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AdAsia 2011 Day 3: Indra Nooyi claims disruption is our new friend

Innovation is not just about refreshing what you have. It’s about rethinking and reframing your whole product offering, your complete service, according to the PepsiCo boss

BestMediaInfo Bureau | Delhi | November 4, 2011

The last session of Day 3 of AdAsia 2011 was perhaps the most awaited session for the entire three-day event with Indra Nooyi, Chairman & CEO, PepsiCo Inc., set to take centrestage. She flew in on her private jet from the Middle East especially to grace the occasion and made sure that none of the avid listeners went home without yearning for more.

Nooyi started off by stating that 80 years ago, a German physicist called Werner Heisenberg won the Nobel Prize for Physics with a simple observation, which he called the Uncertainty Principle. Basically it meant that the more we know about where a particle is now, the less we know about how fast it is going and what direction it’s travelling. This principle had kicked off some intense debates between Nils Bohr, the father of atomic theory, and Albert Einstein, the father of relativity. At the end of one of their long arguments, Bohr said there was at least one thing they could agree on: “Prediction is very difficult—especially if it’s about the future.” And the same is true for all aspects of work, be it in business, in government or in the not-for-profit sector - the world we behold is uncertain, she said.

Though there’s nothing new in this statement, she added, “I do believe there is something new and unsettling about the level of uncertainty we face today.” Five years ago think looked bright and pink as from 1990 to 2007, the global economy more than doubled from $23 trillion to $53 trillion and things looked exciting in all spheres of human existence including business and there was a certain amount of optimism in the air, she said.

However, things now have changed and we have to face reality. Said Nooyi, “There is a new, more negative kind of uncertainty out there today. The financial meltdown brought the easy assumptions of the old world crashing down. Housing markets collapsed, unemployment levels soared, retirement accounts vaporised. Institutions, from banking to automotives, peered over the brink. Famous household brands just disappeared altogether. Creativity gave way to fear and risk triumphed over ingenuity. “

Noori felt that as a result of all this we are now living in the midst of three inter-locking crises. The first is a crisis of leadership. At the top of some famous companies, responsibility went missing. One of the great tasks of leadership is to prepare for events, to be ready for when the storm comes. “On any measure, leadership failed that test. This crisis of leadership was compounded by a simultaneous crisis of governance. Accountability and oversight went missing too. Nobody said stop when bad practice was developing. Governance failed and it failed badly.” The result of poor leadership and even worse governance is that we are now experiencing a severe crisis of expectations. Businesses, regulators and governments are now unsure what success looks like. This complex world feels out of control. Consumer demand changes in a heartbeat. Trust in established brands and institutions has diminished. Businesses are left struggling to keep up. She termed this era as the era of negative uncertainty.

However, she cautioned that we should not fall into pessimism as this is also a world abundant in opportunity, if we know how to navigate it. The upside is that the global economy, which is $62 trillion today, is likely to be $300 trillion or more by 2030 and most of that growth will be powered in developing world. The middle class is going global. Increase in prosperity in the East means billions more people in the world will have better schools, running water, better sanitation and better homes. She said she was delighted that this growth was being powered by women who are emerging as great 21st century leaders. “Across the globe, women are the biggest emerging market in the history of the planet—more than twice the size of India and China combined.”

Nooyi agreed that we were in a new world that was uncertain and the solution to this was adaptation. Quoting Darwin’s insight on survival of the fittest, she explained that those who thrived were those who could adapt to the changing environment.

She then talked of the five thoughts that she hoped will be useful in these changing times. The first is that we all have to explicitly recognise that we are in a new reality and everyone in an organisationhs to accept that we are in a new era of uncertainty. One cannot now have fixed plans for a year and hence old fixed calendars need to be rethought. “We have to speed up. We need to start the next plan while the ink is still drying on the old one. We need to be sure that we have uncertainty built into our plans, from top to bottom along with the skill of adaptability,” she professed.

The second point she talked about was to lead for today and tomorrow at the same time. The only way to manage is to fix our sights on the horizon and steer towards a distant point in the future. But, at the same time, we need to attend to where we are right now. “We have to work on two time scales at once.” She explained that at PepsiCo, they have tried to capture that insight in the phrase ‘Performance with Purpose’, which is a marriage of the short-term with the long-term. She said, “Speed and agility have become our best allies. The only way to function is to be lean and low cost. We need the maximum efficiency today so that we can deliver great performance and invest for tomorrow.”

Her third point was that in these volatile times, we need to be ambitious. Make big changes, big things. She claimed that the days of incremental thinking are over. The days when the future was built on the solid foundations of the past are gone. “Innovation is not just about refreshing what you have. It’s about rethinking and reframing your whole product offering, your complete service,” Nooyi averred.

She proclaimed that disruption is now our friend, not our enemy and her advice was to “disrupt yourselves deliberately. As if you won’t, then the competition will.”

Her fourth point was about attracting and developing the right talent. According to her, leaders in the new era will need courage, confidence, perseverance, accountability, openness to new ideas and the ability to manage rapid change. The whole process of leadership development needs to be rethought.

Her final thought was that we need to communicate all the time. She captured this thought by stating, “Every organisation has to understand the vision. Every organisation needs to know what the realities are. And everyone needs to know how they are moving forward.  If the leader doesn’t tell them, someone else will. There will be press speculation. Rumours will circulate in the workplace. Uncertainty breeds anxiety. It’s natural for people to be concerned. The best way to deal with this is not to deny that it’s true. It’s to open the door and let people in.” Leadership is not just a rational thing. It needs an emotional connection.

She concluded her remarks by stating that she believed that we can generate opportunity from uncertainty. Echoeing the words of the psychologist Erich Fromm, she said, “The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.”

After her remarkable address, Nooyi and John Wren , CEO of Omnicom, had a brief question and answer session. She talked about the succession planning at PepsiCo and how they had identified 300 critical jobs and there was a well etched out back up plan for them.  She also talked about how the models in the East including from India could be lifted and applied in the Western world to disrupt them there and help form a new reality.

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