Growth through diversity: talent, geography and business models
When we hear the word diversity we usually think about people and attributes you can see, such as gender, age or race. At PwC we think about diversity in broader terms. People are still central but we include geographic or market diversity and business model diversity, which are also important for sustainability and growth.
In this special feature we look at all three types, starting with talent.
Diversity in the workforce is not always a good thing: if you have diverse education levels amongst your senior managers, your firm will perform poorly; on a production line a diverse team can reduce cohesion in the group; when you are producing multiples of the same widget, things run smoother with homogeneity.
Another instance where diversity is suboptimal is when you’re in the minority. That can be a miserable experience; research shows you are less likely to be promoted and more likely to receive poor performance ratings.1 The result is you’re more likely to have a higher absentee rate and a shorter tenure at the company.2
There are a number of scenarios where properly managed diversity in your workforce optimises your business.
In creative or intellectual tasks, study after study has shown that more alternatives arise from a greater number of perspectives.3 While you might take longer to get to a decision it will be ultimately a better one. This is surely the goal of most entertainment, media and marketing organisations - greater creativity, more intellectual firepower, better decisions and less groupthink.
There are other documented reasons to embrace diversity in your talent hires. Talent that looks more like your audience leads to a better understanding of your audience, leading to increased market penetration and increased customer satisfaction. McKinsey’s analysis of 366 public companies across a range of industries and countries showed that a company’s likelihood of achieving financial performance above their national industry median was 35 percent higher and 15 percent higher respectively, if they had ethnically and gender diverse senior management and boards.4
Then there’s winning the war for talent. If you’re fishing from a bigger pond you’re more likely to hook a better trout - or data analyst.
Finally, there are cost savings. Due to the nature of our population, you probably have some diversity in your workforce anyway. If it's not managed well, you face costs of more frequent replacement, lower productivity and potentially, litigation.
All this begs the question, if diversity is so good for business, why isn’t it done more often? The answer can be found in two related psychological factors - unconscious bias and similarity attraction.
We are attracted to people who are like us and if we are in positions of power we exercise that attraction by hiring people like us. Has a boss ever said to you ‘you remind me so much of me at your age’? That’s a compliment.
Let’s go back to the point about diversity providing an improved marketplace understanding. Many Australian businesses lag here.
Using Census data we know that in 1911 the average Australian was a 24 year old male whose religion was Anglican and he worked as a farmer.
By 1961, the average Australian was a 29 year old male, still Anglican but now working as a clerk, a quaint term for office worker.
By 2011, the average Australian was now a woman, 37 years old, Catholic - which suggests some ethnic diversity - and she works in retail.
In the same year (the year of the last Census), the average boss was male, 45 years old and much less likely to be bilingual than the average Australian. Essentially, he’s the son of Mr 1961, statistically underrepresented in Australia’s population but significantly over-represented amongst business decision-makers.
Let’s bring this back to entertainment, media and marketing. Smart businesses communicate to the Australia we are now in language that is relevant, telling stories to which today’s audience can relate.
A business doing this well is ANZ. They’ve won many accolades for their timely point of view on issues like the gender pay gap and their ad ‘Pocket Money’ was a viral hit.5 It showed children’s responses after being paid differently for doing the same chores. The children, boys and girls, were outraged and couldn’t understand it. The irony is of course that the gender pay gaps starts in childhood. Girls are paid on average 11 percent less pocket money than boys.6
It’s at their retail level that things get really interesting. Catriona Noble, ANZ’s Managing Director of Retail Distribution says:
For me, diversity means opportunity. For a consumer business like ANZ, understanding our customers is critical. We have a customer base that’s extremely diverse so having an internal workforce that reflects that diversity means we can better understand our customers’ needs and help them achieve their goals and financial success, which is ultimately what we’re here to do.
We also translate many of our brochures into Korean, Chinese, simplified Chinese and Vietnamese and we have 64 branches called ‘international banking services branches’ that have multi-lingual materials; our staff in those branches can speak multiple languages. So these are just some of things we do to try and make some of those financial decisions less stressful and make it easier for the customer.7
Let’s look at geographic diversity. In Australia we won the golden ticket. Our colonial heritage is British so we inherited solid institutions and a rule of law. There’s a positive correlation between robust institutions like a good legal system and economic growth.8 In addition we’re located geographically in the fastest growing, most dynamic region in the world.
When a person’s socio-economic status improves, they spend more on discretionary goods. Many industries rely on discretionary expenditure, including entertainment and media.
Looking at the data, the sensible action for businesses seeking growth would be to gain exposure to these high growth markets.
