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Diversity unlocks innovation

Globalisation and advances in technology have radically altered the way that information is exchanged, ideas and innovations are diffused, trade occurs, and companies collaborate and grow internationally. The multiple dynamics of globalization—financial flows, migration of labour and work, technological innovations, environmental sustainability, and cultural dynamics—form a turbulent and complex environment for businesses to operate in. 

It is not unreasonable to posit that every company is now a global company with their competitive environment influenced and buffeted to varying degrees by global forces. It is futile for organisations to resist these changes. Instead companies should be adaptable and implement strategies that enable them to overcome any resulting challenges. There are crucial decisions to be made by companies about which markets to enter and how to position and respond to competitors across the world with comparable innovations to their own. This is especially critical for early-stage companies which almost always have finite resources and therefore have to make strategic decisions about where to invest their time and efforts.

But there is an often under looked source that companies can leverage for competitive advantage – diversity. There is a moral imperative for encouraging and promoting diversity, as well as a business imperative. Research shows that diversity is critical for an organization's success and a key enabler of growth, with Harvard Business Reviewstating that there is compelling evidence that diversity unlocks innovation.

So, what is diversity? The Global Diversity Practice defines diversity as any dimension that can be used to differentiate groups and people from one another, for example this could be age, gender, ethnicity, religion, disability, sexual orientation etc. This is known as inherent diversity and involves traits you are born with. Diversity is multifaceted and there is also acquired diversity which involves traits you gain from experience, for example working in another country can help you understand cultural differences and the nuances of operating there. Each individual brings with them a diverse set of perspectives, work and life experiences. Companies (whether Fortune 500 or start-ups) should celebrate and utilize the rich dimensions of diversity contained within their employees.

There is a myriad of reasons for encouraging diversity. The Economist Intelligence Units study found that diverse teams tend to be more creative, produce more solutions, and were far more adept at ‘thinking outside the box.’ All of which are pivotal to the flux involved in working with early stage companies.  Last year, McKinsey released a report drawing on a data set of more than 1,000 companies across 12 countries which reaffirmed the strong link between diversity and company financial performance.  Additionally, teams that are gender, age and ethnically diverse make better decisions up to 87% of the time.

A lack of diversity can cost companies crucial market opportunities, because inherently diverse contributors understand the unmet needs in under-leveraged markets. Nowhere is this more relevant than for start-ups at the start of their commercialisation journey. One well known example of this in a more mature company is in IBM. IBM in the late '90s created a women's task force who developed the idea of providing specialized support to small and medium-sized businesses, which were more likely to be owned by women and minorities. This strategy increased the service revenue by $290 million in just three years.

What can early stage companies with large global ambitions do? They should hire skilled, diverse, and inclusive people. This will enable and foster the development of a future pool of leaders that allow the organization to adapt, produce creative solutions, and spot opportunities. A business is an ecosystem – space should be created for talented individuals to thrive, share insights, and embrace the different identities employees have. Diversity unlocks innovation by creating an environment where “outside the box” ideas are heard and with this comes creativity and value.