NYU Stern's "In Conversation with Lord Mervyn King" Series Presents Indra Nooyi

good evening everybody welcome to NYU Stern the in conversation with loud Mervyn King series has become one of NYU's most anticipated events of the earth and we have another blockbuster evening today with a very special guest so just wanted to welcome you all just to House Rules I wanted to remind you of one please no photographs from the aisles but you're welcome to take photographs or from from your seats also we will have a question and answer session with MS nuit at the so dr. Larkin and mr. Murray will have a conversation for about 45 minutes and then they will open it up to the audience so if you have any questions there will be mics placed in the aisles and you can step up and ask your questions then thank you all and for those of you who are able to stay after 7 o'clock there will be a reception following this event you're welcome to join us [Applause] Thank You ragout hello everyone good evening and welcome to another in conversation with event my guest this evening is Indra Nooyi she was chief executive CEO of PepsiCo for 12 years from 2006 through 2018 consistently ranked as one of the most powerful people in business across the world she was born in Madras educated in India and now has made her home in the United States a few weeks ago the Financial Times said that if there were a nobel prize for management Indra Nooyi would be their nominee she has powerful and strong views about how companies should work so please give a very warm Stern welcome to Indra Nooyi [Applause] I missed that article we'll get it for you well Indra thank you for coming to stir pleasure we'll talk and then many of the people here I hope students will ask questions later on and happy birthday but yesterday I think thank you there's a lot of discussion today about the role of a corporation or company in the world what it should do should it maximize shareholder value should have wider purposes when you're at PepsiCo you introduce the idea of performance with purpose can you tell us something about what that meant and and why you did it hmm let me um first of all thank you for having me here Marvin I've seen the YouTube videos of the in conversation with Lord Mervyn King and I always looked at this as a very prestigious opportunity so thank you for having me it's our pleasure and there's a great birthday present for me too so thank you let me talk a little bit about PepsiCo and performance and purpose when we did performance at purpose it felt like the only thing we should be doing to run a responsible company in retrospect everybody talks about it as if it was something frame breaking so I think I should plot some of the arc of progress for you PepsiCo has always been a high-performing company the financial performance was always very strong we made the changes to our business when we needed to make it and it's always been a well-managed company and the way I'd put it is we were a responsible company I will be invested for the long term we delivered results in the short term we had an excellent board we had excellent corporate governance we treated our customers as suppliers our employees in a wonderful way so we ran a responsible company when I became CEO one thing became very apparent that the world around us was changing in profound ways and even though we weren't seeing the the impact of all of that immediately we were going to begin to see them the next few years and how did we how did I realize the changes were coming let me give you a couple of examples one in PepsiCo and all our meetings we have a big table on the side of every conference room in the late-1990s the products is to be regular Pepsi or full sugar Pepsi full sugar Mountain Dew a little bit of Diet Pepsi or dyed tea by the early 2000s you know between 2000 and 2006 it shifted to a little bit more Diet Pepsi and I do and by 2006 7 there's a lot more aquafina water showing up and then it's not just the products that were on the credenza it's the depletion rate the water and the diet products had to be replaced two or three times during the meeting and the regular sugar products would stay around a very low depletion now to me that's very telling because that basically says even among the PepsiCo employees were all consumers their behaviors and their habits were changing and then as you talk to them and really understand what was going on they would tell you that their families were also changing the way they consume products what they fed their kids that was to me a profound trigger to say that the whole health and wellness trend was not a fad or something people were just talking about on the edges it's really changing the core of consumer behavior the other thing one notice was that in many cities around the world we were being denied a license to expand our plants because we used a lot of water we used 3 liters of water to make a liter of Pepsi I grew up in Madras and India where there was no water for living and it seemed unconscionable that we could have a Pepsi plant in the outskirts of Madras using 3 liters of water to make a liter of Pepsi and the people in the city of Madras didn't have water to drink or bathe or carry out the day-to-day responsibilities similarly on plastics landfills were becoming full lands landfills were being shut down and there was no place to store all the plastics so as you put all of these things together these trends we realized that as a company we had to change in profound ways but the CEO deciding if the change in doesn't help you've got to build the case to make the change so we started a piece of work where we identified the megatrends that we're going to impact the company over the next decade or so health and wellness aging population the environmental focus a cybersecurity there were about 10 mega trends we identified and then we said what are we going to do to fundamentally change our company in response to these mega trends so if we didn't have those mega trends and I came forward and said we're going to make a shift to health and wellness people would say forget it you know we are a company that makes treat like products we're going to keep making them and they'd be a lot of resistance but once we showed them these megatrends and allowed people to debate and discuss the mega trends and once they bought into the mega trends making the change was pretty easy but the key thing is we had to do the mega trends outside in not inside out had we done it inside out would have been incremental we had to do it outside and so it would really frame the world the second thing we had to do is find the right language to talk about these megatrends and that's how the words purpose were born today people talk about purpose as if it's a new way of running the company it's not a new way of running the company is throwing heart into the company to say there's a reason we exist you know a tobacco company never says the reason we exist is to create lung cancer they don't say that PepsiCo never said the reason we exist is to make people obese that's not the