diverse group comes together through digital crowds.

So here are a few advantages from fostering diversity of thought:

• Eliminating expert-led groupthink: Diversity of thought increases the opportunity for innovation and reduces the risk of groupthink as, in this context, diversity becomes an active insurance policy against internally-generated blindness that leaves institutions exposed and out of touch with the real world.
• Revealing new insights through diverse contributions: Did you know that tech businesses like Google, Amazon and SAP realized that adopting the strengths within specific minorities could help their businesses flourish? For example, individuals with autistic tendencies tend to be able to sit for extended periods of time to solve complex problems. SAP realized how this strength could impact them and looked to recruit such candidates within their programming environment.
• Solving problems through diversity: Organizations that can operationalize ideation techniques faster than others can begin to align unique individuals to certain teams and projects simply because of the way they think. Advances in neuroscience and cognitive analysis added to working practices can help build truly diverse teams that can best solve an organization’s most pressing problems.

Startupbootcamp was launched in 2010. Since then, we have worked with startups with individuals from a multitude of nationalities across the globe, and our work has been instrumental in facilitating external R&D projects through open innovation. You can find statistics about the benefits of diversity here >>