Igniting innovation with diversity: Power of differences

Diversity of thought drives profit and performance

Older women talking and smiling Organizations eager to unlock business growth are igniting their innovation engine by focusing on people, processes and progress that fuel a culture of diversity and inclusion. Business leaders are opening wide the doors to nonlinear thinking by maximizing individual employee strengths that lead to solutions to today’s challenging business problems. They’re doing it by zeroing in on the inclusion-innovation connection.

In its report, How Diverse Leadership Teams Boost Innovation, the Boston Consulting Group found a strong connection between the diversity of a company’s leadership teams and innovation within the company that drives the bottom line. Specifically, management teams with above-average diversity reported a higher percentage of innovation revenues — sales from products and services launched in the last three years. Diverse companies also enjoyed better overall financial performance, with EBIT margins for those companies coming in at nearly 10 percentage points higher than for companies with below-average diversity on their management teams.

Another study affirmed that the most diverse enterprises were also the most innovative, as measured by the freshness of their revenue mix. In fact, companies with above-average total diversity, measured as the average of six dimensions of diversity (migration, industry, career path, gender, education, age), had both 19% points higher innovation revenues and 9% points higher EBIT margins, on average.

Moreover, based on survey data, the study found that innovation revenues could increase by 1% just by enriching the diversity of the management team (1.5% with respect to national origin, 2% with respect to industry origin, 2.5% with respect to gender, and 3% with respect to managers with different career paths).

Chart: What drives gender equality policies and practices?

Diversity is also a critical factor in market growth, according to research undertaken by The Center for Talent Innovation. Continued innovation required to increase market share and open new markets is dependent on achieving both diversity of thought and diversity of people.

Dr. Tiffany Yates, senior manager, Organizational Strategy, said a lack of diversity and inclusion not only inhibits an organization’s ability to compete and grow, but it creates hurdles in serving clients well. “It’s important to meet clients where they are and have a voice that is like minded and creates common ground. Some organizations today don't truly know their customer journey, and what value they create in every interaction with their customer. Therefore, they can't build it from the outside in.”

In the newly-released Grant Thornton International Ltd.’s (GTI) study Women in business: Beyond policy to progress, enhancing performance was identified by 55% of U.S. respondents as being a top driver in developing gender equality policies and practices.

Indeed, as businesses across all industries face disruption, a new approach to management — “disruptive leadership” — is being implemented to focus on new ways of thinking, creative problem-solving, and utilizing innovative techniques to approach major issues in unprecedented ways. It involves building products, markets, and networks that jolt the status quo. A disruptive leader, through inclusion, invention, and innovation, drives greater impact, outcomes, and overall quality of services.

While most of today’s leaders understand that employers and the organization at large benefit from a diverse, inclusive culture, getting there is easier said than done. Doing so requires organizations to understand the difference between inherent and acquired diversity. Inherent diversity involves traits you were born with such as gender, ethnicity and sexual orientation while acquired diversity involves traits you gain from experience.

Recent research defines companies whose leaders exhibit at least three inherent and three acquired diversity traits as having two-dimensional diversity. Employees at two-dimensional companies 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. Most respondents, however — 78% — work at companies that lack 2-D diversity in leadership. 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 costs their companies crucial market opportunities, because inherently diverse contributors understand the unmet needs in under-leveraged markets.

Dimensions of Diversity of ThoughtBe bold, be brazen. Organizational leaders should be bold enough to embrace fresh thinking from all levels of the enterprise. Encourage it, inspire it and demand it.
Create a mission-driven task force. Assemble a tax force representing a diverse team based on gender, race, ethnicity, background, competency, personality style and thought.  Define a specific business goal to solve and provide the task force the time to work as a cross-functional team to solve the challenge.  Provide resources, set timelines and define measurable goals.
Prioritize innovation. While nearly every organization today aspires to be an innovator, few devote the necessary time and resources to do so. How much time each month does a team spend brainstorming? How often is input sought from all levels of the organization?
Reward innovative behaviors. Incorporate rewards and recognition in innovation strategies including compensation and performance management processes.  Consider developing programs that specifically reward individuals for introducing innovative thinking, products or processes into the organization.
Inherent diversity, however, is only half of the equation. Leaders also need acquired diversity to establish a culture in which all employees feel free to contribute ideas. Six behaviors, the report revealed, unlock innovation across the board: ensuring that everyone is heard; making it safe to propose novel ideas; giving team members decision-making authority; sharing credit for success; giving actionable feedback; and implementing feedback from the team. Leaders who give diverse voices equal airtime are nearly twice as likely as others to unleash value-driving insights, and employees in a “speak up” culture are 3.5 times as likely to contribute their full innovative potential.

