Thursday, October 04, 2012

Improving Innovation with Diversity

Recently, I was giving a talk on innovation and a person in the audience asked me the question: Why diversity is important for Innovation?

Many people in the audience were initially amused by the question. It sounds so obvious that diversity helps innovation, but when I turned the question back to audience, they was whole lot of discussion on the subject. The outcome of this discussion is documented in this article.

Today, in the global world, everyone agrees that successful innovation is the key to profitability. And innovation requires smart people with better ideas. Herein lies an intuitive and the most powerful force for innovation: Workforce diversity.

Almost everyone agrees that diversity is good for innovation, but most people cannot reason out on how diversity helps innovation or explain why diversity helps innovation.


At the first glance, innovation has nothing to do with diversity. A lone inventor working in a lab gets his "eureka" moment and he goes on to create a path breaking invention. In that environment there was no diversity & yet innovation happened. So at the first glance, diversity has little to do with innovation. This was the situation in the industrial age (1850-1920). Thomas Edison, Henry Ford, Alfred Diesel, Nikola Tesla, were all strong individuals who were the beacons on invention. The term "innovation" was not invented yet.

But then, when we look little deeper at the invention, and the process of invention - the need for diversity becomes clearer. Let take a simple example of Edison's invention of light bulb as an example. The first light bulb created by Edison was made of a carbon fiber held between to electrical points in a vacuum glass bulb. Thomas Edison did not even invent one single item that made up the light bulb, his invention was in effect a recipe of putting various things together that made the light bulb work. Edison worked on proven concepts and ideas. Humphry Davy from UK has proved that electricity can be converted into light - by passing high voltage current through a filament of platinum. Another British scientist Warren de la Rue demonstrated that vacuum environments is necessary to longevity of the filament. American inventor John W. Starr proved the use of carbon filaments in light bulbs. The glass itself was originally invented by Arabs and perfected by Venetians. Now when we look at all the people involved in creating various components that make up the light bulb, it becomes clear that a lone individual could not have invented the light bulb. The final invention was a culmination of efforts of a diverse set of individuals.

Now in 21st century, things are not too different - though the pace of innovation has increased tremendously. What used to take a decade to develop in 1900 is now developed in a year.  The technical complexity needed to solve a problem has also increased tremendously. The only way to address the need for faster pace and handling technical complexity is talent. We need more number of intelligent people to innovate. Getting the best talent means getting people from different parts of the world - in other words get a diverse set of people to work on the big problem.

For innovation to happen people have to share their knowledge and work together.

Basic definitions

To understand the benefits of diversity in Innovation, first we need to define and understand a few key terms:
1. Diversity
2. Innovation
3. Successful Innovation.

What is diversity?

Diversity is defined as a group of  people who have differences in race, gender, ethnicity, physical capabilities, and sexual orientation - social or political differences.

What is Innovation?

Innovation is defined as development of new solutions that needs the needs of customers, where new solutions offer greater value to customers. Innovations can be a mix of products, services, technologies and ideas. Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself. (source: Wikipedia)

What is Successful Innovation?

Successful innovation is the innovation that gives greater value to the innovator - i.e., the innovation that gives greater profit/benefit to the innovator than the other alternatives. Often times successful innovation is most often characterized by financial success.

Why have diversity?

Diversity is a good thing, but are there reasons to have diversity? In my opinion, there are three major reasons for diversity:

   1. Speedup Innovation
   2. Tap into specialized Skills
   3. Get different perspectives.

Speedup Innovation

Innovation requires quality talent and in right quantities. As the pace of innovation increased, there is the pressure to innovate faster, this implied that more talented people are needed. Good talent is tough to find in one single location. Immigration laws have hindered people movement, companies are forced to open multiple R&D centers all over the world to attract the best talent. Companies such as Intel, Cisco, Microsoft, Google, EMC, GE, Roche, etc., have setup R&D centers all over the world. Now companies have centers in USA, UK, France, India, China, Israel, Russia, Australia, Korea, Brazil and host of other countries. These global R&D centers collaborate to speed up innovation.

