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Diversity and inclusion: A major driver of innovation

Can more diversity lead to more innovation?

By Bsyn Support

Report 23 Aug 2021
Diversity

What is meant by diversity and inclusion in the workplace and how can this influence innovation and business growth?

Diversity

I work as a junior software engineer in the Android mobile team and, as someone who started remotely, I was very grateful to join such a welcoming team.

At the time of writing this, in the mobile team, we have 13 different nationalities comprising 19 males and 11 females. I believe that the diversity within the team also contributes to its inclusive nature. Feeling like a part of the team meant I was able to work confidently and contribute ideas while not being afraid to speak up and ask for help when needed.

With that in mind, I’m going to talk a bit more about diversity and inclusion in the workplace and how it contributes to innovation and business growth.

What is diversity?

Simply put, diversity is the existence of variations of different characteristics in a group of people.

There are two well-known types of diversity — inherent diversity and acquired diversity.

Inherent diversity involves traits you are born with such as age, race or biological sex. On the other hand, acquired diversity involves traits you gain from experience such as cultural fluency. This can be gained perhaps from working in other countries or from military experience.

Acquired diversity is often much less obvious when compared to inherent diversity. Think about it this way — you don’t often see someone you have never met and say to yourself, ‘I bet they can speak about three or four languages’ but you could think, ‘She’s probably in her mid-20s’. Acquired diversity is usually very hard to determine just by looking at someone!

What is inclusion?

Inclusion is the practice or policy of providing equal access, opportunities and resources for people who might otherwise be excluded or marginalised. Simply put, it is when we embrace all people regardless of their diverse attributes because every individual has the right to be respected and appreciated as valued members of their community.

This culture brings out the best in people by allowing individuals to feel comfortable about themselves and confident in themselves and what they do.

It is important to recognise that diversity is not the same as inclusion.

While diversity refers to human differences, inclusion refers to a cultural and environmental feeling of belonging. If anything, an inclusive environment is what helps to sustain a diverse workforce rather than the other way around.

Diversity without inclusion can be perceived as tokenism and can have adverse effects on a business.

How does D&I drive innovation and business growth?

Market opportunities

An inherently diverse workforce can be a major source of innovation, as diverse individuals are better attuned to the unmet needs of consumers or clients like themselves. This insight is critical when it comes to identifying and addressing new market opportunities as well as increasing value for customers.

The Centre for Talent Innovation reported that teams with at least one member who represent the gender, ethnicity, culture, generation, or sexual orientation of the team’s target end user, are up to 158% more likely to understand that particular end user. This in turn increases the likelihood of the team innovating effectively to meet the needs and expectations of that user.

Decision-making

A diverse team also contributes to better decision-making especially as they are less likely to alienate or misrepresent groups of customers!

A well-known scenario is H&M’s 2018 crisis, when a black, 5-year-old boy modelled a hoodie with the words ‘Coolest Monkey in the Jungle’ across the front.

Inevitably, this ad sparked public outrage which had huge negative implications on both H&M’s finances and their brand reputation. Only afterwards did H&M hire a global head of diversity and inclusion who put initiatives in place to ensure something like this would never happen again! It is also not surprising to read in the subsequent media coverage, that the H&M board of directors were, at the time, all white.

Creativity

A lack of diversity creates a homogenous environment where individuals tend to have a similar way of thinking meaning that they are less likely to challenge the ways things are done.

Creating and maintaining a welcoming and inclusive culture for all types of people makes talented individuals want to join and stay in a company.

Firstly, this allows the company to tap into wider networks that they may have never otherwise encountered. But above this, people who are different from each other bring unique information and experiences to the table. This diversity of information creates a positive tension within a group and that tension increases creativity. This is because interacting with individuals who are different forces each group member to reassess their own assumptions, question things to understand others, and prepare better for discussions therefore making it more likely for out-of-the-box ideas to emerge.

Leadership

Market-worthy ideas, however, aren’t innovation until they’re developed and deployed into the marketplace. To get into the marketplace, these ideas require the buy-in and endorsement of decision-makers at every level.

This is where acquired diversity plays such a vital role in transforming ideas into innovation. Leaders who have acquired diversity — whose background and experience has enabled their appreciation for difference, be it gender, age, culture, or any other diverse attribute — are significantly more likely to behave inclusively than leaders who lack it.

Employees at inclusive companies with 2D diversity — that’s inherent and acquired diversity — are more likely than employees at non-diverse companies to take risks, challenge the status quo, and embrace a diverse spectrum of inputs. They are also 75% more likely to see their ideas move through the pipeline and make it to the marketplace.

The Harvard Business Review revealed that without diverse leadership, women are 20% less likely than straight white men to win endorsement for their ideas; people of colour are 24% less likely; and [those who identify as] LGBTQ are 21% less likely.

In other words, companies that harness both inherent and acquired diversity are measurably more innovative than companies that fail to harness these drivers.

Business relevance

Diverse workforces are better at anticipating and preparing for industry disruption. Companies who lack this insight often fail to innovate accordingly and tend to fall behind their competitors.

A good example of this is Blockbuster which filed for bankruptcy in 2010. This brand went from iconic to irrelevant within four years of Netflix launching its streaming services. Reportedly Blockbuster had previously refused to buy Netflix as it viewed the streaming service as a small, niche business. Although the Blockbuster business model had been successful for many years, it appeared poorly suited to let in new information and embrace change which, I would suggest, speaks volumes to the level of acquired diversity of its leadership.

What are the stats?

The connection between diversity and innovation has been proven by a substantial body of research. Here are some statistics regarding the link between diversity and innovation.

Compared to less diverse companies, more diverse companies are:

45% more likely to report annual market-share growth and 70% more likely to enter a new market [Harvard Business Review]

6 times more innovative and agile, eight times as likely to achieve better business results, and twice as likely to meet or exceed financial targets [Deloitte]

McKinsey analysed the composition of executive teams in more than 1,000 firms across 12 countries and found that more ethnically and culturally diverse companies were 33% more likely to outperform less ethnically and culturally diverse companies. These studies also demonstrated that more gender diverse companies were 21% more profitable than less gender diverse companies.

Credit Suisse Research Institute reported that companies with at least one women board member had higher average ROI and better average growth than firms with male-only boards.

BCG surveyed 1,700 companies and found that companies with above-average diversity produced 19% more revenue from innovation than companies with below average diversity which translated into overall better financial performance.


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