Diversity and Inclusion lead to innovation-here’s the proof

For some years now, the notion that increasing diversity in organisations results in greater innovation has been broadly and increasingly accepted. Quantitative data to support this proposition has certainly been available, though largely based on anecdotal case –studies or loose correlations between increasing female board membership and better financial returns and even statistical computer modelling of comparisons between diverse and homogeneous teams (The Difference – Scott Page).

Symmetra’s Innoclusion Program(TM )-driving innovation through inclusion– conducted with leaders globally has been squarely premised on the assertion that organisations can bolster their capacity for innovation by establishing and maintaining a diverse leadership profile and by instilling a culture of inclusion. Thus Symmetra designed and developed the Inclusive Leadership Index ( ILI) which is a dedicated tool designed to measure via multiple constructs the capabilities of leaders to demonstrate inclusiveness in their workplace interactions.

Now, compelling empirical data has emerged which not only reinforces the innovation through diversity argument but also provides a clear rationale for an active strategy to broaden the spectrum of diverse thinking at management levels. A study from BCG and Technical University of Munich using data on 171 Swiss, German and Austrian companies over a three year period has clearly and convincingly shown a positive causal relationship between increasing management diversity and revenue obtained from innovative products. (click here to see article)

The study analysed companies according to their “Blau Index “, aggregating the effect of six categories of diversity. In plotting each diversity category against the company’s innovation returns (defined as the share of revenue from new products and services in the most recent three year period), it was found that innovation rises with more diversity. Companies with Blau scores above the median (more diverse) generated 38 per cent more revenue, on average, from innovative products than those with scores below the median (less diverse).

Four types of diversity were found to have a high or very high statistical relationship with innovation: Industry background; Country of origin; Career path and Gender.  It is significant that two of these diversity-types are oriented towards demography and the other two are oriented towards diversity of thinking. This underscores the need to have a broad perspective when considering diversity- taking it beyond ethnicity and gender. When it comes to gender, it is having women at managerial level (more than 20 per cent) which has impact: simply having women in the workforce has no benefit for innovation. Moreover, the study is sufficiently nuanced to reveal that it is large, complex companies-those with multiple lines of revenue- which benefit most from this connection.

Finally according to the study, there are five conditions, which, when present in the culture of an organisation, amplify the beneficial effects of having a diverse workforce and thus have the greatest impact on innovation. These conditions are consistent with the constructs which are assessed and measured by Symmetra’s ILI which has broadened the definition of inclusive leadership capability in the 21st century.

By way of illustrating as to how one can measure leadership capabilities which will enhance these innovative capabilities, we summarise the BCG conditions and match them with the corresponding Symmetra constructs using Symmetra’s inclusion model.

In an increasingly competitive environment and with various industries being disrupted by newcomers on a regular basis, innovation is critical. The evidence is one more compelling reason for companies to recognise that establishing a managerial complement which is diverse in its demography as well as modes of thinking will confer multiple benefits- not least, that it provides the foundation which can spur innovation. But diversity alone is insufficient. It is critical to build the inclusive capability of leaders to establish the necessary cultural conditions identified in the BCG study. When an inclusive culture functions in tandem with a broadly diverse (demographic and thinking-style ) workforce, the potential for innovation is greatest.

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