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Rocío Lorenzo: How diversity makes teams more innovative
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Are diverse companies really more innovative? Rocío Lorenzo and her team surveyed 171 companies to find out -- and the answer was a clear yes. In a talk that will help you build a better, more robust company, Lorenzo dives into the data and explains how your company can start producing fresher, more creative ideas by treating diversity as a competitive advantage.
Rocío Lorenzo - Management consultant, diversity researcher
BCG's Rocío Lorenzo advises telecommunication and media companies on their strategy and how to transform their businesses in times of digital disruption. Full bio
BCG's Rocío Lorenzo advises telecommunication and media companies on their strategy and how to transform their businesses in times of digital disruption. Full bio
Double-click the English transcript below to play the video.
00:13
Fifteen years ago,
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I thought that the diversity stuff
was not something I had to worry about.
was not something I had to worry about.
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It was something an older
generation had to fight for.
generation had to fight for.
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In my university,
we were 50-50, male-female,
we were 50-50, male-female,
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and we women often had better grades.
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So while not everything was perfect,
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diversity and leadership decisions
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was something that would happen
naturally over time, right?
naturally over time, right?
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Well, not quite.
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While moving up the ladder
working as a management consultant
working as a management consultant
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across Europe and the US,
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I started to realize how often
I was the only woman in the room
I was the only woman in the room
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and how homogenous leadership still is.
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Many leaders I met
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saw diversity as something to comply with
out of political correctness,
out of political correctness,
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or, best case, the right thing to do,
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but not as a business priority.
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They just did not have a reason to believe
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that diversity would help them achieve
their most immediate, pressing goals:
their most immediate, pressing goals:
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hitting the numbers,
delivering the new product,
delivering the new product,
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the real goals they are measured by.
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My personal experience
working with diverse teams
working with diverse teams
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had been that while they require
a little bit more effort at the beginning,
a little bit more effort at the beginning,
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they did bring fresher,
more creative ideas.
more creative ideas.
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So I wanted to know:
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Are diverse organizations
really more innovative,
really more innovative,
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and can diversity be more
than something to comply with?
than something to comply with?
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Can it be a real competitive advantage?
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So to find out, we set up a study
with the Technical University of Munich.
with the Technical University of Munich.
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We surveyed 171 companies
in Germany, Austria and Switzerland,
in Germany, Austria and Switzerland,
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and as we speak, we're expanding the study
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to 1,600 companies
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in five additional countries
around the world.
around the world.
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We asked those companies
basically two things:
basically two things:
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how innovative they are
and how diverse they are.
and how diverse they are.
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To measure the first one,
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we asked them about innovation revenue.
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Innovation revenue is the share
of revenues they've made
of revenues they've made
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from new products and services
in the last three years,
in the last three years,
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meaning we did not ask them
how many creative ideas they have,
how many creative ideas they have,
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but rather if these ideas
translate into products and services
translate into products and services
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that really make the company
more successful today and tomorrow.
more successful today and tomorrow.
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To measure diversity,
we looked at six different factors:
we looked at six different factors:
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country of origin,
age and gender, amongst others.
age and gender, amongst others.
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While preparing to go in the field
with those questions,
with those questions,
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I sat down with my team
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and we discussed what
we would expect as a result.
we would expect as a result.
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To put it mildly, we were not optimistic.
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The most skeptical person on the team
thought, or saw a real possibility,
thought, or saw a real possibility,
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that we would find nothing at all.
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Most of the team
was rather on the cautious side,
was rather on the cautious side,
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so we landed all together at "only if,"
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meaning that we might find
some kind of link
some kind of link
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between innovation and diversity,
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but not across the board --
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rather only if certain criteria are met,
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for example leadership style,
very open leadership style
very open leadership style
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that allowed people to speak up freely
and safely and contribute.
and safely and contribute.
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A couple of months later,
the data came in,
the data came in,
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and the results convinced
the most skeptical amongst us.
the most skeptical amongst us.
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The answer was a clear yes,
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no ifs, no buts.
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The data in our sample showed
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that more diverse companies
are simply more innovative, period.
are simply more innovative, period.
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Now, a fair question to ask
is the chicken or the egg question,
is the chicken or the egg question,
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meaning, are companies
really more innovative
really more innovative
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because they have
a more diverse leadership,
a more diverse leadership,
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or the other way around?
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Which way is it?
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Now, we do not know how much
is correlation versus causation,
is correlation versus causation,
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but what we do know is that clearly,
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in our sample, companies
that are more diverse
that are more diverse
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are more innovative,
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and that companies
that are more innovative
that are more innovative
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have more diverse leadership, too.
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So it's fair to assume
that it works both ways,
that it works both ways,
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diversity driving innovation
and innovation driving diversity.
and innovation driving diversity.
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Now, once we published the results,
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we were surprised
about the reactions in the media.
about the reactions in the media.
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We got quite some attention.
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And it went from quite factual,
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like "Higher Female Share
Boosts Innovation"
Boosts Innovation"
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to a little bit more sensationalist.
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05:00
(Laughter)
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As you can see,
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"Stay-at-home Women Cost Trillions,"
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and, my personal favorite,
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"Housewives Kill Innovation."
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Well, there's no such thing
as bad publicity, right?
as bad publicity, right?
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(Laughter)
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On the back of that coverage,
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we started to get calls
from senior executives
from senior executives
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wanting to understand more,
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especially -- surprise, surprise --
about gender diversity.
about gender diversity.
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I tend to open up
those discussions by asking,
those discussions by asking,
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"Well, what do you think of the situation
in your organization today?"
in your organization today?"