Here’s the GDP growth for the same group of countries. You can infer from this that the economic status of many in these countries is improving.
A business that acted on this opportunity is Brand New Media (BNM) which made the decision several years ago to expand into Asia and is now in several neighbouring countries, including Singapore, Thailand and the Philippines. This arm of the content marketing agency is doing better than the domestic arm. PwC spoke to BNM’s Asia CEO, Damien Bray who moved to the region several years ago:
Most Asians actually consider Australia to be part of Asia. I would go so far as to say as an Australian working in Asia, I consider myself to be Asian.
Culturally we Australians have quite a way to go before we are integrated with the thinking of the region. That ranges from politics through to how we operate business partnerships through to cultural contact with Asia.
One of the biggest learnings for me is recognising that most Asian countries like Australia. They see Australia as aspirational, they see us as friendly. They might think we’re a little bit hick, a little bit small town in our thinking. I think that’s probably true but we’re not ready to admit it.9
Let’s look at another example of geographic diversity and another success story. This one is a modern fairytale involving a young Australian called Jenny Zhang. Jenny wanted to be an actor, studied acting but encountered a problem; despite being Australian she looks Chinese, so there were no parts for her.
If you look at Australian TV you think you’re in 19th Century England. But if you land here you go 'oh, this is like Hong Kong!' What you see on TV hasn’t caught up with reality. Australia prides itself as a multi-cultural country but it hasn’t been reflected on the screen.10
Jenny went to work for MTV, using her bilingual skills to sell Nickelodeon and Comedy Central programs into South-East Asia. She learn a lot about those markets including what content travels well. The rather diverse characters SpongeBob SquarePants and Dora the Explorer are amongst the winners. Now Jenny has her own flourishing business - Totem Pictures - that facilitates co-productions between China and Australia. She also finds Chinese money for Australian productions looking to localise their program or format for the Asian market.
Given the Chinese film industry is soon to be the biggest in the world - PwC predicts China's box office will overtake the US in 2017 - this seems like a great opportunity for Australian content makers. We asked Jenny what Australians should focus on for the Chinese market:
First and foremost concentrate on creating great content. Too many times [Australian producers] are stressed about finding the Chinese angle. They think ‘If we are going to make a show for China let’s do an overseas Chinese student story’. I say, ‘Great, if you’ve written a good story with great characters and you really care about it then go ahead. But don’t do it because it’s an obvious Chinese angle.
This seems like very good advice. The point is that you don’t have to make ethnicity the storyline. Jenny used as an example the fact that House of Cards has been a hit in China but Marco Polo, Netflix’s equally expensive Chinese-themed series, hasn’t. It may seem counterintuitive but it illustrates that there are some universal story themes, such as the corrupting nature of power which, if well executed, draw audiences from everywhere.
Accessing emerging high growth markets can’t be planned from the safety of a Sydney or Melbourne office. Experts like Jenny suggest spending time on the ground in your target market talking to people, especially young people:
Even though they were brought up differently, they are interested in what is happening overseas. They love underdog stories because to a large extent they are perceived as underdogs. They love gaming, new technology so they are not that different from the younger generations around the world. [But] there are many nuances you can only get from talking to them. I suggest to people that they go over there, have a look and have a chat.
Filmed entertainment is not the only TMT (telecommunications, media and technology) sector to enjoy growth in this exciting part of the world. PwC's recent MoneyTree Report for China showed that in the second half of 2015 investment in TMT businesses increased strongly, despite the downturn of the domestic economy. Nearly 1,500 deals were completed, worth over A$25 billion. This represented an increase on the first half of the year of 11 percent.11
Let’s turn now to business models. This has been an area of increasing diversity over the last few years, especially in the entertainment, media and marketing space.
Publishers have moved into live events, free-to-air television into subscription video on demand, gaming business models have proliferated with reward-for-engagement one of the most interesting coming out of mobile gaming. Online has seen massive change. Affiliate fees for marketing outcomes illustrate the general shift towards remuneration for specific actions, for example per lead, per download or per acquisition. Tracking remains a hurdle however, especially getting both sides - brand and affiliate - to agree what the outcome has actually been.
One traditional media business that excels here is the Special Broadcasting Service (SBS). When you think of diversity in relation to SBS you would be forgiven for assuming it begins and ends with multi-cultural content but the semi-commercial public broadcaster is diverse in other areas such as business models. SBS can be found on 24 different platforms, more than any other network. It was the first free-to-air network to partner with subscription television and last year it increased its All People audience by over 13 percent, a coup when free-to-air audiences are in slight decline.
