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Published with Der Tagesspiegel 22 Nov. 2018

Diversity Drives Innovation

When Karl Benz invented the first petrol-powered automobile in 1885, he could not have imagined that less than 20 years later, a pair of American brothers would launch their first flight in Kitty Hawk, North Carolina. The automobile is one of the most significant innovations of the industrial age; yet, its mass production had not been achieved before the next major leap in transportation arrived, airplanes.

These innovations accelerated the movement of people to the furthest corners of the globe. Today, over 1 billion vehicles travel the world’s roads, while an average of 8 million people traverse countries and time zones on a plane every day. In this movement, ideas have collided and spread. After tasting his first latte in a Milan café, Howard Schultz reinvented Starbucks to what we know today. It took moving to Australia, for Lebanese-born Aheeda Zanetti to create the burqini, a bathing suit offering full body coverage for Muslim women. Now that idea has spread for anyone worried about skin cancer.

These are examples of what I call the Medici Effect: We have our best chance of finding groundbreaking ideas at the intersection of diverse industries, disciplines, and cultures. This phenomenon is akin to the creative era the Medici family helped spur in Renaissance Florence. Put another way, diversity drives innovation.

The Convergence of Innovation and Diversity

It’s no coincidence that Florence was the epicenter of the Renaissance, situated at the crossroads of trade between East and West. Today’s digital economy has fundamentally changed trade in new and profound ways, eliminating traditional boundaries and transforming how we relate to and interact with people across the globe.

In this climate, two clear trends have emerged: innovation and diversity. In many ways these trends have been intertwined for centuries, but now they are commanding news headlines globally and top the agenda of industry and political leaders. Innovation is more critical than ever to stay competitive, spur entrepreneurship, and drive economic growth. Meanwhile the dialogue around diversity has intensified, fueled by issues of gender and sexuality to abilities and immigration, all of which have broad implications for society, culture, business and geopolitics. A growing global awareness to the multi-faceted nature of diversity is igniting a demand for action and change. We see this in the #MeToo movement happening all over the world—France, Israel, Kenya, South Korea, U.S., to name a few. The urgency of bringing more women and people of minority background into executive and board positions is cascading across industries and national lines. Laws and policies are being enacted to further pave the way for the LGBTQ community. Here in Germany, policy is moving forward to recognize a third gender. Immigration is a debate active everywhere by far-right populist parties in the U.S. under the Trump Administration, and broadly throughout Europe, South America, and Asia.

The diversity trend will only accelerate as people continue to move for any number of reasons— education, financial security, refuge from threats and persecution. From what I see, this movement of people will not stop because it is fundamentally correlated to growth and to innovation.

Innovate or Die

Commonly heard in the business world for decades, “innovate or die” has become more real and relevant in the digital age. An indicator of this is the number of patents filed. Worldwide that number jumped from under half a million in 1985 to over two million in 2016, a 300 percent increase in 30 years. Global funding platform Gust conducted a study tracking the entry of startup accelerator programs around the world and found an exponential rise between 2000, with zero programs, and 2015, with 26 entrants incubating startups offering with new products, services, and business models.

Think startups can’t possibly have impact? Consider Tesla, Netflix, and AirBnB, to name a few. Once startups themselves, these companies have brought disruption to their industry. They proved that in a boundaryless global economy, competitors can emerge from anywhere. In some cases, unexpected competition has had repercussions that go beyond losing market share. Nokia’s fall took the Finnish economy with it, coinciding with a recession that is still felt today. Innovation is not only necessary to remain competitive but also to drive growth and survive. Dr. Thomas Funke, who I met in Frankfurt a few months ago, expressed concern about Germany’s large companies. “They have had working business models for 200 years. It’s hard for them to imagine new revenue streams, but they need to move out their traditional ways of thinking.” One way that Dr. Funke is trying to enable this shift is through TechQuartier, which he co-founded to connect major banks and global financial services leaders to Germany’s vibrant ecosystem of FinTech startups.

