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Sustainability

Driving diversity into product innovation

Published 30 September 2022 in Sustainability • 6 min read • Audio availableAudio available

Some companies are recognizing the benefits of creating new products and services for traditionally under-served audiences. But many more would benefit from doing the same.

There is a long history of products and services that have been adapted to cater for customers unable to afford the typical pricing strategies adopted in the West. Take Devi Shetty, founder of Narayana Health in India, whose network of clinics have performed thousands of cardiac operations at a fraction of the cost of US or European surgery, without sacrificing quality. Shetty created tremendous value through business model innovation – hiring and remuneration practices, scalability, patient time in hospital, and so on. His and other innovative companies saw the value in setting up different pricing models for the poorer segments of the global population, and have generated significant revenue as a result.

But only recently are companies waking up to the idea that there are other segments of society that have traditionally not been catered for, but where there lies huge untapped potential. Hollywood provides the most visible example of this awakening: the commercial success of films ranging from Black Panther – with its virtually all-black cast, and which became the top-grossing superhero film of all time in North America – to 2021’s Shang-Chi has served to raise awareness of the potential that lies within directly targeting more diverse audiences.

Beyond the economic rationale, there is greater societal expectation on companies to reflect awareness of diversity by their actions. Not only is the general moral obligation to consider all customers equally better understood: at an individual level, customers are frustrated by being treated as a homogenous group and by companies that show a lack of understanding of the diversity of their needs. Companies that can show a more sophisticated and empathetic understanding are rewarded with improved future customer engagement.

Greater focus on diversity also helps with attracting and retaining talented employees. Talent wants to see progressive practices inside the companies they are looking to join. Having conversations around innovation and product diversity conveys the right intent internally and externally. Increasingly, we see MBA students opting to work for relatively unknown, smaller organisations where they feel that their views will be valued, and their work will be more meaningful on some dimension. Existing employees equally want to feel that they’re working in a company that is socially aware, independent of profit perspective. With a corporate climate that embraces diversity throughout, motivation, satisfaction, and loyalty increases.

Black panther affiche
Black Panther – with its virtually all-black cast, is the top-grossing superhero film of all time in North America ©Disney

Where to begin

The purpose of innovation is understanding the needs of customers: discussing who they are, what are their needs, and finally, how to come up with an offer. Driving diversity simply pushes the logic of innovation a little further than has been done before.

The starting point to cementing diversity in product innovation is to have those open discussions with the right team of people. A team needs to reflect both a diversity in competencies and perspectives. The diversity within the team at the beginning of the project will affect the opportunities that are chosen to be pursued or not. If a team is all male, for example, it is difficult to bring gender into the discussion. Research shows very clearly that, whether it’s the management or innovation team, or the board, diverse teams perform better along many different dimensions. Inevitably, they are more complicated to manage, and therefore less efficient. It takes longer to debate issues, and to reach convergence on any single item, which can be frustrating. But with the right culture and processes in place, they are more effective and can deal with more complex problems by devising richer solutions.

Good management of teams comes down to good leadership. Google conducted research into the effectiveness of teams and found that psychological safety (confidence in participating in discussions without fear of being judged or ignored), is the number one criterion for success in teams that want to innovate. With good leadership, strategies will be in place to ensure that everybody has a voice. It may be as simple as asking all members to write their perspective on a given topic and sharing those with other members prior to the discussion.

Leaders should also always ensure that it is a debate of ideas, not people, and any disagreement is at the level of the perspective, or the idea. Finally, they should be able to gauge and make clear to everyone the length of time for debating – too short and it may curtail the richness of the debate, too long and people are frustrated by the lack of outcome.

It’s important that a team is allowed to evolve. It may become clear through the innovation process that some fundamental perspective is lacking, and in that case it should be brought on board. Fluidity is an important part of agility, and the structure of the team should evolve based on what is learnt, and the directions taken. It should not be limited by the initial formation that was in mind at the beginning of the project.

 

Help from elsewhere

While diversity within the team is fundamental, it’s also important to engage different stakeholders outside in the ecosystem. Beyond asking, “who do we have on the team?” companies should ask, “who do we talk to?” and, “do we have a view of the world that reflects the diverse needs of the people we could serve?”. Talking to different people, and detecting interesting needs and practices enables innovators to connect insights that come from very diverse sets of knowledge bases. That, in turn, gives rise to an intuition as to future direction.

Having a product diversity office (as is the case at Lenovo) may be a sensible step for companies. With corporate social responsibility initially, and latterly ESG, we have seen that there is a first stage of awareness which requires a dedicated person, or office, to make sure that the programme receives proper attention in the organisation. It’s a logical first step, as the fact that the office exists would suggest that there is still a lot of progress to be made. Once diversity is integrated into the fabric and culture of the organisation, from conception of product to sales, the need for the office becomes redundant.

Car accident dummy on the ground
“The car crash-test-dummy, based on a 50th percentile male body is used to set the standard seat around which optimum safety measures work, people who sit outside the “standard” (i.e., women) are 47% more likely to be seriously injured in a crash.”

Early days

Product diversity is not yet an item that is high on companies’ agendas. Innovation may focus on AI or blockchain, or certain markets around the world, but diversity is rarely part of the initial framing discussion. And yet it is relevant to all companies regardless of sector.

Caroline Criado Perez’s book Invisible Women highlights numerous examples of products and policies that have been designed by men and therefore treat men as the default. One of the most shocking is the car crash-test-dummy, based on a 50th percentile male body, used widely across car manufacturing. Given that this dummy is used to set the standard seat around which optimum safety measures work, people who sit outside the “standard” (i.e., women) are 47% more likely to be seriously injured in a crash.

It’s a clear demonstration of the potential that exists. Driving diversity into innovation on car safety is the right thing to do, creates value, and provides meaningful initiatives for talented people working in the industry, resolving a legitimate and significant need.

These gender and/or racial biases also often exist whenever AI algorithms are employed. Dating apps are a useful case in point: studies have shown that these apps discriminate against Black women and Asian men, as a result of algorithms that run on systems of ranking and clustering people and which keep ‘lower ranked’ profiles out of sight of more popular ones.

Elsewhere, the financial sector is another example. When coming to a mortgage decision, there are emotional, safety, security and financial considerations at play that male and female customers may react to differently. Yet there is no targeted communication from banks. All customers receive standardised communication as if all have the same needs and concerns. Is that really the case?

Returning to Narayana Health, Devi Shetty saw a huge portion of the market that had been totally ignored by others. Without doubt there are other segments across countless industries that have been ignored, and where true innovation potential exists but where discussions have not yet even started. Let them begin.

Authors

Cyril Bouquet - IMD Professor

Cyril Bouquet

Professor of Innovation and Strategy at IMD

Cyril Bouquet is Director of the Innovation in Action program. As an IMD professor, his research has gained significant recognition in the field. He helps organizations reinvent themselves by letting their top executives explore the future they want to create together.

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