Maximising Innovation with
Diversity
Bringing people from different
backgrounds together to work in teams can help generate new ideas, but creating
diversity across teams can unlock even greater innovation.
Organisations in today’s era of
hyper-competition are increasingly reliant on innovation to sustain a
competitive advantage. This is particularly true for newly established
start-ups, where ongoing innovation is fundamental to effective product market
competition.
An important precursor to innovation
is the ability to take knowledge from different areas and to recombine it in
new and impactful ways. Teams are an important aspect of this process. Having
people work in teams and sharing ideas can allow firms to create a more
sustained pipeline of innovation than the “light-bulb moments of lone genius,”
as noted by Aspen Institute CEO, Walter Isaacson. While the need
for team-based innovation is widely acknowledged, less well understood is how
multiple teams should be organised within a company in order to maximise
innovation for the firm as a whole.
Knowledge
recombination versus coordination costs
Much research has been done
highlighting the positive impact of having diverse teams made up of members
with varied technological backgrounds. What has often been overlooked, however,
is the benefit that can be gained from across-team diversity – putting together
teams which may not be diverse with respect to the composition of their
individual members, but which are very different when compared to other units
within the firm.
There are a number of reasons for
taking a ‘big picture’ approach to organising teams. In order for innovations
to happen, firms need to maximise the benefits of knowledge recombination and
minimise the costs of coordination - the frictions and communication
difficulties that occur because of the different backgrounds and experiences of
the players. Often the very diversity that sparks the cross-fertilisation of
new ideas within a team can stymie its use in new and impactful ways across the
company.
Managers need to consider this when
designing firms for innovation, particularly when the organisation has multiple
innovations occurring simultaneously, and many interdependencies among its
teams of innovators.
Team organisation and
firm-level innovation
The impact that different approaches
to firm-level team organisation have on innovation is the focus of a recent
study with my colleagues David H. Hsu and Andy Wu from the Wharton School. In
our paper R&D Production Team Organization
and Firm-Level Innovation
we studied 476 biotechnology start-ups from their founding date onwards,
examining the implications for firm-level innovation of different approaches to
organising the diversity of inventors’ technical experience. Particular
attention was paid to the interplay between knowledge production and
coordination.
What we found was that companies
organised with higher levels of across-team diversity – for example, creating
very different teams each specialising in a particular area – had a greater
positive impact on company innovation than those organised with higher levels
of diversity within the unit.
There were contingencies however,
one example being the extent to which inventors on a particular team had
previously collaborated with one another. This relationship was found to
influence teams’ collective identity and group cohesion, making them less
likely to seek out knowledge from other teams hence reducing the benefits of
across-team diversity. In addition, combinatorial novelty – the degree to which
teams pursued truly breakthrough innovations – increased the benefits of
ensuring diversity within a team.
Keeping an eye on the
bigger picture
The results of this study can apply
to many situations where there is a need for ongoing team-based innovation.
Teams do not operate in a vacuum, and with innovation becoming increasingly
important to a firm’s success, managers need to pay attention to the tradeoffs
between knowledge recombination and coordination costs at multiple levels of
the organisation. Managing diversity should take into account not just a
team-by-team perspective, but rather keep an eye on the bigger picture of
across-team diversity.
Vikas A. Aggarwal, INSEAD Assistant Professor of Entrepreneurship and Family Enterprise
Read more at
http://knowledge.insead.edu/diversity/maximising-innovation-with-diversity-3924#8Z5fVFpSojxf6ouK.99
http://knowledge.insead.edu/diversity/maximising-innovation-with-diversity-3924?utm_source=INSEAD+Knowledge&utm_campaign=8480f2d51d-2_Apr_mailer4_2_2015&utm_medium=email&utm_term=0_e079141ebb-8480f2d51d-249840429
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