May 20, 2021

Cultural Differences Foster Creativity: Why Diversity in the Team Also Pushes Business

Different countries, different customs, new thinking – diverse, heterogeneous teams produce significantly more ideas and bubble up profits. In Germany, every fifth startup is founded by people with an immigrant background, and young companies employ an average of 27 percent people with intercultural experience. But diversity needs management and organization. On the occasion of World Day for Cultural Diversity for Dialogue and Development, we have looked into the role of diversity in the startup industry.

Autsch – that was a bitter experience for the founders: With pink plastic gloves, women should be able to remove tampons more cleanly and comfortably and dispose of them odor-free. Although the “Pinky Gloves” were able to convince an investor in the TV show “Die Höhle der Löwen”, the two founders immediately earned a storm of indignation on the internet: Above all, women thought that the offer made shameful menstruation a taboo and, despite the recyclable plastic material, was harmful to the environment. Criticism grew into anger, rage, and finally even death threats. The founders apologized and meekly gave up their venture.

Too bad. The offer was not as useless as many critics thought: such gloves would be quite useful for outdoor activities or in situations where there are no disposal options for hygiene products and consumers should take them with them. Perhaps they would even have been bought by girls who are still unsure of how to handle blood, menstruation, tampons. The founders would probably have saved themselves effort, an embarrassment and a lot of gloating if they had involved their female customers earlier in the development and presentation of the pink gloves; knowledge about residual waste and its recyclability would also have been appropriate. The product range would have been more mature, the advertising for it more appealing – or the Pinky Gloves would not have ended up in the public eye at all.

Diversity Increases Creativity in Company and Also Profits

Developing products and services in an ivory tower and without the participation of the intended target groups can quickly backfire economically. Companies are therefore striving for diversity. For some time now, the term has stood not only for a balanced ratio of women and men in companies and in leading positions, but also for the participation of as many groups as possible: Older people, for example, migrants, fat or thin people, people with disabilities. With their experience, attitudes and knowledge, they all bring many different approaches to problems and tasks. This gives companies more scope to respond better and more appropriately to the wishes and needs of their customers, to optimize their offerings more easily and to avoid risks.

Diversity brings many advantages in a globalized economy. Studies have now pointed this out. For example,

  • 69 percent of companies with mixed teams are more likely to launch innovative or improved products and services on the market because they bring together diverse ways of thinking and intercultural experience.
  • These companies also perform significantly better in terms of sales and profits, especially when they have women in leadership, because they are known to manage more prudently and adhere more closely to compliance rules.
  • heterogeneous teams with a wide range of language and cultural skills are much better equipped for international expansion and foreign business.
  • companies increase their attractiveness as employers and respond to demographic challenges such as the shortage of skilled workers.

Diversity is seen as a recipe for success for companies and is celebrated worldwide on May 21, World Day for Cultural Diversity. However: Diversity and a welcoming culture in Germany could be formulated more loudly, especially in business, and could also be better organized in startups.

At least when it comes to internationality, startups are open. According to the latest Migrant Founders Monitor, they employ an average of 27 percent people from other cultural backgrounds who grew up abroad or are the children of immigrants. The internationality is even higher if the founders themselves come from different countries: Today, about 20 percent of startups are initiated by specialists with an immigrant background, and the proportion of internationality in their teams rises to as much as 48 percent.

Women and Migrants Get Fewer Opportunities

Startups and growth companies show weaknesses when it comes to women, older people and handicaps. At Google, the quota of women is 30 percent; only about every fourth management position there is held by women. The figures are similar in other, more tech-driven companies, but Google in particular is increasingly having to defend itself against discrimination. It can now even be proven in its technology and algorithms.

People over 40 are also rather rare in startups. There is no data on this, but this could be one reason for the sluggish implementation of digitization in society, politics and business. Presumably, older people tend to feel excluded from youthful speech and have little use for many apps and digital services, especially if their functionalities are not secure and change regularly.

At second glance, the economy and startups are not all that colorful: According to Eurostat, less than a third of management positions in Germany are still held by women. Migrants also get fewer opportunities; according to the German Center for Integration and Migration Research, they are entrusted with only 9 percent of executive positions. And even though every 5th startup is founded by a person with an immigrant background today, these founders, like women, have more problems getting government funding, financing and venture capital, even though they are often better educated, more willing to take risks and more successful internationally faster.

Lost in Translation – Managing Diversity

ikoo in Munich shows that things can be done differently: The startup, founded in 2021, now gathers 14 nationalities and age groups from 20 to 65 in their team. The provider of sustainable hair care products builds on the diverse knowledge of its approximately 30 employees. “Hair and hairstyles – this is a topic that is extremely influenced by cultures and fashion styles,” explains Managing Director Katrin von Hallwyl. “The diversity in the team gives us a much broader insight into trends, traditions or needs, and we can respond more quickly with offers. We think more internationally and are much more successful abroad as a result.” The company now markets around 160 styling products in 54 countries.

The experiences and needs of employees continually inspire new products, but above all they lead to a modern, cosmopolitan approach in marketing and sales. Advertising is evaluated from different perspectives, and images or slogans are immediately cleared of misunderstandings or taboos if necessary. In addition, there is usually someone in the team who’s able to describe in more detail the advantages of brushes, shampoo and packs to uncertain customers in their own language. Last but not least, ikoo obtains international comparisons during procurement and also tenders some orders abroad.

That, however, doesn’t come without friction. “What we’re certainly not quite as good at,” von Hallwyl admits, “is internal communication. I’ll just say – lost in translations.” Anyone who wants to benefit from diversity must therefore consciously organize and, above all, promote it. German and other language courses are just as much a part of the program as training or discussions about existing biases and prejudices among the nationalities represented, as well as about teamwork. Differences should be made conscious so that everyone can accept them, work with them and even recognize them as a personal opportunity.

Diversity begins with targeted personnel planning: Not every position in the startup has to be filled with academics. That also increases diversity. Unaware biases during the application process can be avoided by anonymizing CVs, in which age information is missing as well as the name. In addition, interview questions to applicants can be standardized and more closely related to the later role or functions. When hiring, it is not so much important who founders would like to have a beer with, but rather what experiences, values, and attitudes candidates can bring to the company and how they can enrich their team.

Would you like to learn more about diverse hiring? Read 5 tips for a more diverse recruiting process by German Accelerator mentor Bernhard Hecker!

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