In the October 20, 2003, issue of
Week magazine, there's a picture of Steven Reinemund, CEO of PepsiCo. He is smiling—and for good reason. In the third quarter of that year, PepsiCo
reported excellent numbers. This was due
to a 7% revenue growth from snacks and a 16% sales growth from international
reached $1.07 billion, a 13% gain. New
products contributed substantially to these results.
Fast forward to
a different decade.
Today PepsiCo is led
by CEO Indra Nooyi. She's guiding a much larger company, 2011 net revenue of $66
billion, in a more complex global economy.
Founded in 1965 through the
merger of Pepsi-Cola and Frito-Lay, PepsiCo went on to acquire Tropicana in
1998 and merged with the Quaker Oats Company, including Gatorade, in 2001.
Times change and so do market positions. According to Fortune Magazine:
- Last year between May and September Pepsi stock
dropped 15%. Coke stock is up 40%
in the same period.
- Pepsi often fails to hit its profit targets—something
unacceptable to the investment community.
- In 2011 Pepsi was displaced as the number two soft
drink beverage losing out to Diet Coke.
Coca-Cola is No. 1.
Earlier this year Ms. Nooyi, who has a strong interest in nutritional products,
outlined a new plan to support the core North American beverages business. She also removed the head of that unit in an attempt to get things moving again.
While there's a lot of back-and-forth in the cola wars perhaps PepsiCo could learn from an internal laboratory that has fueled
the growth of its snack business, which a few stock analysts would like to see spun off as a separate company.
Some time ago
I was allowed to go on-site and visit innovation in action at
Frito-Lay, a unit of PepsiCo.
presenter Dwight Riskey, since retired, was a corporate vice president and
chief marketing officer. In his own personable way, Riskey took the audience inside the processes of innovation at Frito-Lay. While not all business principles transfer well, there may be something on this short list of takeaways that could be helpful to your organization
All businesses get to a point where
growth becomes extremely difficult.
Riskey made clear that sustained growth is hard to achieve.
the 90s dot com bust and the real estate debacle of recent times, we know in retrospect that much of the growth purported by many companies and market sectors was an
illusion. While high-flyers get
a lot of media attention for rapid growth, the enterprise worth putting
under a microscope is the one that achieves consistent results over extended
Success stories like this are hard to find for two reasons. First, these businesses
tend not to draw attention to themselves.
Second, the examples are few and far between.
Growth at Frito-Lay comes through
Business leaders are in tension with themselves wanting control, creativity, and growth at the same time. This is a difficult act to pull off.
If it's true new
products help PepsiCo increase revenue, how
does innovation see the light of day in a large bureaucracy? What
makes the difference when it comes to identifying and implementing innovative ideas?
It could be credible individuals such as Dwight Riskey and his talented staff. Or as a best-selling author, Jim Collins would
say, the “who.”
don’t happen by themselves. They need help. There needs to be a champion pushing an idea
through a system that is often quite comfortable with itself. Product innovation is not
likely to go anywhere without someone giving permission or protection to try something new.
important to understand that Riskey, in his day, had access to people who could make
decisions and provide resources for innovation.
How did he get this access? Trust. He made time to establish solid relationships within PepsiCo.
would be easy to look at products, advertising, and luck at Frito-Lay to
conclude this is the path to profits. These three categories are important. However, it’s essential to give credit to the human
element of successful improvisation.
It’s hard to be creative inside a
we see something determines how we’re likely to respond. If your thinking and position are mature then it could limit creativity. If so, what are ways to tap the imagination and be innovative?
ever thought of simply moving around the room to look at your idea from
another angle? Or enlisting others to help you think about the
product or service you’re trying to launch? What about talking to consumers who
don't buy from your business and asking them why?
difficult to be creative using outmoded thinking, it’s impossible to turn on
the light in a closed mind.
may be the most enduring lesson from our day at Frito Lay.