reason we exist we existed to provide convenient foods and beverages society changed so we have to change because that is the responsibility of a corporation to change when societies have to change so performance with purpose was about delivering performance but the purpose element was threefold change the product portfolio to make it healthier and dial up the really positively healthy products reduce our environmental footprint and make the company a more inclusive companies everybody could bring their whole self to work and the wonderful thing about performance of purpose was if we didn't work on purpose we couldn't deliver performance if we didn't deliver performance we couldn't fund purpose so we changed the way we made money we didn't give away money we made and then we run this campaign to sell it across the company and kept hammering the same message for 12 years for the investments behind it and we deliver results tell us a bit more about how you actually practice persuaded the employees buy into this message because that was I can see the leadership coming from you but how did you get the very large number of employees to buy in it was interesting the rank-and-file got it right away the young people got it the real problem was what I call the frozen top usually the top two layers of the company take the longest time to buy into any change and you can't blame them you know they're often referred to as a frozen top because they are stuck in their ways the reason they're hard to convince is because the minute they hear about a change program the first thing that goes through the head is oh my god how am I going to deliver my targets how am I going to deliver on the quarterly numbers will they give me enough investment so they're very pragmatic so what you've got to do with these people is to say look we are going to give you the investments we are going to modify your targets we do expect a behavior change from you and incidentally if you don't sign up the behavior change program in six months or two years you're going to have to get off this engine because we never told people we're going to fire them we told them you're going to retire them and so we had a lot of retirement parties for people who didn't stay with the program that's one the second thing we did is the first thing I did I went to frito-lay North America anybody know free delay makes Doritos testigos Fritos anything with toes they're based in Texas okay all right TOS not to here they're based in Texas and they believe any message that came from New York was overheads so they were the biggest skeptics and they rejected us so the first day that I crafted performance of purpose I went down to Texas and I spent a day with them and said this is what I'm thinking of doing in PepsiCo I had laid out the whole rationale and I said what do you think about this they said we'll think about it come back to you and lo and behold they flew up to New York which is highly unusual for my free delay chaps they flew up to New York and they said we love it this is the only way to run the company and we have signed up now to reduce the fat and salt in all our core salty snack products so the Lay's potato chips you eat today has about 20 to 25 percent less salt than it did a decade ago it's fried and heart healthy oil it's got a simple label just three ingredients if you look at the back of a Lay's yellow bag a plain salted you see three ingredients potatoes oil and salt and it's a great chip to have so if you're going to eat a potato chip eat the Lay's because I will it's now it's the healthiest of the potato chips you know that's what really aiming to do tomorrow morning I will I'll try it I promise it goes well with dinner split now you left PepsiCo last year and you're now a non-executive director of Amazon one of these big tech giants we've all loving to hate what what are the challenges of being a non-executive director of one of these big tech companies how many of you are Amazon customers show of hands thank you you know I tell you something I consider being on the board of Amazon sort of a privilege and you get a front-row seat to the to how life is gonna change with the application of technology for the better and there's a person of practice performance with purpose for a decade a lot of people asked me about you know if you're so Purpose Driven why would you get in the Amazon book of course it's getting rid of retail and all that good stuff I thought long and hard about joining the Amazon board because I had the pick of so many companies that I could have joined the board of I joined Amazon the great joy because I thought Amazon actually was a company with the deepest sense of purpose and I'll tell you what I mean by that Amazon gives you something that you don't get which is the gift of time with a swipe you can all home administrative tasks and get rid of it you can reduce the time on everything that's home administration and when you can do that and you can get that time back you can now use that time for nurturing activities which is what you took the time from to do home administration I don't know about you guys when I had my children I picked them up put them in the car seat drive to the grocery store take them out of the car seat put them in the grocery cart screaming kids going through the store hey now you want to do anything at home do it just swipe swipe and the products appear at home so to me Amazon is an amazing example of purpose they give you the gift of time which other company can say that so I look at it as an extension of the performance of purpose that I was practicing to be part of a purpose-driven company and so I actually considered an incredible privilege to be part of this company so you talked about it being a privilege but it's also a challenge because you have a responsibility as a non-executive director has it been easy to take on the role of non-executive having been a chief executive so long and what do you is there something particularly challenging about being a non executive of a company like that you know a newly retired CEO always struggles with being a non-executive director because you're dying to interfere in the company's day-to-day operations because that's what you did for all your life right so you always think you can do better than the company the good news is that in the case of Amazon there's no way I can do better than the company because you're so damn smart but I am also learning how to be a good tone exec director by providing the right governance input but not overstepping the bounds but you know we're a non exec director flourishes is when you have good management and a good CEO and that's what we have in Amazon I mean I'm not a commercial for Amazon but for those of you who know Jeff Bezos one of the most brilliant people at MIT and the big difference is that as a founder he acts like a public company CEO not as a founder CEO so he comes to every board meeting listens to the board sits through every second of the board meeting listens to us and the board is a very vocal board so you know it's easy