Beyond the numbers: How true diversity impacts innovation

It’s an unfortunate thing, but if you’re trying to make a business case for diversity in your organisation, you need to offer more than the obvious reason: because it’s the right thing to do. C-Suite might have sympathy for that position, but it’s not going to fundamentally guide their strategic thinking. At least not in the same way as stuff like profits, productivity, innovation and market cap.  

If we want to put diversity, equity and inclusion (DEI) front and centre, we need to go beyond the numbers and show how diverse workforces are more than some vague, ESG tick box. They’re simply a better way of doing business.  

Over the last 15 years or so, a lot of research has gone into this field, and the results are pretty conclusive. Studies have shown, time and time and time again, that diverse teams are better at making decisions, more likely to outperform their competitors, more engaged at work and three times more likely to be happy with their job.  

But there’s another advantage lurking behind the numbers, which is that diverse teams have 19% higher rates of innovation – at least compared to homogenous, mono-culture organisations. As the Wall Street Journal put in their first corporate ranking that examined diversity and inclusion among S&P 500 companies, “Diverse and inclusive cultures are providing companies with a competitive edge over their peers.” The important words there being “competitive” and “edge”.  

Of course, it’s worth taking a second here to define what we mean by ‘diversity’. And ‘innovation’, for that matter.  

For a diverse workforce, you have to go beyond the obvious metrics – age, gender, ethnicity and sexual orientation – and look at the whole picture: experience, industry background, career path, cultural context, and so on. A ‘diverse workforce’ isn’t necessarily one that meets rigid DEI hiring benchmarks – although it can be – it’s more about having a wide spectrum of ideas. A pluralism of thought, and even ways of thinking. That’s what creates innovation. And by ‘innovation’, we don’t mean just creativity; we mean creativity that leads directly to hard-nosed, data-backed, commercial advantage.  

In other words, profit. 

Computer scientist and former CEO, Telle Whitney, put it this way: “Diversity drives innovation – when we limit who can contribute, we in turn limit what problems we can solve.” That’s what innovation is, down at the core: the ability to solve complex creative problems. And why would a business ever want to voluntarily impose a restriction on its own problem-solving power?  

How does this work? Well, in homogenous teams, there’s a tendency for thinking to regress towards the middle. Most group members already think the same, so there’s no need to challenge that thinking, and no struggle to reach consensus. But that struggle is actually the secret sauce. A Harvard Business Review study found that diverse teams solve problems 30% faster than homogenous ones, and teams with different perspectives can help radically reduce bias in group decision-making. Embracing diversity is what unlocks our potential for innovation. Essentially, it’s our differences that force us to innovate.   

The clever leaders already know this, of course. They know that their companies benefit from attracting and developing a diverse workforce, and that the more diverse voices in a room, the smarter that room tends to be. They also know that creating and maintaining an inclusive culture is the closest thing we have to a retention silver bullet. Short version: people are more likely to want to work for diverse companies. 76% more likely, according to McKinsey.    

We don’t have to look too far to see the disastrous results of cultural homogeneity, either. With the rise of AI, we’ve seen countless industry examples of algorithms being trained on biased data, fed to them by engineers who – by definition – can’t see their blind spots. AKA their own biases. HR recruitment algorithms that preference Stanford and MIT graduates, regardless of merit. Finance AI that gives minority applicants higher risk scores. Facial recognition software that only function accurately on those with lighter skin tones. The list goes on and on. It’s an important reminder that, in an AI-powered world, diversity isn’t a nice-to-have. It fundamentally informs the way we build products, train learning models, solve problems, and do business.  
 

We need to stop thinking of diversity and DEI metrics as performative, and start thinking of them as enhancing performance. Used correctly, they can unlock business growth, profitability, creativity and innovation.  

“Businesses perform better when you have diversity of view in your senior leadership positions,” Ruth Porat, CFO of Alphabet and Google, famously said. “This is not just the right thing to do socially; it's the right thing to do for your business.”