How is diversity a key enabler for innovation?
Diversity has long gone from a sign of modern practices and inclusive corporate behaviour. Studies have shown that the more diverse a company, the better its performance. The numbers are staggering: companies in the top quartile for gender diversity on executive teams are 25% more likely to have above-average profitability than companies in the fourth quartile. Organisations with greater representation have also reported increased employee satisfaction, a better public perception of the brand, improved decision-making processes, and they’re also considered to be more customer orientated.
However, even more, what impacts a business is that diversity and inclusion fosters innovation. Companies that embrace variety have reported greater profits from innovation (45% of total) than companies with below-average diversity (26%).
How does diversity contribute to a company’s innovation?
The more diverse the talent, the more innovative the ideas
Employees with different backgrounds, experiences, and perceptions will bring a unique view of a problem. Combine all those different views, and you get a highly creative team that thinks “outside the box”, which is critical in industries that require high levels of innovation, such as tech. Teams with different backgrounds are better equipped to deal with adversity and highly uncertain competitive environments than other homogenous teams.
However, diversity can only contribute to innovation if the company culture creates the right environment. Without a company culture that ensures everyone is heard and fosters a safe, collaborative environment, diversity has a minimal impact. Leadership teams need to make it safe for employees to suggest novel ideas, give team members decision-making authority, give them credit when it’s due and give actionable feedback. The results speak volumes: companies that give diverse voices equal chances to be heard are nearly twice as likely to receive value-driving insights, and employees who work in a “speak up” culture are 3.5 times as likely to contribute their full innovative potential.
Diversity drives innovation, but how does that translate into results?
Diversity fosters innovation, which increases performance
Organisations that embrace diversity innovate more due to the particular mindsets in collaborative company culture. Creating this circumstance shouldn’t stay only at a lower or middle management level; it needs to reach leadership positions. The concept of two-dimensional diversity (2-D) refers to leadership exhibiting at least three inherent and at least three acquired diversity traits. Businesses with a diverse leadership team outperform their competitors all together. And the numbers don’t lie: companies that employ 2-D diversity are 70% more likely to conquer a new market.
What’s the root cause?
Diversity: the missing link between market analysis and the reality
Increased variety and inclusion can lead to better financial performance; a workforce that reacts quicker to unforeseen circumstances and situations is more creative and fosters innovation. Unsurprisingly, reports have also shown that inclusive teams make better business decisions up to 87% of the time. They make those decisions twice as fast within half as many meetings.
There are many benefits to creating a diverse team and promoting inclusion, and perhaps one of the most important ones is that it reflects the reality of the market. If at least one team member has traits in common with the client, the entire team better understands that person and can build a product or service that fulfils their needs better. A team with a member who shares a client’s ethnicity is 152% more likely to understand that client than a team that doesn’t.
What started as a wake-up call for companies has become a competitive advantage for any company that embraces it. Countless studies have shown the positive impact of diversity at all levels: better team dynamics, faster decision-making processes, increased profitability or teams that are better equipped to deal with adversity and highly uncertain competitive environments, to name a few. However, in a fast-paced environment, where new competitors emerge constantly, innovation is vital for any company, and diversity is one of the main factors that contribute to it. It’s never too late to incorporate diversity into your organisation’s strategy.