to be a non-executive director of a successful company changing the world with a sense of purpose where the founder CEO is acting like a public company CEO who doesn't have you know preferred class of stock so that's the ideal world for non exec board member so if you look at the range of very big high tech companies in the u.s. several of them probably not Apple but most of the others are still run directly or indirectly by the founders and the people who started them do you think that all of them will face a serious challenge when those individuals retire disappear go I don't know I think technology is changing so rapidly that these companies have to keep reinventing themselves many young founder CEOs are not to stay on because they believe that if you moved out of them into a professional CEO their start to focus too much on quarterly earnings as opposed to reinvesting constantly into the future in an industry that has got a voracious appetite for capital and so these young founders have never run these huge companies stick around the better young founders surround themselves with great managers so that you know the company is not so dependent on one person but they build the shoulders so the company can continue on if anything were to happen to them or if they choose to just step out and go their merry ways and one of your roles presumably is to successions landing you guys on that play a role in it that's a big important part of a non-executive chair now you've regularly been ranked as one of the world's most powerful business leaders what what is power in that sense and and you enjoy being powerful you know I think that that most powerful women list which was really where you know people like me sadly show up was because there weren't enough of us and they wanted to shine a light on us to say hey these women have arrived at last and so I don't think it the focus was on powerful as opposed to there are women there's this recognition that we've reached the CEO suite it's unfortunate that we need that list of most powerful women as opposed to women showing up in the most powerful business people or whatever the most prominent businesspeople you can put whatever name you are now you know definition you want but I still think that with less than six percent of Fortune 500 companies being run by women it's gonna be a long haul before we get a critical mass of women so you don't have to worry about these lists why do you think it's so low I mean that in almost all other professions has been a enormous change as the cohorts of younger women come through but as you say it's chief executives it still remains a remarkably low in comparison with you know politics or many other professions now the problem with CEOs is we're not born CEOs we have to develop CEOs and you get a lot of women into the entry level by the time you reach the third level the number of women in the jobs have or even go down by 60 or 70 percent because it's very hard for women in particular to balance you know having a family and work because we don't have the care ecosystem in our country to support them we don't have flexible work hours we don't have good maternity paternity care so it's very hard for them to stay in the work force if they choose to get married and have kids some women just say look I can't stand the bias that I face in the work force so I wanna up and leave other women leave because they have incredible responsibilities at home to care for aging parents so I think that I mean I heard a statistic which blew me away it said 70% of high school valedictorians are women 53% of the top grades and college graduates are obtained by women yes even MIT graduates 53% of the engineering classes women we have all the women gone ok if we now say that the valedictorians the top grades the top grade of tenors and not the people we're gonna pick from to be CEOs what we're saying is from the other 47% which is not that great we'll pick CEOs that's really what we're saying ok and I think we have to figure out how to grease the skids so we can allow women to ascend we have to do a lot of stuff we have to address the care ecosystem we have to address this bias issue which is still incredibly prevalent in business today not just corporate America but business as a whole and we do have to figure out how we can redo communities family societies so we allow young people not just women young people to integrate work and family that's the next big challenge in front of us there's very interesting you mention it my wife is from Finland she ran her own company yeah my two stepdaughters are high flying executives they've all benefited from extraordinary childcare provision in Scandinavia which is provided collectively mmm the Society provides the resources to finance childcare and so it's just quite normal for women to combine it you don't have to take a big step out of a career and it's accepted that people go back and continue and yet when I was at the Bank of England what was very clear was that exactly as you said over just over 50% of our intake were women yeah as economists and yet when it came to the higher levels people had dropped out where they'd gone they've taken a career break it was impossible to for the bank to provide childcare because people live so far away there was no other provision and gradually people dropped out and once they dropped out it was hard to persuade them to come back because there is no return ramp for many of those troubled because you're not with your cohort group you don't have the right jobs for them and technology has passed them by so we have no program to retrain them to bring them back so I think if we want to really improve the productivity of the country you're gonna have to find a way to bring many of those people have dropped out of the workforce back into the workforce we have a job to do I did notice when I was at the bank that one of the big changes was that the younger generation of men took their own responsibilities for childcare mm-hmm seriously so when we introduced flexible working yeah we it was for everyone and men were taking advantage to spend one or two days a week at home to take their turn for childcare did you see that in is this growing I think maternity and paternity care are both growing I think what we have to do is not to shame men for taking the paternity leave we've got to make it more mainstream and normal so that in fact we have to force the men to take the paternity care not play golf take the potato go home and help over care right but if we can make that more normal thing as opposed to I can't believe you're taking the paternity care you're not interested in your job kind of thing yeah I think young people look we want young people in in our country here to have 2.1 kids which is a replacement rate we are sitting at about 1.6 to 1.7 that is a dangerously low number so we have work to do to get the birthrate up so a lot of potential female executives here in the audience of students well what advice would you give them as to how to manage the career and deal with some of these