12: >> Let's see, good afternoon. >> Good afternoon. >> At Walmart, we tend to speak back to each other.

20: We're going to have some time in a little bit to talk so please be thinking about what you might want to ask us about. I'm really excited, Indra, that you're here.

27: >> I am too. >> They told me I couldn't come back unless I brought you with me. >> [LAUGH] >> And I said I'd come back only if you were going to do it with me.

33: >> [LAUGH] >> I want to start with maybe the most important question, and that is, when you're in your University and

39: you were playing cricket, what position did you plan on the university team? >> [LAUGH] >> You know, first of all,

46: do you know what cricket is all about? >> I do not. And I- >> Okay, so. >> [LAUGH] >> Still not going to make a difference what I tell you.

52: >> I'm not really very interested either. >> Okay, okay. [LAUGH] >> Go ahead.

58: Let me- >> What position did you placed here? >> I opened the busing and the bowling. [SOUND] >> Someone knows what that means.

64: It's really great. [LAUGH] >> [LAUGH] >> Are you impress? >> Leadership. >> Are you impress? >> I think so, yeah. >> Then, I was also the captain of the Cricket team.

73: >> That was kind of my point. She's a leader. >> [LAUGH] >> I have known Indra for a really

78: long time, and I was thinking about what words I would use to describe her. And some of them would be, visionary, competitive, tough-minded, caring.

89: >> Indra makes things happen. She has a natural leadership characteristic that you have used not only to lead PepsiCo and in your previous roles, but

97: you also influenced Walmart in a big way. >> Mm. I appreciate it, Doug, but let me give you the compliment back.

103: Doug and I know each other for a long, long time. And I've always referred to Doug as not just Doug McMillon,

110: I'd call him Doug McMillon Walton, because he represents the best of Walmart, the values of Walmart.

115: And believe me, even though we're a generation apart in age, Doug. >> [LAUGH] >> I'm not sure.

121: >> I'm much older. I've learned so much from Doug, the way he operates this large company.

127: And is repositioning it, and so I think this is a two person back slapping society and I'm the charter member of it.

133: >> [LAUGH] >> So as we think about what these people might be interested in or benefit from the most,

139: the first thing that comes to my mind is change. And I know your business well enough and know what you're thinking well enough to

145: know that you're facing a situation where the world is changing very dramatically.

151: People are changing, the environment you're operating is changing and you're trying to position PepsiCo for the future.

158: So maybe we start out with starting out talking about what you see that convinces you that PepsiCo needs a change and

165: what is it that you are trying to accomplish during your tenure. >> It's many questions nested in one but let me take a shot at it.

173: I think every company today, the CEOs of every company, are looking at the environment and sort of the investor expects you

181: to be this duck that's just sort of swimming across the water. And in the past these ducks would sort of furiously

189: swim underneath the water just to move ahead. Now, it's like you've got to paddle on steroids because the pace of change is so

197: enormous that you've got to paddle even faster just to make small movements. And nobody is going to give you a break and say you can slow down or

205: you can actually stay in place for awhile. What's changing? And I'll talk about the food and beverage industry because in a way our interests intersect there.

213: Every aspect of the business is changing. What is healthy food is changing.

219: What do people want to eat and drink is changing. How should products be labeled has not been defined.

227: There is no authority that defines it. Supply change are globalizing yet traceability and

233: safety standards have not been established. There's an NGO in every corner. So, there's somebody there calling us out when don't do things right but

241: then there's no standard to look at in terms of what we need to do right.

247: The retail environment is changing whether it's the emergence of Walmart in the 90s and the year 2000s or now the hard discounters and

254: the emergence of e-commerce. Everything about the world is changing. And then, right here in Silicon Valley, all of the best and

263: brightest that we want in our companies are being recruited by these startups. So we have a tough time recruiting the right talent to run our companies.

270: I'm speaking to all of you, so I think, what happens is that, we are facing unprecedented change in our business models.

