Innovation and Diversity

Tomorrow’s management systems will need to value diversity, dissent and divergence as highly as conformance, consensus and cohesion.

A while ago, I came across this tweet by Gary Hamel.  It reflects well the fact that businesses range in increasingly dynamic and complex environments, imposing accelerated and mostly unforeseeable change. The most promising way for organizations to face this unprecedented discontinuity is to develop an ability to adapt to changing conditions and emerging opportunities: Adaptability.

Following Gary Hamel, he proposes in particular two capabilities in order to build a highly adaptable organization:

Intellectual Flexibility, i.e.

• regarding every belief as a hypothesis forever open to disconfirmation
• generating a variety of perspectives through embracing diversity, divergent thinking and dissent

Strategic Variety, i.e.

• building a portfolio of strategic options and ideas
• exploring a lot of new options and maximize learning-over-investment ratio through experimentation

(I recommend reading the entire two-part post incl. part 2)

Basically, both capabilities are interrelated: the creation of a variety of options and ideas requires (cognitive) diversity, enabling complementation and recombination of diverse angles. Innovation can be considered an evolutionary process, providing the variation that organizations need to adapt and survive. What’s true in nature is also true in business – a lack of diversity limits variation and the organization’s ability to adapt. Moreover, complex problems can often be solved through re-framing the problem or recombined solutions, i.e. putting existing pieces together in a game-changing way. Both types of innovation leverage collective intelligence, being fed by diversity of different people, disciplines and perspectives.

As diversity turns out to be a crucial ingredient for modern organizations, I’d like to discuss some implications:

Workforce and Network Diversity

Diversity in teams or networks pays attention to the fact that every individual has its limitations in terms of personality, culture, expertise as well as framing and solving problems. Collaboration in (cognitively) diverse teams and networks balances individual blind spots and attention blindness by combining heterogeneous profiles. The benefits of diversity have been widely indicated in research. Some examples:

• A recent Fobes study has identified workforce diversity as key driver of innovation and as a critical component of being successful on a global scale.
• Lu Hong and Scott E. Page have shown that groups of diverse problem solvers can outperform groups of high-ability problem solvers (experts).
• Scott E. Page has also demonstrated how, when making predictions, a group’s errors depend in equal parts on the ability of its members to predict and their diversity, simply expressed as: collective accuracy = average accuracy + diversity.
• Stylianos Kavadias and Svenja C. Sommer have shown that higher group diversity has a positive effect for solving cross-functional problems.
• Companies with diverse executive boards have been proven to enjoy significantly higher earnings and returns on equity.

There are several levers to enhance firm performance through nurturing organizational diversity:

• Cultural diversity: multicultural networks promote creativity.
• Gender diversity: teams containing more women demonstrate greater social sensitivity and in turn greater collective intelligence.
• Generational diversity: age may be an advantage when it comes to entrepreneurship and ever rising complexity.

Workforce and network diversity has its merits for collaboration. However, leading and managing collaboration requires taking note of some issues:

Innovation requires both, structured, goal-oriented as well as informal collaboration. The former relates to an analytical approach, the latter to an interpretive approach for innovation. Interpretive innovation utilizes meaning-making conversations of different stakeholders for novel ideas to emerge. Involving external interpreters beyond organizational boundaries increases diversity, thus stimulating divergent thinking.

Diversity seems to have a negative effect on convergent thinking, and this is because convergent processes are all about knowing how to evaluate ideas in light of achieving a shared vision. Moreover, different disciplines or domains often have different core values, and have grown together as social groups precisely because of the shared values within each discipline. In order for a new interdisciplinary team to become effective, the team must develop shared values and culture.

Proximity matters for collaboration and innovation. Face-to-face conversations tend to provide a better quality of interaction as well as a higher likelihood of serendipity, compared to online platforms. Furthermore, tacit knowledge is more likely to flow during face-to-face exchange.

Individual Diversity

In their book The Innovator’s DNA, Jeff Dyer, Hal Gregersen and Clayton Christensen identify Associating as key skill for innovators. They describe:

First and foremost, innovators count on a cognitive skill that we call “associational thinking” or simply “associating.” Associating happens as the brain tries to synthesize and make sense of novel inputs. It helps innovators discover new directions by making connections across seemingly unrelated questions, problems, or ideas. Innovative breakthroughs often happen at the intersection of diverse disciplines and fields.

Associating, in turn, implies having access to diverse sources of information and ideas. People who bridge different knowledge or disciplinary network domains are referred to as brokers or domain spanners. Research indicates that those domain spanners have higher ideation performance than individuals engaged in only one knowledge domain. In today’s knowledge economy, value is increasingly created by establishing and utilizing appropriate networks to get complex tasks done. Harold Jarche makes a good point:

Innovation is not so much about having ideas as it is about making connections.

Interestingly, research from Ronald S. Burt reveals that it’s misleading to presume that people benefit from their connections just by tapping new information:

Networks give people a “vision advantage” in terms of seeing and developing rewarding opportunities. But the lack of spillover from a neighbor’s network implies that this advantage comes not from having access to new information, but rather from having to juggle diverse bits of information.

It suggests networking is not so much about ‘tapping a (large) network’, but rather about ‘building the right network’ and working across people with diverse views and behaviors. This requires individual awareness and personal development, as studies show a paradox that people tend to praise diversity on the one hand, but exhibit a tendency towards similarity on the other. In particular, this has turned out to be valid for businesspeople where, after expressing a desire to meet new people from new industries, they most often socialize with members of their same field. According to Brian Uzzi and Jarrett Spiro, successful networks feature a mix of strong and weak ties. However, this doesn’t imply that mixed teams, consisting of existing relationships and new team members, perform best in general.

Brokers are essential for innovation. Broking can have significant personal payoffs. But at the same time it can be intellectually demanding and stressful to span the intersection of multiple domains, cultures or personalities. Particular traits are required to thrive in this environment. Therefore, brokers tend to be socially adaptable, disruptive and individualistic, among others. Furthermore, they need to be able to integrate opposing viewpoints and tolerate ambiguity. Beside broking, people at intersections can also act as builders, introducing unconnected contacts to each other in order to optimize the network structure. Leveraging capable people to interact in diverse networks is likely to bear significant potential for value creation and performance improvement of organizations. That’s related to what John Hagel, John Seely Brown and Lang Davison describe as Collaboration Curve.

Takeaway

Diversity in organizations becomes more and more crucial in order to build an ability to successfully adapt and innovate in complex environments. In order to leverage diversity, it needs to be addressed on different levels:

Organizations are required to enable the formation and proper interaction of diverse workforces and networks. Organizational success depends on a proper mix of formal and informal collaboration. Particularly, the latter brings forward novel ideas through conversation between diverse interpreters. This implies working across organizational silos and utilizing external relationships, depending on problem and context. Leading diverse groups requires a proper balance of encouraging dissent and divergent thinking with building consent through shared vision and values.

On an individual level, appropriate people need to be recruited and developed to succeed at network intersections. First and foremost, they need to be integrative and associational thinkers to connect with diversity.