challenges I don't think they can do it just by themselves I think very often we've just told the young women it's your problem in a mini books have been written about make a checklist okay other people have said prioritize brutally prioritize saying no to things no why does it have to be just a woman carrying the burden yeah I think we have to change the dialogue from asking women to do it all to asking the question what do government communities societies families companies what do we have to do collectively to enable the country to have productive young kids come into the whole population pool so we can have wonderful future citizens so I'll tell you one thing if we could solve one thing across the country we'd make a huge contribution to young women staying in the workforce that's zero to five childcare outstanding childcare for children zero to five with certified child care workers and great childcare facilities really well taken care of it'll contribute two wonderful children productive families and I think the economy will benefit now you were born in Madras hmm you came to the United States why did you come here you know when I came here in 1978 the US was a beacon for everything for hope dreams the greatest inventions in the world all my friends were here already and I applied to Yale to the Business School they're truly on a sort of lark to see what would happen I never thought I'd get in and when the letter arrived which said you've got so much scholarship and so much loans the loans seemed like and a stunningly high number but you know what I got in and I crossed the Seas and came here and never regretted it Yale was a great experience hmm so you had a lot of experience in US industry now different levels and hours and non-executive do you think that executive remuneration has reached levels was just simply too high in the US or how she'll be think about what does NYU's perspective of this I think you look on remuneration you sit at the center of greed well I think we can see that there are people in New York whose amelioration outside Stern is a lot higher than not only people in stern but the average person living in New York so the ratio of the remuneration of chief executives of the top 500 companies to the average incomes of their employees has risen very substantially over the last 20 30 40 years if you think that's justified and so one has to be very carefully looking at that particular metric because let me take a Google which has engineers and designers and hype you know income people yeah the employees and the CEO ratio might look at look like 350 times the average for the median of the employees you take a company like PepsiCo where we have frontline salesmen truck drivers that's a large population pools and they're truly global I mean they're in emerging markets developing markets and if you took the median of that population pool the CEO conversation might look like 600 but the CEO of PepsiCo gets paid a lot less than the CEO of a tech company so you know you have to be very careful with ratios that are blunt instruments instead let me talk a little bit about CEO compensation there is no question that our CEOs get paid very well but most of our compensation is in stock 85% of my conversation was stock the stock did well I did well the stock didn't do well I didn't do well in fact the cash compensation the cash portion of the compensation was pretty low now where the problem comes about is going back all the way to the first question Marvin a CEO can run the company for the duration of the CEO you can say I will be CEO for six years which is the average tenure I'm going to cut all investments I'm going to run the company to maximize EPS the stock will go up I'll be rich I'll retire the new CEO will come in and say everything that the old CEO did was wrong I'm going to take a huge reset which is what most new CEOs do and then they write the Alpha as they call it whoever came up with that name I don't know they ride the Alpha and the next CEO comes in after five or six years and does the same thing that is the terrible way to run the company I always think CEO should run the company for the duration of the company not the duration of the sea and so you know the old poem by Lord Tennyson the brook which says men may come and men may go but I go on forever that's what corporation should be doing men may come and men may go but corporations go on forever so I think that if we approached running a company with that mindset and invested judiciously to balance level and duration of returns people focus too much on level of returns well if you're balanced level and duration of returns I think what you'll end up with is a reasonable increase the stock price and don't start off by saying I'm going to beat every index makes no sense run a responsible company which balances level and duration and at that results in a good increase in stock price you deserve to get paid so when I was at the Bank of England and visited lots of companies I was always struck that the companies that were successful were run by people who didn't wake up in the morning and say gosh how can I make money today they were run by people who were passionate about what the company was doing believed in the product and they wanted to be judged in a way by the success of the product making money is a bit of a side effect of that if you run a really good company it will happen to make money but if you sit up every morning as having to make money then as you say you just cut costs you drive the company into the ground so it's a question of choosing the right people to to run these company it's that and also what we teach students and business codes I would strongly urge edenia I think that we have forgotten to teach students responsible management of enterprises we quickly go to corporate social responsibility in talk about doing social programs that's not what we're talking about how do you run a responsible company so you make money the right way let me give you a simple example if you're on a marketplace that's growing at 3% and your company is growing revenues at 4% by definition you're gaining share okay if you're now grow profits 7 or 8% boy you've got a great spread between revenue and profits if you now grow profits 10 12 13 % every quarter it means you're cutting some investment means you're cutting some investment unless you've got extraordinary returns from your innovation so there are some very simple ways you can look at a company's P&L look at the leverage from market roads to revenue growth to bottom line growth to EPS growth and say where does the company getting the leverage and any investor who looks at the company should say if you have extraordinary profit growth which is not commensurate with your top-line growth for a long time what are you cutting show me your innovation pipeline where is the price premium and if you can't ask those basic questions then don't complain that the company is doing badly after the CEO left to me this is where you've got people who are so happy with short-term returns that they criticize