By Ruba Qaqish
Generating revenue by introducing new products and services to the market has been an integral part of the growth of Saskatoon’s companies. But until very recently, few company leaders, all over the world and here in Saskatoon, knew that diversity in their teams could be a catalyst for the creative ideas driving that growth, nor did they know that more equal gender representation in their leadership teams could boost revenue from innovation to above-average levels.
Through her work with companies in Europe and the US, Rocío Lorenzo, a management consultant and diversity researcher, noticed that diverse teams developed fresher and more creative ideas. To find out whether diverse companies are really more innovative and whether they have a competitive advantage, she and her team conducted a study in cooperation with the Technical University of Munich. They surveyed 171 companies in Germany, Austria, and Switzerland, asking two main questions: what is the company’s innovation revenue (revenue from new products and services arising from creative ideas) and what is the diversity of the company’s employees (country of origin, age, and gender, among others).
The results confirmed that the more diverse companies are, the more innovative they are. The results went deeper, revealing an interesting fact about gender diversity: “It is only when you have more than 20% women in leadership that you see a clear jump in innovation revenue to above-average levels.”
Over the past 20 years, the number of female college/university graduates with 10 years of professional experience has increased. Contrary to expectations, the increase in the number of women in leadership positions has not followed that increase – it’s not even close. This means that the best-educated female generation in history has failed to achieve leadership in significant numbers. So if companies want to achieve 20% female leadership and reach their goals in innovation revenue, and if time, education, and experience are not factors in the equation, what is? What’s the path to change? How can companies achieve these goals?
To Lorenzo, the solution is simple. It is in the two decisions that each business owner makes every day: who to hire and who to develop and promote.
To Lorenzo, the solution is simple. It is in the two decisions that each business owner makes every day: who to hire and who to develop and promote. Software company SAP had 19% women in leadership in 2011. The firm decided to do better and did what one does in any other areas of business in which one wants to improve: set a measurable target. SAP set a target of having 25% female leaders in 2017, which it achieved. It is now aiming for 30% women in leadership in 2022. Companies like Alibaba, JP Morgan, and Apple have already reached that threshold.
Previously, leaders did not have any specific reason to believe that diversity might help them achieve their goals. But this research shows that greater diversity results in greater innovation. The question now is whether business owners will prioritize diversity when selecting their leadership team, not because it is something they have to comply with, but because they know that diversity is the path to a more innovative business – while providing true opportunity for everyone.
Source: “How diversity makes teams more innovative,” TED Talk by Rocío Lorenzo, Oct. 2017.
First published in the September 2018 edition of The Business Advisor.