Pepsi CEO: Break With the Past, and Don’t Play Too Nice

Soft drinks and snack foods don’t get the best press these days, but that hasn’t slowed Indra Nooyi’s campaign to restructure PepsiCo, one of the world’s largest food and beverage companies. Since she became CEO in 2006, the company’s global revenue has increased from $40 billion in 2007 to more than $63 billion last year. Hallmarks of her management style include a tough-minded willingness to uproot a legacy culture and a laser-like focus on the customer experience. In Nooyi’s case, this included following trends in eating habits by offering more water and low-calorie drinks. “In many ways, you’ve got to make a break with the past. If you don’t, you’re spending more time appeasing the heritage employees” than making the necessary changes, Nooyi said during a recent discussion with Stanford Graduate School of Business students.

"The challenge of the leader is to look around the corner, and change before you need to change." Indra Nooyi #gsbvftt @StanfordBiz

— Gabrielle Scrimshaw (@GabScrimshaw) May 10, 2016

Nooyi disagrees with management theorists who advocate ignoring short-term results in favor of the long haul, and approvingly quotes advice given to her by Apple’s late CEO Steve Jobs: “Don’t be too nice.” Nooyi, named by Fortune in 2014 as one of the most powerful women in business, spoke at a View From The Top session this month, where she was interviewed by Walmart CEO Doug McMillon. Here are six key insights into management she shared during that conversation:

Break With the Past

Conventional business thinking suggests that leaders of a turnaround need to preserve the history and culture of the company. But Nooyi said it’s a maxim that’s often overused and she sometimes wonders if old culture “is a ballast.”

Looking back on PepsiCo’s turnaround, Nooyi said she may have been a little too respectful of her company’s past. Rather than appeasing conservative, long-tenured employees, the CEO may need to say, “Guys, we don’t have the time. We have to make the change. And guess what? It’s going to be painful,” she said.

“I think if I had to do it all over again, I might have hastened the pace of change even more,” she added.

Don’t Be Too Nice

Steve Jobs, a famously short-tempered executive, told Nooyi that losing one’s temper isn’t always wrong. “Don’t be too nice,” she recalled his advice to her. “When you really don’t get what you want and you really believe that’s the right thing for the company, it’s OK to throw a temper tantrum. Throw things around. People will talk about it, and they’ll know it’s important for you.” Nooyi called that guidance “a valuable lesson.”

Be Personally Conservative

More than one CEO has gotten in trouble recently for broadcasting a controversial personal statement. “We’ve just got to be careful about putting out personal messages,” Nooyi advises. But “personal conservatism versus taking risks with the business are two different issues. If you really want advantage, you’ve got to be the first mover. So I think on the product side and the product experience side, we can take as many risks as we want,” she said.

The Short Term Matters

Finding a balance between long-term and short-term initiatives is key when managing a large business, Nooyi said. “You’ve got to look at the investments you make in the company as a portfolio. There’s a bunch of stuff that delivers in the short term. That gives you the breathing room and the fodder to invest in the long term,” she said. Investors in legacy companies won’t tolerate a manager who tells them to wait three to five years to see huge results.

Be a Lifelong Student

Managers who depend upon the traditional planning cycle or the standard set of consulting reports are doing their companies a disservice, Nooyi said. “Our CEOs and leaders have to be lifelong students—not just students in the sense of attending courses or reading a book or two. You’ve got to learn how to read widely, walk the market, look at trends in the marketplace, make connections that don’t seem obvious,” she said.

You Are the Consumer

Twenty years ago, side tables at PepsiCo meetings were replete with full-sugar beverages, Nooyi said. A few years later, diet beverages appeared and now people are drinking bottled water at those meetings. “The point I make is, ‘Guys, you don’t need to hire a consultant to tell you where the trends are. You just have to look at our side table,’” she said.