everybody who is generating good returns but not extraordinary returns in the short term and that's where your mismatch comes between investor behavior and corporate behavior he's paying a CEO a lonely job it is a difficult job yeah it is lonely because you can't really talk about it talk about issues with your colleagues at work because you're the CEO you can't talk about it with third parties because everything is subject to confidentiality I could talk about 10% of the issues with my husband not all of them because if I said to him you know so-and-so didn't really listen to me and was rude to me the next time my husband sees them at a party he won't talk to them I decided I am NOT discussing anything to do with PepsiCo and people with him so you're sort of bottle it all up inside you what we had was a little kitchen cabinet there were five of us CEOs J&J gee IBM American expressed myself and we would meet once a quarter and we could sort of discuss issues not provide too much detail but we could get advice from each other you know that helped some but it is a lonely job and unless you have the backbone the desire the mental makeup to do that don't take it on now you've held very important jobs now involved with Amazon this is big stuff but one of your positions is far more important than any of those yeah which is that you're on the board of the International Cricket Council this is this is undoubtedly the most important organization in the world [Music] cricket seems to me to be a sport that tells us a lot about life it's at any moment two individuals are battling each other but it you any win or lose within a team what why did you take this on and what do you think are the lessons from cricket which many of our audience need to understand they're gonna be successful in life why did I take it on you know when I was growing up cricket was religion in India it still is as you know and cricket those days was just beautiful this game everybody was invited these multiple rainbow colors a little there wasn't as much protective gear that people wore so it was really a fun game to watch not that I like people getting hit by bouncers baby and it was a fun game and when I went to college there was no women's cricket at that time this was 1970-71 there was no women's cricket at all and we started the first college cricket team and for women and then the other colleges in Madras started women's cricket teams and we played cricket and that love the game love getting involved in the game of cricket and I'll tell you an interesting story a humorous story the first match we played against another women's cricket team the men were the amps and so like I was bullying how many of you know cricket here show of hands okay quite a bit so I was bullying first ball the person's LBW okay and I asked for the column say every Dahlia out and the UMP doesn't give me the call mad like hell but the third over clean bowled it's over so I look at the amperes and what happened the first over why didn't you give her out he says to me she was a good-looking gal I wanted to see her for two more office cricket in cricket okay so it's changed since but that's where women's cricket came from today we are gearing up for women's cricket or last kilobases and I got involved with ICC because you know here is the chance to see cricket at the highest levels the governing body of cricket which needs changes in governance to be honest it's still a country led organisation now I'm the only independent board member so I watch all the bickering and I have to figure out how to help the warring parties come together and resolve stuff I'm not always successful but I'm trying but I'm also witnessing the incredible rise of women's cricket so it's coming full circle in fact we have the big World Cup for women in February March of next year in Australia and it's going to be a fantastic event so it's a lot of fun to being triggered why is cricket a great game for life you know most team sports are great games to teach you about life how to work in a team how to give and take you know when to take a run where not to take a run the give and take planning strategy for how you're going to kill the opponent all of that you know they're wonderful games of life and for me New York Yankees baseball and cricket are my two passions so I'm involved in them so in a minute we're going to open it to questions get your questions ready it'll be microphones in the two channels here I just want to come back to the question of women's cricket because it's the fastest growing sport in many countries and together with Mark Nicolas who's one known television commentator he and I started a charity to promote cricket in state schools where it had been disappearing and one of the unexpected side products of that was that now for over 4 million children have been through the project half of those are girls that was not expected when we started and the women's team in it the English women's team coach in this program when they're not actually playing for England so anyone who hasn't yet got a sport forget no that's not the way to business success cricket it I say we're gonna open up us a cricket oh oh yes we are investing heavily in USA cricket and there are many many many many players in the United States who want to play cricket and the hope is that we could get trickle into the 2028 Olympics in LA that's a moment well that's a real ambition wonderful now questions from the audience there's one here I'm sure they many there's one at the front here and then there's one just over there and I'm sure there are others thank you so much for coming pleasure so three companies are going through sort of issues and stumbling blocks right now are we work you know jewel labs in Boeing if you could just a few were CEOs of each of these companies what advice or if you're consulting you cheese company what advice would you give them and how would you use your management style to kind of turn them around or get them over the stumbling block you know I'll be honest Vienna whatever I say is gonna sound arrogant so please don't take out the arrogance interpretation if I would see away those three we wouldn't be in the mess we're in okay because it's harder to clean up messes then it is not to get into the mess in the first place all right it's better to delay a program than to launch something hurriedly and face the consequences later on I can't tell you how many projects in PepsiCo they didn't didn't hurdle on product taste we just pull it at the last minute just say it's not worth launching even though the cost of failure of a PepsiCo product was much smaller we just pull it never ever try to launch a company we don't have a clear pathway to profitability and you know moats around the relevant parts of the business if you don't have it don't launch it and if you're a company which is viewed as so the same company don't try to compensate for once in with another sin okay so recovery from these problems is much harder and the best way to do it is typically management gets changed if it is necessary and then