Team diversity: The foundation for successful innovation

Where does successful innovation originate? A eureka moment in the shower? A whiteboard coated in post-its and sharpie scribbles? Inspiration and ideation are indeed critical steps for successful innovation, but there is one important factor that may precede them: team diversity.

Diversity is often in the headlines for unfortunate reasons. Overall representation of women and ethnic minorities in the tech industry is abysmally low, and many companies are plagued by sexual harassment and discrimination scandals.  Although inclusiveness and diversity are moral obligations, they also make sense from a business perspective. As will be discussed in the following sections, a number of studies empirically link team diversity (i.e. gender, ethnicity, and education) to innovation performance.

Gender balance and innovation

In a study looking at the composition of 4277 Spanish tech firms, researchers sought to determine whether gender diversity (i.e. balance) predicted firm innovation (Díaz-García, González-Moreno, & Sáez-Martínez, 2013). This is especially relevant for Spain, where the authors note that the technology sector is particularly imbalanced (64.2% male). The dependent variable was whether the firm had produced a new product on the market in the past two years (i.e. radical innovation), based on data from the Eurostat’s ‘Community Innovation Survey’ (CIS).

As predicted, gender diversity had a positive and significant impact on radical innovation. Why is this? Citing a variety of literature on the effect of gender diversity in teams, the authors argue that benefits arise from combining people with different sets of knowledge, career trajectories, and socialization. It is also worth noting that this finding is not isolated: a 2011 Danish study found similar benefits of gender diversity (Østergaard, Timmermans, & Kristinsson, 2011).

Ethnicity and education

The benefits reaped by diversity are not only limited to gender. A very recent paper looking at team composition in terms of international origins and educational backgrounds found similar results (Mohammadi, Broström, & Franzoni, 2017). This time the authors looked at diversity in highly-skilled workers (i.e. those tasked with new product decisions) in 3888 Swedish firms.

Ethnic diversity was assessed in two ways. First, the authors looked at whether employees were from Sweden, other Nordic countries, Western Europe, other European countries, North America, Asia, or others. As an alternate measure, they also looked at how long employees had lived in Sweden. Educational background was categorized by the following disciplines: engineering, humanities, health sciences, natural sciences, social sciences, and others.

The authors then linked these diversity scores with the turnover generated by new products. As predicted, greater diversity predicted greater innovation. For example, increasing ethnic diversity by one standard deviation resulted in increased innovation turnover by 1.3%, and 5% for educational diversity. It is, however, worth noting that the same Danish study cited earlier also found benefits associated with educational diversity, they were unable to find any link with ethnic diversity.

Diversity challenges harmony

Although there are a variety of reasons for why diversity may foster innovation, one study from 2009 proposes an interesting explanation (Phillips, Liljenquist, & Neale, 2009). In a creative experiment, the researchers asked three participants from a fraternity or sorority to attempt to solve a fictional murder, based on a series of interviews conducted by a detective. After a short period, someone joined the group from the same fraternity or sorority (in-group), or a different one (out-group). Interestingly, the authors found that not only did the diverse groups perform better (i.e. solve the murder), this increased performance was not based upon new ideas.

Instead, outgroup members challenged in-group harmony. When an in-group member found himself or herself agreeing with the conclusions of the out-group addition, he or she focused more on the task to justify their agreement. In other words, participants were motivated to explain this agreement with an outsider, which led to greater justification and attention to the problem at hand. This finding indicates that one of the ways that diversity helps promote innovation is to reduce complacency within a group. Dissenting opinions may be given more consideration, thereby increasing the probability of effective decision-making.

What if you can’t hire anyone new?

What if your organization is homogenous, but you lack the resources to increase internal diversity? One option may be to look for external partners, such as universities, customers, and even crowd-sourcing. For example, the authors of the study in Sweden found that when firms engage in external collaborations, they can compensate for a lack of educational diversity (although not ethnic diversity), and thereby still boost innovation success.

Initiatives such as EasyAccessIP, a collective of universities and research institutes dedicated to disseminating information and industrial collaborations, offer an excellent way for firms lacking educational diversity to overcome innovation challenges and move forward.

Conclusion

Organizations can use a variety of methodologies to innovate, including a variety of different brainstorming methods, using external collaborations or consultants, and even crowdsourcing. However, the research above suggests that everything may begin with the hiring process. Ensuring that you have a range of dissenting opinions, different backgrounds, and dissimilar life perspectives is key to laying the foundation for successful innovation.

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References

Díaz-García, C., González-Moreno, A., & Jose Sáez-Martínez, F. (2013). Gender diversity within R&D teams: Its impact on radicalness of innovation. Innovation15(2), 149-160.

Mohammadi, A., Broström, A., & Franzoni, C. (2017). Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm‐Level Innovativeness. Journal of Product Innovation Management34(4), 406-426.

Østergaard, C. R., Timmermans, B., & Kristinsson, K. (2011). Does a different view create something new? The effect of employee diversity on innovation. Research Policy40(3), 500-509.

Phillips, K. W., Liljenquist, K. A., & Neale, M. A. (2009). Is the pain worth the gain? The advantages and liabilities of agreeing with socially distinct newcomers. Personality and Social Psychology Bulletin35(3), 336-350.