Innovation and Diversity: Earnings, Creativity, and the Global Economy
According to research, 85% of executive leaders recognize the impact that diversity has on innovation. Clearly, that’s to be expected — if strength lies in differences, as Stephen Covey believes, then diversity in any form will always spark new ideas, reshape existing ones, and inspire fresh perspectives.
However, the question isn’t really about whether or not diversity is a key driver of innovation (we know it is), but whether or not decision makers are effectively leveraging its power.
A Cultural Movement
In this recent interview between Forbes’ Ekaterina Walter and Progressive’s Neil Lenane, they discuss the concept of workplace diversity as a cultural shift, rather than just a strategic initiative.
“We view diversity not as a program but a cultural movement,” says Lenane. “While gains can be slow moving and measurement less clear than other business metrics, we find the key is keeping the momentum going every single day. Ultimately it ends up as not something we check off a list but a cultural attribute we use to help us achieve our operational goals.” Top-tier companies have shown tangible innovation benefits to developing an ‘all-inclusive’ approach to fleshing out their workforce, which allows them to deal with cultural challenges and language barriers more effectively than businesses that don’t actively drive diversity. Additionally, the myriad backgrounds and perspectives that shape how employees ideate and innovate is extremely valuable, providing expanded insight for global interactions and strategies, as well as internal challenges.
Lenane suggests the following advice for decision-makers: “Due to the constant pace of change, increase your desire and ability to be agile. This will help in not only weathering change but proactively adapting to it. And, obviously, look at diversity as a business success imperative.” According to HBR, employees at companies with greater diversity are “45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the firm captured a new market.” As companies compete on a global scale, it’s imperative to acknowledge that a variety of voices not only encourages collaboration, innovation, and change, but that diversification promotes competitive differentiation.
Listen Up, Leaders
Although initiating culture changes in your organization is key to driving innovation through greater diversity, it still must be treated like any business goal. From EY: “Leaders must first cultivate the insight to recognize and understand differences and their power to bring about profound cultural shifts in organizations. This mental transformation is critical to developing transformational leadership capabilities. It is the single most important step toward becoming a successful player in the global arena.”
Strengthening the employee pipeline and retaining top talent typically rests squarely on the shoulders of company leaders, as does catalyzing innovation for overall success. A lot of this probably sounds pretty obvious, but that doesn’t mean it’s easy. According to a recent white paper from Forbes Insights, “Organizations still face external and internal challenges in implementing these policies and procedures. Internally, companies are still struggling with negative attitudes about diversity among their rank-and-file, while externally, a rocky economic recovery has impeded many companies’ hiring efforts.”
While that may be true, the evidence supporting a global need for diversity in the workplace — and its positive influence on innovation — is overwhelming. Studies show that diverse teams often out-perform teams with less diversity and higher-level skill sets. Research from Donald Fan shows that, when dealing with a problem, “we encode our perspectives and then apply our particular heuristics to explore new and better resolutions. Diverse teams often outperform teams composed of the very best individuals, because this diversity of perspective and problem-solving approach trumps individual ability.” And, EBIT margins at highly diverse companies are generally about 14 percent higher than those of the least diverse. Furthermore, HBR notes that without diverse leadership, “women are 20% less likely than straight white men to win endorsement for their ideas; people of color are 24% less likely; and LGBTs are 21% less likely.”
This data should be a powerful motivator for businesses; research has solidly established the incredible role that diversity plays in innovation and all-around market relevance, differentiation, and advantage. Check out this infographic for more information.