the new person has to clean house to make sure that it doesn't ever happen again so well there was one over there just behind you well I'll need someone can you say who you are yes I am Zhang I'm a professor here in finance nice to meet you thank you for coming I'm very curious why you decided to leave perhaps leave your position as CEO and I wonder how much that decision was anticipated and whether your employees and other stakeholders like lenders behave differently towards anticipate your potential anticipated departure twelve years is a long time to be seeing the average 10 year is about six in my industry eight would be very high so twelve years is a long time so everybody knew that I was you know I was there longer than most the wonderful thing about PepsiCo is that we have a very very orderly succession process so you know we build a pipeline we get the candidates lined up with big jobs so the street knows who's being groomed for big jobs and then year or so before the decision we elevate a couple of people to even bigger jobs so everybody knows the change is coming and if anybody was surprised by my stepping down I never heard about it because they viewed PepsiCo as a textbook transition example which it has been in the history of our company we've always had insiders they've always been through a logical and planned methodical transition process so from my point of view I was tired after twelve years I really wanted to do something else and so our board is a very good board we had wonderful conversations and we had a wonderful transition so everything worked out fine well you're certainly not tired now now there's a question hi david knapp i'm american then after that down here on the so again i wanted to ask you you mentioned that you were excited surprised that you got into Yale and there's a lot of people who have an impostor syndrome and I'm wondering when in your career you thought wow like I really am incredibly successful and the rest of my you know tenure is going to be great like how far into your career were you when you sat back and had that reflective moment you know until my last day at CEO I didn't still didn't feel that way I'll tell you why because as an immigrant you have an immigrants fear the fear you have is all you might fail and you'll shame your family this is maybe an Indian cultural thing okay and so at every point in time I was like I hope I'm doing okay I hope I'm owning my job I hope I'm earning the right to be CEO I hope I'm doing the right thing so I always had that fear in the back of my head there was never a time I felt I've landed you know I'm successful I'm powerful those you know badges meant nothing to me I was always worried about how I was doing the job and that I was worthy of doing the job now I could sit back and say yeah maybe it was successful you know I met somebody from PepsiCo last week who came to visit with me and they were saying in red do you know we did ABCD and they rattled off everything we're done I said yeah I guess we did all of that stuff but while we were doing it it just felt like we have to get it done not that we were taking off milestones and success was being measured that way so maybe just an immigrant's fear different mindset hi I'm snake aroma of the Executive MBA students here my question is regarding you mentioned mega trends so bigger companies monitor mega trends and so do smaller ones like mine what is your one takeaway in terms of or advice for a young company or for a small company when bigger companies like Amazon are entering every single space to survive or to do better or except for being acquired by a bigger company what space are you in healthcare in particular yeah look that's a area that's ripe for innovation and invention so you know you've got to think through how the space is going to change or what trends are going to impact your space over the next few years and what space you want to occupy there as a niche company I mean I'm looking at digital healthcare startups all the time I'm looking at insurance companies like Oscar starting up I'm looking at what I told go and a is doing with the three big companies with Haven so I think the opportunities for big companies small companies little niche companies abounds in this digital in this healthcare space depends which area you want to go into and why what do you have that makes you worthy of being in that space that's a question you have to answer yourself and sometimes you know what a big company buying you out might put you out of your misery because you can't scale sometimes you just can't scale up but I hope you're successful with your company and I wish you all the luck question over here on the right and then the second row here afterwards hi again thank you for coming I'm an undergraduate student here anyway you I'm a senior and I just have a question about the megatrends that you mentioned so in Bolivia and in my experience with South America it seems like the health trend isn't as prevalent as here in America people's like at least in my experience still seem to enjoy sugary drinks and not really healthy snacks you would say so I was just thinking like in your experience do you think this change will expand like the way it has in in the u.s. to regions like South America it has I mean let me take Mexico as an example let me take Chile let me take Colombia let me take all those countries I remember Mexico talking to the Mexican team and the Mexican team said we in Mexico love our sugary drinks and we love our salty snacks you know beyond Sabritas and gamesa in mexico we all we own those markets yet if I looked at the underlying trends in Mexico I felt that there would be an increased focus on health and wellness just look at all the statistics now I want to be very clear our products only 2% of the consumption calories 2% yet I thought every company in the ecosystem should worry about these issues because if every 2% company says not my issue collective you won't make change I just felt all of us collectively had to lean in any time I talked to my team in Mexico they wouldn't admit there was any issue where as an outside every time I went in I could see the issues I could see the landfill the junk lying on the sides of the road I see the obesity statistics creeping up because the food Dale itself is high in fat what happened six months later the Mexican government imposes a huge soda tax okay so I think what one has to do is look at all the numbers and statistics objectively and draw for yourself conclusions almost as if to say if I were President of the country but what I do and if you think that way you can draw a line and say in five years there could be some action so let me change the portfolio now okay but in changing the portfolio I'm not telling you that by reducing the sugar you make a the product it's still a great tasting product but with lower sugar okay great tasting product with zero sugar so the challenge is how do you give you the same great taste without the negatives and that's what performance with purpose was all about Christian here on the