For entrepreneurs and corporate leaders alike, the most coveted prize is innovation-fueled market growth. Yet few organizations fully capitalize on their greatest potential source of innovation--diversity. 

Despite a vast body of research on the subject of innovation, there is a significant gap when it comes to understanding how to create a culture of sustainable innovation. New findings from the Center for Talent Innovation (CTI), based on input from 1,800 survey respondents, 40 Fortune 500 case studies, and 100-plus innovators, fill in key dimensions previously not understood or examined. 

Serial innovation comes from diversity.

The study reveals that serial innovation--the kind that drives and sustains growth--is highly correlated to two types of diversity. Inherent diversity describes "embodied" difference--traits you were born with and have consequently been conditioned by, such as gender, ethnicity, and sexual orientation. Acquired diversity, in contrast, is not who you are but how you act as a result of what you’ve experienced or learned. The combination is a powerful amalgam we call two-dimensional (2D) diversity.

It’s no surprise that an inherently diverse workforce confers a competitive edge by "matching the market" of diverse end users. Simply by being women, people of color, gay, or of a different nationality, age group, or socioeconomic background, their insights help identify and address new market opportunities that others may not even see. CTI research shows that teams with at least one member who brings an innate understanding of the "points of pain" (unmet needs) of the target market (consumer/client), the entire team is as much as 158 percent more likely to understand that target. That in turn increases the likelihood that the team will innovate effectively for the end-user with the unmet needs. Given the radically changing demographics of American and global consumers, this end-user understanding is more critical than ever.

Encourage a "speak-up culture" and you unleash the potential of every employee.

Yet an inherently diverse workforce isn’t enough to unlock innovation. For an innovative idea to be developed and deployed in the marketplace the buy-in and endorsement of decision-makers at every level is required. That’s where acquired diversity matters most.

Leaders with acquired diversity help establish the "speak-up culture" that is so critical to unleashing the full innovative capacity of each employee. These leaders are more likely to demonstrate behaviors critical to innovation:

  • They give equal time to everyone--they often solicit the quietest voices in the room
  • They empower team members to make decisions
  • They enable the right kind of risk taking
  • They make sure that each team member gets constructive and supportive feedback
  • They share credit for team success

When leaders exhibit these behaviors, the results are measurable and dramatic. Employees are 3.5 times more likely (67 percent versus 16 percent) to contribute their full innovative potential.   

It turns out the magic really happens when both acquired and inherent diversity are present--which adds up to two-dimensional (2D) diversity. Companies with both inherent and acquired diversity in leadership are 70 percent more likely (46 percent versus 27 percent) to capture a new market, and 45 percent more likely (48 percent versus 33 percent) to improve market share. Their teams are able to bring more passion, creativity, and openness to radical and transformative ideas. 

Listen carefully to different voices or risk missing an opportunity.

The marketplace is littered with missed opportunities and failed products because diverse voices weren’t in the room or their proposed ideas were not supported when decisions were made. For example, Bertelsmann passed on buying Skinnygirl Margarita because the all-male team Bethany Frankel pitched the idea to did not get why women might want a low-cal alcoholic beverage. In 2012, Skinnygirl Cocktails was the fastest-growing brand in the spirits industry. Conversely, Eurostar spent millions on the ePad Femme--a tablet designed for women by men--only to see it tank.

To avoid such perils and to maximize the innovation potential in your company, the combination of an inherently diverse workforce and leaders who prize difference and value every voice may just be the most transformative investment of all.