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KIN Summit 2007KIN Summit 2007Innovation For Marketplace Innovation For Marketplace
SuccessSuccess
Albert ManzonePresident, PepsiCo Shelf Stable Juices
PepsiCo, IncJune 18-19, 2007
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~40% of growth
2004-2007E
Innovation Has Been Critical To Meet Innovation Has Been Critical To Meet PepsiCo Growth TargetPepsiCo Growth Target
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Up To Today, We Have Been Able To Figure Up To Today, We Have Been Able To Figure Out The World Around UsOut The World Around Us
Innovation a relatively “simple” competitive advantage…
…Relying on a “repeatable” formula that values scale, reach and speed
Fast follower is enough to win
Narrower portfolio and competitive pressure mostly Coke
Space not a constraint
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Innovation Success Formula
Impactful Marketing
Aligned Operating Envelope
Right Expectations
Compelling Consumer
Proposition
Sustained Execution
• Leverages current assets
• Serve national footprint
• Relevant messaging and activation
• Sufficient and sustained support
• Distribution targets achieved
• Right placement• Right level of in-
store inventory• Ongoing support
• Clarity on innovation role
1. Risk tolerance and patience
2. Pace of innovation
3. Algorithm expectation
We Know What WorksWe Know What Works
Structural and Cultural Enablers
• Deep insights• Differentiated
proposition• Product and
packaging fulfill consumer need
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Impactful Marketing
Aligned Operating Envelope
Right Expectations
Compelling Consumer
Proposition
Sustained Execution
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The World Around Us Is ChangingThe World Around Us Is Changing
Consumers more savvy, sophisticated, and demand fragmenting
Categories blurring
Emboldened Pure Plays are true innovation leaders
Stronger, more demanding customers
Broader portfolio to support
Space bottlenecks
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Space Bottlenecks Have Increased Space Bottlenecks Have Increased DramaticallyDramatically
5 Years Ago225
Today375
Grocery30,000 SKUs
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Impactful Marketing
Aligned Operating Envelope
Right Expectations
Compelling Consumer
Proposition
Sustained Execution
• Late alignment with conflicting messages to the system
• Limited launch A&M and not sustained
• Distribution targets not achieved
• Support window only
• Giving up in less than 1 year
• Push/pull unbalanced
• False optimism
• Rushed to market
• No advantage versus competition
New Realities Are Challenging Our New Realities Are Challenging Our InnovationInnovation
Factors Contributing To Innovation Misses
1. Low risk tolerance and lack of patience
2. Amount of innovation beyond sales / system capacity to execute
3. Algorithm constraints
Structural and Cultural Enablers
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External Development / M&A
Expand OutMostly Niche Initially, With
Intent To Scale
Internal Development / Organic
Fuel the CoreMostly Scale, Some Niche
In This New Environment, Innovation Has To In This New Environment, Innovation Has To Achieve A Better Balancing ActAchieve A Better Balancing Act
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And We Need To Find New Ways To And We Need To Find New Ways To “Expand Out”“Expand Out”
• Few available
• Scale vs. timing
• Sky-high valuation
M&A
$ $ $
• Create future advantaged growth in emerging categories
• Required when no competitive advantage in category
• But more difficult and requiring more patience
Greenfield
• When can leverage existing assets or competitive advantage
• Does not address blurring/fragmentation
• Challenging in image-driven categories
Fast Follower
“EXPAND OUT”“Fuel The Core”
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Incubation approach
Partner with key Customers
Prove it out in a region or a series
of targeted markets
Pre-seed in a specific channel where we have
advantaged reach
Warehouse/ Distributors
DSD
GT
M O
ptio
nDevelop More Nimble CommercializationDevelop More Nimble CommercializationAnd IncubationAnd Incubation
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0
50
100
150
200
250
300
350
400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
MM cs (8 oz)
Years from launch
Aquafina
Snapple
Red Bull
Gatorade
Propel
Monster
Vitamin Water
Patience And Sustained Investment CulturePatience And Sustained Investment Culture
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Case StudyCase Study
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Show. Don’t Tell
Discovery: Provide Stimuli To Targeted Discovery: Provide Stimuli To Targeted Consumers For Their InterpretationConsumers For Their Interpretation
1) Anchor in a ‘backed-up’ proposition – Product: Delicious, Natural/GFY, Unique, Stylish Design– Company With a Conscience: Global Education Fund– Company With a story (entrepreneurial, Boulder)
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Anchor in a ‘backed-up’ proposition – Product: Delicious, Natural/GFY, Unique – Company With a Conscience and a Story
2) Present a premium, impeccable appearance
3) At the right places…2) High-profile events3) Culture-driving locations4) Hip, premium venues5) Retail
4) In the right hands2) Influencers and celebrities3) Culturally creative, discerning adults
Discovery 2, 3, 4: Provide Stimuli To Targeted Discovery 2, 3, 4: Provide Stimuli To Targeted Consumers For Their InterpretationConsumers For Their Interpretation
Show. Don’t Tell
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IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premiumIMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium
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IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premiumIMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium
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PREMIUM APPEARANCE: present the ‘art’ of IZZEPREMIUM APPEARANCE: present the ‘art’ of IZZE
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RIGHT PLACES. RIGHT WAY – Retail demos are keyRIGHT PLACES. RIGHT WAY – Retail demos are key
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INFLUENTIAL EVENTS & ASSOCIATIONS INFLUENTIAL EVENTS & ASSOCIATIONS
Celebrity Events
Victoria Secret Gibson Guitar Lounges
Natural Food Trade Shows
Tribeca Film Festival After Parties
Guess Co-Promotion Event
Spa Event
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RIGHT HANDS: (celebs and influencers)RIGHT HANDS: (celebs and influencers)
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Separated structures within Corporate culture!
Protected resources – people / funds
Aspirational leader reporting to the top
Outward orientation
Great set of external partners
Different type of matrix
The Structure: PepsiCo’s Innovation The Structure: PepsiCo’s Innovation RepublicRepublic
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FRITO LAYNORTH
AMERICA
QUAKERTROPICANAGATORADE
PEPSI COLANORTH
AMERICA
PEPSICOINTERNATIONAL
CORPORATE, Chief
Innovation Officer
Confederation of Decentralized "States"
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Dedicated resources
Top management oversight
Quarterly forum for cross-divisional opportunities
Share best practices
Drive innovation agenda
Aligned vision
CMO Split: Chief Marketing Officer/Chief Innovation OfficerCMO Split: Chief Marketing Officer/Chief Innovation Officer
Chief Marketing Officer/Chief Innovation Officer RoundtableChief Marketing Officer/Chief Innovation Officer Roundtable
Mar
keti
ng
Inn
ova
tio
n
Dedicated StructuresDedicated Structures
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Not Only Marketers:Not Only Marketers: Proven problem-solvers
Strong analytical minds
Leveraging of external resources & partners
Cultural bilingualism – balanced brain
Self-motivated / creators
Non-Traditional Executive ProfileNon-Traditional Executive Profile
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New Best-In-Class PartnersNew Best-In-Class Partners Developing breakthrough innovation with best-
in-class partners that challenge our thinking
• New capabilities
• New mindset
• New insights
Challenging Our Thinking With Best-In-Class Challenging Our Thinking With Best-In-Class Partners “The Dudes”Partners “The Dudes”
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Different Set of MatrixDifferent Set of Matrix
Complexity
New Benefits New Markets
Risk
C
Return
A
B
Pushing The Innovation EnvelopePushing The Innovation Envelope
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Historian Ethnographer Storyteller
Marketer Of The FutureMarketer Of The Future