second row I think so being here my name is Amy ho I'm a second year full-time MBA student here I work for a family office that does early-stage investments in better-for-you consumer products and I know Pepsi did some awesome acquisitions like bear snacks and SodaStream so my question for you is do you have advice for early stage investors that are trying to shape the space the right way or you know what how can we do the right thing look are you in the food space I am okay the first thing and you know again I'm gonna give a generalized observation may not be in your company's case all the small companies we bought many of them we bought what we discovered and we all we usually bought them and they were between 30 and 100 million dollars in revenue because there are stall points in these small companies the first stall point comes at about 30 million the next tall point is at 100 million then at 200 million struggled to scale what we discovered was many small companies what was on the label and what was in the product we're not consistent okay so remember if you really want to succeed and get to the next plateau the next plateau you have to make sure your product authenticity is complete we bought a drink or so be how many of you know so be the drink you out of it you got a really well-educated group you better tell me what it is we bought so be as a beverage Sam you know maybe about 15 years ago and when we bought so B we didn't do the due diligence on the labels and the product because it was doing so well it was a hundred million dollars in sales once we bought the product we put the R&D guys to work on it and they found that the label and the product didn't really sink up or as a small company you could say things about the product that has a large camp we can't say for example so we had a line which was called so be liquid liposuction liquid liposuction what was it it was a lower calorie so V product now if PepsiCo called a product liquid liposuction what do you think a lawyer is going to do a lawyer from NYU is going to do you know there would be a lawsuit against us saying we didn't see anything liquid or liposuction about this product so what happens is as a small company if you start doing the right things now it might add to your costs but will create a more robust company and at some point you will want to flip it unless you have infinite resources because scaling up in consumer products is very very expensive and so you have to partner with the big company you'll get a better price if you create the right product where all the elements of the business model align themselves to the truth of the product okay question on the fifth row here thank you for your time today this is amazing I'm such a fangirl so I'm just gonna be shy my name is iturra and my question for you is around the way unicorn companies are growing today versus how when you look at companies from the prior generations and how they've grown strategically and you're seeing how overnight growth is growth is happening with companies today what's your perspective and where do you see some of these companies growing it's a generalization because they're a good unicorns and then there are unicorns still finding their way recently a bunch of us retired CEOs are doing a lot of work with unicorns people who want to go public next year or the year after have reached you know a line of sight over 100 million dollars and some of them have got multiple hundreds of millions of dollars in sales again what they don't realize is when you grow so fast if you don't build the foundation of the company when you are small you're never going to build it when you get big right when you're before you go public be very clear where your advantage lies what are you going to invest in what are you going to outsource very gonna borrow services be very clear what your business ecosystem is going to look like and have a clean line of sight to saying I may be investing for the next five years but after that here is a clean line of sight on terms of how I'm going to make money very few companies have that and then they offset their inability to talk about how they're gonna make money through financing mechanisms if I did this lease model with this buyback model with this repurchase model with this low debt model I'll be okay doesn't work all those are games no I just find I find the game they have in the Caribbean is one of those I don't think that's what we should be looking at what is a clean business model that will deliver profits in whatever timeframe articulate the case articulate how you're going to build moats around part of your business these unicorns can succeed I think generally a general statement I'd make is a lot of the unicorn started by founders need some adult supervision that's what they do okay next a question to the back I know this is uncle cam Kalia I'm also a fangirl and I've been watching your career for many years and you've influenced many of my decision including coming to stern for my MBA one of my question I have two questions one is do you see companies like Amazon and Google sort of turning to heavily regulated sectors like financial services whether it's payments or asset management and my second question is heard a lot of stories about your success do you have any stories of failure to share with us as well you know I don't know where Amazon and Google are gonna go and whether they're gonna become regulated companies I think regulation is needed if you behave badly okay and more and more regulation happens if you behave you know if your bad behavior continues which it did for many financial institutions witness the 2007 crisis and you should talk to Lord Mervyn King about this he knows all about it if a company behaves responsibly if an industry sector behaves responsibly it anticipates regulation and changes its behavior to avoid punitive regulation there might be oversight but they transform the model to prevent punitive regulation I hope some of the big tech companies do that themselves as opposed to being regulated by people who don't even understand the industry ok so that's my hope to your second question on failures you know all of us become better because of failures if you only had successes you know what do we have to learn from I can't tell you how many failures one has had business-wise personally you know over my career my 40-year career sometimes I look back and say did I just have bad luck or what happened I look at each of them each of those failures as a teaching or a learning experience because I went back and I thought about what did I do wrong that I failed or what was wrong with my behavior that ticked off somebody else and when you look at each of these as teachable moments you become better and more humble after failure so it's how you approach the failure rather than the failure itself that makes you a better leader another question just in front hi my name is Kevin parks I founded my own company about three years ago and I really enjoyed the part of the conversation where a lord King started to talk about people