Tap into specialized Skills

When we look around the world, we find that not all the skills are available in all countries in equal measures. Some countries have specialized in certain technologies or certain skills. This specialization has allowed countries to create a competitive advantage. For example, France has specialized in Aviation & Nuclear energy. Germany has specialized in Automobiles and heavy engineering. USA has specialized in Software, Biotechnology, & Semiconductors, India has specialized in software and heavy engineering. China has specialized in manufacturing.

Innovation needs multiple skill sets. So when companies look for skills, they need to set up R&D centers in countries which has those skill sets or get people to immigrate to a central R&D center. For a long time California was a hot bed of innovation - because companies could get people from all over the world to work in California, but with changing immigration rules, companies are forced to set up multiple R&D centers.

Get different perspectives

Today. Customers are global, products are global. A new product - say Samsung Galaxy phones are being used world wide over and by people of all ethnicity, cultures, genders, etc. So when the products have to be sold to a diverse set of customers, the product development team will need different perspectives - and the best way to get that is to have a diversity in the innovation teams.

People with different skill sets and with different cultural backgrounds see different problems and solutions. Getting multiple perspectives to the problem helps to create new and better solutions. To understand this, consider the example of Samsung's Galaxy cell phones. Samsung understood the need to have a global perspective for its smart phones and developed phones with different designs - There are several designs of smart phones instead of having one standard design. The phones in some markets allow dual SIM, so that people can use the same phone with multiple carriers, the user interface & screens are customized, and the phones are priced differently as well. The range and diversity of Galaxy phones led to the success of Samsung in Smart phone business.

Diversity also brings in sensitivity towards different customers & markets. This helps in avoiding cultural blunders when developing new products. If GM had Mexican engineers in its team in 1970's - it could have avoided the 'Chevy Nova' branding blunder.

How diversity helps in creating successful innovation?

We know that diversity can help innovation, but can diversity help in successful innovation?

To answer this, we need to understand the word "success".

In simple concepts of economics, success is maximizing the increase in economic output with minimal increase in inputs. Where the economic inputs are capital & labor, and output is sales revenue.  This basic principles explains why governments and companies like to increase  spending on education and R&D.

Economic success through diversity has three distinct aspects:

1. Synergy from different combination of ideas
2. Enhance Organizational Efficiency
3. Increasing corporate profits

Synergy of Ideas

Diversity brings in different perspectives and different ideas and these ideas can be combined in many ways. Diversity helps pick the right combination of ideas that can address different markets. For example, at EMC, two teams of engineers developed two products - Atmos, a cloud storage system and Smarts a network management software. Another team saw both the ideas and saw value in combining the two products that enhances the value of Atmos. The new idea did not cost much - but the value was very high.

Enhance Organizational Efficiency

Diversity also improves organization efficiency in many subtle ways.

1. Easier to attract talent.
Having a diverse workforce will help attract talent - which lowers cost of hiring & helps towards innovation. 

2. Management Processes
People from different cultures bring with them different management processes and techniques. 

3. Understand market requirements & help enter new markets
People who share the same cultural background as the customer will understand the needs and nuances of the market better.

4. Improve customer service.
Better understanding of customers leads to better quality of service

5. Improves investment climate.
Diversity in the management & leadership levels will make it easier to attract capital from different markets/investors.

Overall, diversity helps lower the cost of operations. This helps improve operational efficiency.

Increasing corporate profits

The big benefit of diversity is that when innovation projects are well managed, it helps increase market size, lowers costs of development and can increase revenue in a big way. With proper management, diversity can be used to increase corporate profits & shareholder value.

Closing Thoughts 

The globalization of business has created a hyper competitive and a complex business environment. To be successful, companies now need to create new products and services while lowering the cost of development. The best way to do that is to have a global, diverse workforce.

A diverse R&D team is a necessity for innovation and to develop global business strategies. Having multiple voices will lead to new ideas, new services, and new products, and encourage out-of-the-box thinking. Today, companies no longer view diversity and inclusion efforts as separate from their other business practices, and recognize that a diverse workforce can differentiate them from their competitors by attracting top talent and capturing new clients.

Innovation provides the seeds for economic growth, and for that innovation to happen depends as much on collective difference as on aggregate ability. If people think alike then no matter how smart they are they most likely will get stuck at the same locally optimal solutions. Finding new and better solutions, innovating, requires thinking differently. That's why diversity improves innovation.

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