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And a frequent reaction to that is,
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"Well, we're not yet there,
but we're not that bad."
but we're not that bad."
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One executive told me, for example,
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"Oh, we're not that bad.
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We have one member
in our board who is a woman."
in our board who is a woman."
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(Laughter)
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And you laugh --
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(Applause)
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Now, you laugh, but he had a point
in being proud about it,
in being proud about it,
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because in Germany,
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if you have a company
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and it has one member
on the board who is a woman,
on the board who is a woman,
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you are part of a select group of 30
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out of the 100 largest
publicly listed companies.
publicly listed companies.
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The other 70 companies
have an all-male board,
have an all-male board,
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and not even one of these hundred
largest publicly listed companies
largest publicly listed companies
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have, as of today, a female CEO.
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But here's the critically
important insight.
important insight.
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Those few female board members alone,
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they won't make a difference.
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Our data shows that for gender diversity
to have an impact on innovation,
to have an impact on innovation,
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you need to have more
than 20 percent women in leadership.
than 20 percent women in leadership.
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Let's have a look at the numbers.
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As you can see, we divided
the sample into three groups,
the sample into three groups,
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and the results are quite dramatic.
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Only in the group where you have
more than 20 percent women in leadership,
more than 20 percent women in leadership,
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only then you see a clear jump
in innovation revenue
in innovation revenue
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to above-average levels.
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So experience and data
shows that you do need critical mass
shows that you do need critical mass
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to move the needle,
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and companies like Alibaba,
JP Morgan or Apple
JP Morgan or Apple
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have as of today
already achieved that threshold.
already achieved that threshold.
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Another reaction I got quite a lot was,
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"Well, it will get solved over time."
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And I have all the sympathy in the world
for that point of view,
for that point of view,
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because I used to think like that, too.
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Now, let's have a look here again
and look at the numbers,
and look at the numbers,
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taking Germany as an example.
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Let me first give you the good news.
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So the share of women
who are college graduates
who are college graduates
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and have at least 10 years
of professional experience
of professional experience
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has grown nicely over the last 20 years,
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which means the pool
in which to fish for female leaders
in which to fish for female leaders
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has increased over time,
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and that's great.
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Now, according to my old theory,
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the share of women in leadership
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would have grown
more or less in parallel, right?
more or less in parallel, right?
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Now, let's have a look
at what happened in reality.
at what happened in reality.
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It's not even close,
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which means I was so wrong
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and which means that my generation,
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your generation,
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the best-educated
female generation in history,
female generation in history,
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we have just not made it.
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We have failed to achieve leadership
in significant numbers.
in significant numbers.
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Education just did not
translate into leadership.
translate into leadership.
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Now, that was a painful realization for me
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and made me realize,
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if we want to change this,
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we need to engage,
and we need to do better.
and we need to do better.
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Now, what to do?
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Achieving more than 20 percent
women in leadership
women in leadership
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seems like a daunting task to many,
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understandably, given the track record.
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But it's doable,
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and there are many companies today
that are making progress there
that are making progress there
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and doing it successfully.
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Let's take SAP, the software
company, as an example.
company, as an example.
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They had, in 2011,
19 percent women in leadership,
19 percent women in leadership,
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yet they decided to do better,
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and they did what you do
in any other area of business
in any other area of business
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where you want to improve.
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They set themselves a measurable target.
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So they set themselves a target
of 25 percent for 2017,
of 25 percent for 2017,
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which they have just achieved.
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The goals made them think more creatively
about developing leaders
about developing leaders
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and tapping new recruiting pools.
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They now even set a target of 30 percent
women in leadership for 2022.
women in leadership for 2022.
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So experience shows it's doable,
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and at the end of the day,
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it all boils down to two decisions
that are taken every day
that are taken every day
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in every organization by many of us:
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who to hire and who
to develop and promote.
to develop and promote.
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Now, nothing against women's programs,
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networks, mentoring, trainings.
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All is good.
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But it is these two decisions
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that at the end of the day
send the most powerful change signal
send the most powerful change signal
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in any organization.
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Now, I never set out
to be a diversity advocate.
to be a diversity advocate.
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I am a business advisor.
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But now my goal is
to change the face of leadership,
to change the face of leadership,
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to make it more diverse --
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and not so that leaders can check a box
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and feel like they have
complied with something
complied with something
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or they have been politically correct.
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But because they understand,
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they understand that diversity
is making their organization
is making their organization
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more innovative, better.
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And by embracing diversity,
by embracing diverse talent,
by embracing diverse talent,
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we are providing
true opportunity for everyone.
true opportunity for everyone.
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Thank you. Thank you so much.
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(Applause)
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ABOUT THE SPEAKER
Rocío Lorenzo - Management consultant, diversity researcherBCG's Rocío Lorenzo advises telecommunication and media companies on their strategy and how to transform their businesses in times of digital disruption.
Why you should listen
Rocío Lorenzo is a Partner and Managing Director at The Boston Consulting Group, based in Munich.
For the last fifteen years, Lorenzo has worked extensively in telecommunications and media, advising senior executives across Europe and the US on strategy development, growth programs and large scale transformations. She leads the telecommunications growth topic worldwide. In 2015 Rocío was named one of 25 female business leaders by Handelsblatt, HuffPost and Edition F. She is the author of several studies on diversity, including "The Mix that Matters: Innovation through Diversity," and she leads the Women@BCG Initiative in Munich.
Rocío Lorenzo | Speaker | TED.com