Walldorf-based SAP, which ranks among the 10 largest software companies in the world, has seen its share of upstarts in its industry. “We are a 46-year old company in a face-paced digital world where everyone is continually trying to disrupt, to stay relevant,” Executive Board Member Jennifer Morgan expressed to me. “To thrive in a constantly changing business and geopolitical landscape, we need to innovate faster and that often means tapping into new and diverse pools of talent.”

Diversity is an Engine of Growth

SAP isn’t the only company looking to its diverse talent to innovate. Although much of innovation today revolves around technology and science, at its core, people make innovation happen. The more diverse the team, the greater the possibility for unexpected and powerful connections that break new ground by the different perspectives, networks and experiences individuals bring. A 2017 study by the Technical University of Munich found there is a positive relationship of diversity and business performance and innovation—that’s just one study from a still growing collection dating back to 1980 from institutions all over the world.

The Walt Disney Company has made diversity a key business strategy to open up massive, new growth opportunities. It was no accident that Disney’s Marvel Studios was the first studio to release a big-budget superhero movie with diverse talent both in front of and behind the camera. 2018’s Black Panther dismantled racial, cultural, and gender stereotypes on a scale that Hollywood had never attempted before. To date, the movie has brought in over €1.14B (€21M in Germany). Disney is taking a stance on the future—society is vibrant, diverse, and multicultural, and viewers want entertainment that reflects this. Disney is one of the first movers in its industry to make such a huge bet on diversity, and by doing so creating huge advantages for itself.

While it is easy to look at diversity in terms of gender, ethnicity, sexuality and abilities, it is much more multi-dimensional. At my firm, The Medici Group, we believe diversity refers to who we are, such as the above; what we do, meaning education, industry or department we work in, function we hold; and how we do it, such as our thinking or interaction styles (e.g., introvert, extrovert). Disney, a company we have worked with for 10 years, understands this well.

We use this approach to diversity with teams worldwide, at companies large and small and across sectors like consumer goods, technology, government, biopharma and engineering. The empirical evidence is consistent. Diverse teams: 1) generate more unique ideas, 2) select better ideas, and 3) execute faster under tight constraints. Diverse teams, where all members are included and have a voice and opinion, are able to tap into a broader set of relationships and resources, which allows them to explore more pathways, increasing the chances for a breakthrough.

Belén Garijo sees this every day as an Executive Board Member and the CEO of Healthcare for Merck KGaA, Darmstadt, Germany. She affirms, “Having a diverse team is essential to a leader’s success. When people from different backgrounds, cultures, and communication styles all add their own perspective, we are better equipped to deliver on our mission of being a global leader in science and technology.”

The Future is Diverse

Our industrial and digital age innovations have remade the world. Walls and boundaries cannot stop the flow of people, ideas and competition. Thriving in this new world order means taking on new perspectives, even ones that do not align with yours. This difference has potential for great innovation and ingenuity. This applies to your organization, your team, your network, and your personal goals.

Wherever you can, increase the diversity in your organization and teams. Recall the many dimensions of diversity that my firm promotes. Sometimes diversity is having someone of minority background; other times it is having someone who spent their career in a completely different industry. With so many factors to consider, you can get creative in the dimensions your add to your team.

There’s a catch, however. It’s not enough to have diversity. It has to been activated, meaning that all individuals are allowed a perspective, and feel that what they bring is encouraged and valued. Similar to “active listening,” active inclusion takes conscious effort, otherwise, it is easy to fall back into habit. Even the most careful individual can be dismissive or shut perspectives down, out of habit.

Lastly, direct these intersections into driving new products or services, business models, marketing strategies, etc. Organizations that can achieve this are well positions to use diversity and inclusion ti its most strategic advantage—that is, to drive the future. Channel Apple CEO Tim Cook, who stated in 2015: “I think the most diverse group will produce the best product, I firmly believe that.” Apple’s website backs this up, “The most innovative company must also be the most diverse.”

The world is connected. To innovate, you should make those connections.

Frans Johansson is founder and CEO of New York-based The Medici Group. His book, The Medici Effect, has influenced business leaders, educators, scientists, entrepreneurs, and policymakers around the world.