How diversity makes teams more innovative | Rocío Lorenzo | TED

289,952 views ・ 2017-11-15

TED


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00:13
Fifteen years ago,
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I thought that the diversity stuff was not something I had to worry about.
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It was something an older generation had to fight for.
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In my university, 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?
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Well, not quite.
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While moving up the ladder 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
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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,
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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:
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hitting the numbers, 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
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had been that while they require a little bit more effort at the beginning,
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they did bring fresher, more creative ideas.
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So I wanted to know:
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Are diverse organizations really more innovative,
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and can diversity be more 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.
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We surveyed 171 companies 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.
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We asked those companies basically two things:
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how innovative 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
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from new products and services in the last three years,
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meaning we did not ask them how many creative ideas they have,
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but rather if these ideas translate into products and services
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that really make the company more successful today and tomorrow.
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To measure diversity, we looked at six different factors:
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country of origin, age and gender, amongst others.
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While preparing to go in the field 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.
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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,
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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,
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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
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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
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that allowed people to speak up freely and safely and contribute.
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A couple of months later, the data came in,
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and the results convinced 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.
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Now, a fair question to ask is the chicken or the egg question,
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meaning, are companies really more innovative
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because they have 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,
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but what we do know is that clearly,
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in our sample, companies that are more diverse
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are more innovative,
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and that companies 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,
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diversity driving innovation 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.
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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"
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to a little bit more sensationalist.
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(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?
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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
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wanting to understand more,
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especially -- surprise, surprise -- about gender diversity.
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I tend to open up those discussions by asking,
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"Well, what do you think of the situation 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."
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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."
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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,
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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,
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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.
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The other 70 companies have an all-male board,
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and not even one of these hundred 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.
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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,
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you need to have more 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,
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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,
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only then you see a clear jump 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
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to move the needle,
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and companies like Alibaba, JP Morgan or Apple
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have as of today 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,
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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,
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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
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and have at least 10 years 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
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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?
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Now, let's have a look 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,
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we have just not made it.
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We have failed to achieve leadership in significant numbers.
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Education just did not 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.
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Now, what to do?
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Achieving more than 20 percent 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
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and doing it successfully.
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Let's take SAP, the software company, as an example.
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They had, in 2011, 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
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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,
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which they have just achieved.
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The goals made them think more creatively 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.
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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
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in every organization by many of us:
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who to hire and who 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
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in any organization.
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Now, I never set out 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,
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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
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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
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more innovative, better.
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And by embracing diversity, by embracing diverse talent,
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we are providing true opportunity for everyone.
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Thank you. Thank you so much.
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(Applause)
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