Nicole Blythe, Grant Thornton’s national managing partner, People Experience, explained that it’s important to recognize what she describes as “invisible diversity”. “Regardless of race or gender, we want people who have different behavioral styles and skillsets, because that can only increase the effectiveness of the team and their thinking. Bringing a different background and experience is really important and that’s not always visible.”

Diverse, unique thinking and perspectives from a wide variety of employees with different backgrounds and experiences is critical to creating innovation. However, because individuals’ approach to thinking and thought leadership aren’t worn externally, it can be challenging to assess their work style and fit it within a pattern with a team.

Courtney Anderson, Grant Thornton’s Leader of Culture Innovation, stressed that an inclusive culture involves recognizing the power of diversity of thought. “Each of us, as individual contributors, have a different way of thinking based on our own unique experiences and background. You’re not going to be forward thinking and innovative without having different ways of thinking that are purposefully collaborating together.”

Three steps to igniting the innovation engine

“Diversity is the gas and the culture is the engine that really produces a highly innovative workplace,” said Grant Thornton’s Yates. She suggested that an innovation-focused culture is centered on three critical components.

First, a culture of innovation built upon a diverse and inclusive workforce must be integrated into the organization’s total rewards philosophy. What behaviors are rewarded and promoted? Some examples include agility, risk taking, and bold thinking and action.

Second, an appropriate reporting structure must be in place to facilitate employee to manager collaboration. “An organizational structure that is hierarchical and cultivates fear will not promote the open sharing of ideas needed to drive innovation,” Yates said. “The organization design can’t be so rigid that it restricts the flow of communication cross functionally. Best practice input are critical from all levels and it is leadership’s responsibility to make sure they are encouraged.”

Third, organizations must simply prioritize diversity and inclusion as a strategic objective by supporting programs with the appropriate people, tools and technology. How does job performance management metrics promote focus on diversity and inclusion? What tools accelerate relevant diversity and inclusion programs? How can technology create common ground thought collaboration?

“It’s about promoting diversity and inclusion in an intentional way across all aspects of an organization and empowering everyone to have an innovative approach no matter where they are,” Grant Thornton’s Yates explained. “”If you’re responsible for innovation, in a role like Chief Innovation Officer, it’s your purpose to promote that across the organization and bring in new techniques and resources to help teams engage in brainstorming and design thinking. When you build an ivory tower of innovation in the center of the organization, it doesn’t infuse and flourish across the business.”

A new approach to recruitment and onboarding
Organizations seeking to facilitate the kind of diversity of thought that drives innovation and growth need to take a close look at their recruiting strategy. Too often, organizations try to recruit and onboard talent they believe are highly innovative before thinking about what kind of organization they’re onboarding that talent to. “Often times, in interviews, organizations might say to a candidate: ‘You represent the culture we want.’ Instead, they should be saying, ‘You represent the culture we have,’” Yates said. “They are looking to bring in talent from the outside that offers a fresh perspective, a diverse look on the market, a competitive advantage or some insight they don’t have.” However, if organizations don’t already have in place a culture that fosters innovation and fresh thinking, it will be difficult to recruit and retain top talent who can bring the kind of unique perspectives that can help drive growth.

“A change agent of one or a new hire cohort will not solely drive the progress that’s needed to really deliver an innovative culture,” Yates stressed. “We need to think about how the inside of your organization operates innovatively in order to attract and retain highly innovative thought leaders. It also requires thinking about the entirety of the employee lifecycle and how to engage top talent in a diverse, inclusive way across their full career journey.”

Building the kind of culture that plays a direct role in driving innovation requires solid and courageous leadership. Grant Thornton’s Blythe suggested that “There is a distinct difference between leadership and courageous leadership, which is the willingness to have the hard conversations, to make the tough decisions, and to stick your neck out for somebody when other people won’t. It’s being able to sit and listen and have conversations about what skills are really needed and who brings them to the table, and ultimately to make the right decision based on that.”

Ready to ignite your innovation engine? Grant Thornton can help. Reach out to our professionals below.

Contacts Erica O’Malley
Erica O’Malley

Partner, Organizational Strategy
T: +1 312 602 8786

Dr. Tiffany Yates
Dr. Tiffany Yates

Senior Manager, Organizational Strategy
T: +1 678 515 2314