The Managing Director, Michael Ebeid, explains the strategy:
Having SBS On Demand on all those platforms- digital platforms, mobile platforms, connected TVs, game consoles etc., is all about being where the audience is. We do that for a very simple reason, to extend the reach of our content. Because we are on all those platforms, we are now delivering over 15 million views every month and engaging with audiences that wouldn't typically have come to us on SBS or SBS 2. Some of our programs on SBS On Demand have never been on TV; it's an entire library with about 5,000 hours of content - and it's a free, legal library. It's not a subscription-based model but supported by advertisers, which has worked well with our audiences. Our usage is far higher today than it ever used to be when we only scheduled content on linear TV.12
Turning full circle back to people, it’s been well established through decades of robust research that hiring diverse talent leads to greater creativity and less groupthink, the dangerous practice of valuing conformity and harmony over debate.
To determine how well we’re doing in the entertainment and media industries we used PwC’s Geospatial Economic Model13 to identify who most epitomises someone working in the entertainment and media industries in Australia. It turns out the stereotype holds: the Van Vuuren Bros’ Bondi Hipster characters are alive and well in media.
He’s 27, male, Caucasian and most likely lives in Bondi or Newtown. In fact 37 percent of the national entertainment and media workforce live in Sydney and of those, 24 percent live in the eastern suburbs or the inner west.
In Melbourne, the overall number of entertainment and media workers is lower - but they congregate around St Kilda and Richmond.
Similar to the world we see depicted by media, entertainment and media businesses do not hire diverse talent. As a result they are perhaps less well-equipped than they could be to find growth in the future.
The question then arises, how do we fix it? There’s a great deal of research on this and different organisations will choose different paths depending on their needs but one sound approach from two human capital experts, Meyerson and Fletcher, builds on a classic change theory called ‘the small wins strategy’.14 It involves steps that are practical and non-combative rather than revolutionary, to avoid scaring people into resistance. It’s perfect for corporates looking for new ways to find growth through improving the workforce as a whole. Elizabeth Broderick’s Male Champions for Change and Mediascope's Peggy's List are examples of the approach.
Here’s another example: a recruitment app called Blendoor has been developed by a Harvard graduate who wanted to create a job matching service that circumvented unconscious bias. It hides a candidate’s name, age and photo, surfacing only their qualifications. Once a match is made, the hidden information is revealed. The situation that prompted the developer to build Blendoor is interesting. This Harvard graduate started coding as a child, programming from the age of 13, had an engineering degree from Stanford, an MBA from MIT, five years with a global software company and yet missed out on a data analytics role; in fact was told marketing or sales might be a better fit.
Stephanie Lampkin, an African American woman, didn’t agree.
These are the sorts of practical solutions that can help tackle biases that make real diversity hard to achieve. Some biases are so entrenched they're hard to recognise, they’re felt rather than seen. As Meyerson and Fletcher say - ‘they linger in a plethora of work practices and cultural norms that only appear unbiased’.14
Today, businesses are looking for every competitive advantage they can find. In our view, diversity - in your talent, geography and business models - should be considered a strategic imperative in the search for growth.
- ND Tackey, P Tamkin & E Sheppard, ‘The Problem of Minority Performance in Organisations,’ The Institute for Employment Studies, Report 375, 2001
- DR Avery, PF McKay, DC Wilson & S Tonidandel, ‘Unequal Attendance: The relationships between race, organisational diversity cues and absenteeism,’ Personnel Psychology, Volume 60, 2007
- Scott E Page, ‘The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies’: Princeton University Press, 2008
- Vivian Hunt, Denis Layton and Sara Prince, ‘Why Diversity Matters’: McKinsey & Co, 2015
- See https://www.youtube.com/watch?v=LfrK4Ef2FFU
- Gender Pay Gap - Over the Life Cycle, ACTU, March 2016
- Catriona Noble, Managing Director of Retail Distribution, ANZ, to PwC, 12 May 2016
- Policy Volatility, Institutions and Economic Growth, Fatas and Mihov, 2009
- Damien Bray, CEO Asia, BNM, to PwC, 29 February 2016
- Jenny Zhang, Founder/CEO, Totem Pictures, to PwC, 9 March 2016
- MoneyTree China TMT Report Q3/Q4 2015, PricewaterhouseCoopers Zhong Tian LLP, April 2016
- Michael Ebeid, Managing Director, SBS, to PwC, 4 April 2016
- See http://www.pwc.com.au/analytics/gem.html
- 'A Modest Manifesto for Shattering the Glass Ceiling', Meyerson and Fletcher, Harvard Business Review, February 2000