How Diversity Improves Innovation

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How Diversity Improves Innovation

Evidence suggests that businesses with diverse leadership teams hold some significant advantages. See how diversity can help your business be more innovative and profitable too.

Lately there has been a flurry of studies looking at the impact of diversity on business results, and it’s clear. The businesses with more diverse leadership teams had a significant advantage over others.

  • A 2012 survey by McKinsey and Co. found that companies with diverse executive boards enjoy significantly higher earnings and returns on equity.
  • A 2016 survey by the Peterson Institute for International Economics found that “having women at the C-Suite level significantly increases net margins.”
  • A 2017 report on the research of Mayer, Warr and Zhao found diversity in the workplace leads to more innovation.
  • Arizona University research shows “… companies that have women in top management roles experience what we call ‘innovation intensity’ and produce more patents — by an average of 20 percent more than teams with male leaders.”

So, the evidence is there.

Companies which value and create diverse teams – in both gender and culture – are more profitable and more innovative. This shows in bottom line results of each business. The question is, how does diversity have such a positive effect on profitability?

Innovation

It stands to reason that teams made up of people from different cultural backgrounds, ages, genders and experiences will be more likely to have a broader view of the world. Such diversity inspires creativity and allows teams to approach problems or develop solutions in new ways. There’s a wide range of insight and understanding in these teams, and that’s what sparks new ideas, new systems and new products.

Talent attraction and retention

There’s a pool of talent out there which hasn’t been tapped into because they come from a different cultural background. When a business is known to be pro-diversity, it will attract these talented people, giving access to high performing individuals, and ultimately the edge in the marketplace. People will be more inclined to stay in a business where they are heard and valued, so retention is higher. Pro-diversity businesses have access to a broader range of top talent and find it easier to keep them.

Decision making

Eileen Taylor, global head of diversity, Deutsche Bank, is quoted by Forbes as saying,

“Diverse teams and companies make better decisions.”

Diverse teams bring a wide range of perspectives which can help shape or reshape company decisions, from product creation through to marketing. This is especially important today where many businesses have a global market. Having people on your team who can interpret, explain cultural differences, point out cultural sensitivities and suggest the most appropriate marketing approach will not only save you a fortune, but will produce more targeted results.

How diverse is your business? 

There are still many businesses which haven’t come to terms with diversity and they are missing out on some serious advantages. Given the evidence pointing to higher returns, higher productivity and higher innovation, they should be making some changes right now. The longer they put off transforming into a diverse business, the further they’ll slip in the marketplace.

How do you encourage diversity in your business? We would love to hear from you! Please leave a comment below.

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I am a Mum, business founder, author and accomplished CEO with over 20 years’ experience in the corporate world. My childhood dream was to become a fighter pilot, but when that didn’t materialise, I found my place in the corporate world, climbing the sales and marketing ladder to my role as CEO of Cox & Kings Australia.

I'm the founder of Empowering Ambitious Women, I've led start-ups to companies with annual revenues from $55 million to more than $250 million. My role as CEO of Australia’s leading franchise network of professional builders saw me as a pioneer in the industry; as a female CEO leading a large franchise home building company.

I was formally recognised twice by the Telstra Business Women's Awards my achievements in business.

As a woman who became one of the 16% of female CEOs, and who has led in male-dominated industries, I’m passionate about creating pathways for women leaders to step up, take a seat at the table and own it.

I love; French champagne, socialising, dining out and having an impact...

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