Indra Nooyi Module 2: Future-proofing your business

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When Indra Nooyi first entered into her new role as CEO of PepsiCo, she had one goal: future-proof the company for decades to come. 

“We provide jobs to a quarter of a million people, livelihoods to their families and all the suppliers and the ecosystems that support PepsiCo,” she says. “So I said, ‘Wait a minute. We have to keep going forever and ever.'”

In this module, you’ll learn about the steps Nooyi took to create the conditions for long-term, sustainable growth, how she implemented her “Performance with Purpose” initiative and why legacy is just as important as performance, if not more so.  

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Transcript of Nooyi’s discussion with Vistage CEO Sam Reese: 

Sam Reese: Now, where did you get this courage and confidence when you talk about that? I can only imagine how hard that must have been when you came up with this Performance with a Purpose. When you started talking about the environment, and customer and employee well-being being on par with financial results for Pepsi. I can only imagine what that first presentation felt like in the world you’re in. What gave you the conviction to keep pushing that you knew that was the right thing to do?

Indra Nooyi: So I’m going to make some observations here. Typically, when new CEOs take on a job, they try to lay out a strategy that makes them look good or deliver short-term results. I was focused on something completely different.

I wanted to future-proof the company. I said, “I want this company to go on for decades.”

Because we’re a large-cap company. We provide jobs to a quarter of a million people, livelihoods to their families, and all the suppliers and the ecosystems that support PepsiCo. So I said, “Wait a minute. We have to keep going forever and ever.” And when I was growing up, I went to an Irish Catholic School, and there was a poem by Alfred, Lord Tennyson, who’s a very famous English poet. He wrote a poem called “The Brook.” And the refrain of the poem “The Brook” says, “For men may come and men may go, but I go on forever.” ‘Cause this brook is flowing. It says, “Men may come and men may go, but I go on forever.” To me, it was CEOs may come and CEOs may go, but PepsiCo should go on forever. Which meant that I wanted to run the company for the duration of the company, not the duration of the CEO.

So I started with an exercise where I looked at the megatrends over the next 10 years and said, “What are the big trends that are going to decide whether PepsiCo’s going to be successful or not?” And let me work back from those megatrends and say, “What do I need to change inside PepsiCo to make sure we are successful for the future?” So what I was doing was future-proofing the company. And what it showed was the consumer was shifting toward health and wellness. Not walking away from fun-for-you products, but moving to more good-for-you products in their repertoire.

I saw an incredible focus on water use, plastics and landfill, and greenhouse gases. And then of course, the most important phenomenon that I saw was young people graduating from colleges [who] wanted to work for a company that was doing the right thing. They wanted to work for companies which had a soul, a purpose. And there were many other trends, but these three trends I encapsulated in the purpose pillars. So I said, “Hey, PepsiCo’s always going to perform.” We have to deliver financial performance, because we are, at the core, a high-performing consumer products company. But we’re going to add three pillars to purpose.

The first is human sustainability. How do we transform our portfolio to include healthier products? Environmental sustainability. How do we replenish the environment after we’ve taken water out of it or put plastics into the landfills? And how do we cherish our employees, truly cherish our employees? And the way I looked at Performance with Purpose, it was not Corporate Social Responsibility.

It was not giving away the money we made. It was making money in a new way.

If we didn’t deliver performance, we couldn’t find purpose. If we didn’t focus on purpose, we couldn’t deliver performance. So it was a virtuous circle. Now… 

Sam Reese: I love that. I love that, but you didn’t see it. It wasn’t like the financial performance would be impacted negatively. You saw this as a circle and said, “The reason we will perform is because we do these things. And that’s one of the reasons why we’re going to be successful.”

Indra Nooyi: Sam, this is a very interesting one because what I had to balance was level and duration of returns. Many people, even there are textbooks written about this saying, a new CEO should come in, crash the financials, deliver alpha, then retire after five or six years. The next person — 

Sam Reese: Get out of there.

Indra Nooyi: — Crashes the financials. And I said, “You know what? I used to be president and CFO before I became CEO. Why would I crash the financials?” I knew what the financials were. I was working on the strategy. I am not going to crash the financials. And I used to sit on the board of [the] Fed in New York at that time. I saw the financial crisis coming. You don’t crash financials when going into a financial crisis.

Sam Reese: No.

Indra Nooyi: So I said, “Hey, stop, stop. Let’s think through our strategy very deliberately, and let’s future-proof this company so it’s going to be resilient for years to come.” So, developed the strategy, went to our board. Sold the strategy to the board. And the board said, “This is the only way to run the company.” And I told the board, “This is the only way that I know how to run this company. And if you want to change the direction at any point, you’ve got to find somebody else.” Because the only reason you would change the strategy is if the megatrend changed. ‘Cause I was working backward from the megatrend.

Sam Reese: Where did that humility come from? ‘Cause that has to be hard. You’re running one of the biggest companies in the world. You’re a role model for women throughout the world, for sure. Where did that humility come from to say, “I’m going to take a step back, and it’s all about strategy for the company and not about me.” How did you reconcile that?

Indra Nooyi: Well … 

I think all CEO[s] should be judged with the legacy they leave behind.

I think when a CEO leaves, and there’s basically a disaster in their wake, I don’t think that’s a good way to run a company. We have a way of forgetting history. In [the] corporate world, we should not. I think CEOs should be judged by how they develop people, how they leave a legacy of enduring investments that will survive well into the future and a strategy that’s future-proofed.

And to be honest, having been a strategy consultant, having worked in industries where we had to do that many times, I didn’t know … the unfortunate part, Sam, is, I didn’t know any other way. So I didn’t even know that was humility. I just said this is the only way to run a company.

And so I kept telling myself, “Long after I leave, I want PepsiCo to be viewed as the good company.” Good commercially. Good ethically.

Good is a short word, but it’s a profound word. It doesn’t mean somebody’s good-looking. So if I say, “Sam’s a good guy.” It doesn’t mean he’s wealthy or good-looking. It says that he’s good ethically. He’s good at everything he does. So I wanted people to say PepsiCo was the good company. So that’s where it started. And once the board signed off on the strategy, that was it. We were off the races.

We’ve built all the capabilities to deliver the strategy. We made some trade-offs. We invested some of our monies into the business because we said this will ensure returns well into the future, which is what’s happening now. My successor’s doing a great job off of the same strategy playbook. He’s made some changes, some very good changes, but the core strategy playbook is exactly the same.

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