Diversity: Don't Innovate Without It

If your employees represent a cross-section of the U.S. population, they'll come up with better ideas, and you'll appeal to a larger audience

A white guy, a white guy, and a white guy walk into a bar…did we lose you yet?

Thought so. Nothing interesting was going to come from that joke. Humor works when you have an unexpected, compelling outcome. So does the innovation process. In fact, that's the goal, and it's often achieved by adding diversity—getting the ideas of people of different ages, genders, races, and ethnic backgrounds; people with varying perspectives, personalities, experiences, mindsets, etc.

But when most think about the topic of diversity, it is invariably in terms of "inclusion," "multicultural acceptance," and "global integration." All of those have tremendous merit, but why the heck, when you hear the word "diversity," are you suddenly thinking like someone who has Equal Employment Opportunity responsibilities? Yes, your company does, but you are responsible for hardcore growth results: marketing, and new product development.

Sustainable Competitive Advantage

So start thinking about diversity that way. And if you do, you will elevate the value of diversity far beyond the words in the employee handbook. In fact, you are bound to come up with: Diversity=Sustainable Competitive Advantage. (This, of course, is the Holy Grail.)

Don't take our word for it. Some of the best, and most innovative, companies—Booz Allen Hamilton, Deutsche Bank (DB), DuPont (DD), Pfizer (PFE), and Raytheon (RTN)—believe diversity to be one of the invaluable ingredients that leads to sustainable competitive advantage.

The argument breaks into three parts:

1. Understanding. If your workforce mirrors the diverse demographics and cultural aspects of your customers, you are bound to have a better understanding of your audience. (Providing you encourage all those unique voices to contribute. If all you are doing is counting heads—"let's see we employ 53% women, 11% blacks, 16% Hispanics…yep, we're covered; now let's have the same old people at the top make all the decisions as they always have in the same old ways"—you have not gained a thing.)

2. Credibility. If your workforce looks like the people you are trying to reach, you increase the odds of closing the sale. Let's use a simple example to make the point. From whom would 22-year-old guys want to buy their $85 athletic shoes? A 63-year-old grandmother or a 22-year-old guy?

3. Connectedness. And if your workforce is the same as the people you are trying to reach, you are bound to be closer to them at all times, which give you a leg up on the competition.

The takeaway is clear: Diversity makes a company more capable—because you are adding more skills, and smarter—because you are drawing on more, and different, brains.

Innovation success is driven by the ability to make connections (BusinessWeek.com, 4/10/08). Most connections that lead to meaningful innovations are part of your current perspective or world view. (Want proof. Sit down and a draw up a list of all the things you have never thought of.)

That's where the benefit of diversity comes in. It provides a different lens that allows us to see the world in a different way. The more (different) inputs we have to work with, the better chance we have to make connections.

So you can see how innovation can actually be fueled by diversity. Too abstract? Okay how about some numbers, courtesy of The New York Times?

What the Demographics Say

Hispanics, African Americans, and Asian Americans now constitute almost 30% of the country's population, or 85 million people. These three groups, taken as a whole, already represent the majority in the 10 largest U.S. cities. They are also the fastest-growing populations in 50 of the top urban areas. Since 1999 they have become, for the first time in history, the majority group in California, which is the largest and most powerful consumer market in the U.S. Across the country, they command over $1.5 trillion in annual purchasing power. By the year 2050, these same groups will tip the scale from minority to majority.

Wouldn't you want to know what it's going to take to get all those people to buy from you? Shouldn't you be tapping into their thinking? Talent, brains, curiosity, and creativity are all race/gender/ethnicity agnostic, and an indispensable part of your innovation success. We recommend you don't innovate without as many different viewpoints as possible.

That—and not some government mandate—is why diversity is important. (Sorry for the bad joke at the beginning.)

Before it's here, it's on the Bloomberg Terminal.