he knew or had worked with who are so successful because the passion they have and I find that in my own kind of day job I focused more on and by myself you know trying to hit goals kind of objectively and working in the asset managers face it seems like you know one of the things you know to the point that you were talking about you know beating in index doing things that are objectively measured as successes I'm wondering what the some of the more intangible parts of your job or your character that you think has set you apart or some of them intangible elements of you know just are collectively as people we can kind of work on to help try and measure success a little better interesting so let me clearly in our jobs they have to be some objective measures you know like performance of purpose goals you know those were all public and those were made explicit output metrics and sort of in process metrics what are we investing what's the return on the investments all of those with tangible metrics and those are all good success metrics because without them there's no point talking about other leadership qualities let me tell you what I did in my time at PepsiCo first I absolutely totally loved everybody I worked with I loved my employees and let me tell you how I showed my love to them I just didn't tell them I love them I gave them tough love I coached them and I mentored them constantly constantly I would I'll give you one crazy example which I look back today and say I must have been daft I've done that the team in Russia was preparing to make a major presentation for an acquisition I flew to Russia on a Friday I worked with them all weekend to prepare for this presentation and I flew back on Sunday from Russia and I was as I was leaving I said to the Russian team do you realize what I just did I'm the CFO of the company I flew down to Russia to help you write this presentation which are going to present to the CFO on Wednesday does it make any sense but there any other CFO do it probably not but the reason I did it is because when that team came to present to the CFO not to in renewing when they came to present to the CFO I wanted them to look good because that's the way they learn how to work a presentation and do it better on the other hand had they presented to me and I said this is a lousy acquisition you guys have no case get out would have demoralized them on the other end did it take a weekend off my life here but it made this team such a loyal team to me as I became CEO so there's a great line which says the distance between a number one and number two is a con if you want to lift your organization you've got to lift yourself because the distance between the number 1 and 2 is constant so I constantly lifted myself and I forced the organization to rise up with me and when they struggled I put a hand out and lifted them up so it was an enormous time commitment but there's one thing I think most people in PepsiCo miss is that constant pushing I gave people to do better to do better to do better I stopped 3 colored pens I had a blue purple green and the red 4 felt pens you know and whichever pen was there would write on it once I sent the decks out I would write on every page people would say this isn't purple ink what does she mean by purpling versus blue ink on this page satis your memo it says them ink colors don't mean anything don't spend a minute thinking about that focus on the questions on every page I read everything my people sent me I gave them comments I gave them ideas how to improve what they did sometimes I would tell them things like great deck but a trained monkey could have done it could you do better you know but they knew I said it from a place of love not a place of anger or hatred so you have to decide as a leader how you want to motivate and coach your people because your success is a function of how well your organization improves over time and one last question you know you identified the question right go ahead right thank you my name is Janet Valenza I'm in nyu alum and i own a business though and i want to thank you for coming in drew you're an incredible inspiration to me and you just mentioned about lifting yourself up so you rose so high who I wonder was your inspiration and how did you inspire yourself to continue to grow sometimes continuing to grow is not an option it's a necessity because if you wanted to convince the organization to make major investments in you know AI for something you can't just say I'm going to put AI into this area nobody knows what it is so as a CEO I had to learn everything about the space and communicated to people sort of in a cheeky Ducky way so that they can understand and make the changes so in the past it used to be briefed the top and trained the bottom today it's trained the top and trained the bottom so I had to train myself to become well-versed in all these new technologies in terms of inspiration there isn't one person that inspired me for different things different people inspired me for recovering from failures you know I'd look at the people in PepsiCo who had a sick child an aging parent you know a spouse was going through mental illness and they were still come to work smile and perform and I said thank going how do they do it I know all the problems they have how did they do it and anytime I had a problem I'd say if so-and-so could do it with so many problems in their life surely I can do it so at every point in time my frame changed if I had to push myself to learn something brand-new I'd say look if so-and-so could have gone back to school at age 50 to learn a new skill I can do it to run this company so I was constantly looking for the right role model to get inspired by as opposed to picking one person saying you are it I'm gonna be you because it was never gonna work it's too complex a subject thank you for asking that question appreciated ladies and gentlemen I think you'll all agree with me that we've been privileged tonight to to see and learn at firsthand exactly what it takes to be a successful chief executive and that's the cue for our own CEO Dean we will close the session [Applause] you're gonna have to repeat that all over again after I speak so on a serious note Thank You Marvin Thank You inter for truly wonderful wonderful evening not just the said advice but the warm humor with which it was imparted I think that will be remembered as much for me this evening was special for many reasons not just seeing one of madrassas most spectacular success stories here at Stern but most of all as a fellow cricket tragic seeing this mention of cricket on stage at Stern in NYU I never thought I would see this thing so thank you very much a very small token of our appreciation [Applause] thank you all for your questions and please to join us at the reception just outside you [Music]

Channel: NYU Stern

Views: 40,151

Rating: 4.8110881 out of 5

Keywords: new york university, nyu stern, stern school, Indra Nooyi, Lord Mervyn King, Mervyn King, PepsiCo

Id: MvQf7XStV-Q

Length: 64min 14sec (3854 seconds)

Published: Fri Nov 01 2019