279: And on top of that, we have to globalize, but the world is a tough place right now. We've got economic volatility, macro-economic crises in many,

288: many places, political upheaval. So I think companies like ours, if you really want to keep performing,

297: you've almost gotta change your model all the time. And Klaus Schwab of the world economic forum talks about this and

303: says, you've always gotta be in beta. It sounds wonderful as a set of words, but

308: when you actually have to practice in the company, it's pretty scary. Because it's not motivating a small group of start ups or

315: a small group of employees who have the same thinking that you do. We have 260,000 employees and when you decide to zag and

323: zig you got to tell them what you're going to be doing, why you're doing it. How it's going to impact them and

328: why they all have to some along with you on the journey. Let me give you examples when we decided to change our product portfolio to go for

336: a predominantly fun for you product line to including more better for you, good for you products.

343: Different profitability, very different product line, closer to agriculture.

349: Changed the model in the company. Our employees had to go, what is she doing? Why do we have to change?

355: We're doing pretty well selling these products, why do we have to change? But the challenge of the leader is looking around the corner and

363: making the change before it's too late to make the change. I remember as late as 2007 or 2008.

370: Going to see investors. And they looked at me and said, why do you have to change your portfolio?

376: We are American. We like soda and chips. Your job is to sell more soda and chips.

381: And I sat there in shock, because every trend that I was seeing, indicated that the consumption of these categories was slowing down.

388: And I looked at the investor and I said have you changed your eating and drinking habits. And that person said yeah, but forget me I'm not the normal consumer.

396: I said the problem is many consumers are like you. They've changed their eating and drinking habits.

401: Today, that same investor says to me why can't you go faster. Why you so slow at making a portfolio change?

407: It's because people like you wrote a ballast for me, you didn't let me go faster because you always criticize what I was doing, all right, but that's reality.

415: So I think we're in a world of unprecedented change

420: where companies, the CEOs, the DNA of the company, has to change. And we all have to change at a point when short term is abundance.

429: Everybody wants the results today. And the tolerance you have to make the change on a large scale is not there.

439: And I'm sure you're facing the same issues, Doug. And I mean, I watch it in action at Walmart. So tell me a bit about what you're going through?

446: I wanted to ask you the questions. >> [LAUGH] >> I already have another one. >> Either way. >> I think it's very similar.

452: I mean you know where you are and you develop a vision for where you need to be and trying to get from here to there is the hard part.

459: I feel like that the vision that we have, collectively, is improving all the time. But turning around and moving an organization that's older than 50 years,

466: that was built for certain purpose, with 2.3 million people, is a big part of the challenge.

472: And the last time I was here, I admitted that I have envy for those who were at a startup, because you can write your culture on the wall,

480: or your values on the board, and you can go that direction, you get to create something rather than change something.

487: And changing something feels harder. And then I said to anyone who wants a great challenge, let me know and we'll hire you at Walmart.

493: I had one person call me. [LAUGH] So, you know, it is hard and

498: I think these people are smart enough to figure that out. >> That's true. >> Let's go to learning.

504: You mentioned that you're seeing what you believe the company should become.

512: You didn't arrive in this position knowing everything that you know now. How do you go about learning as an individual and using the knowledge that

520: you are picking up to shape the future because as you know strategic planning cycles are gone now, its strategy is being shaped hourly not annually.

531: >> The one big lesson I've learned, Doug, is that if you just depend on the traditional strategic planning cycle, or depend on a standard set of consulting

540: reports, you actually are going to do your company a big disservice. And our CEOs and leaders have to be life long students and

548: not just students in sense of attending courses or reading a book or two.

553: You've gotta learn how to read widely, walk the market, look at trends in the market place, make connections that don't seem obvious.

562: And start to paint pictures of what the future could be. And then watch consumer behavior.

568: I'll give you an example. Ten years ago or maybe 15 years ago if you came to PepsiCo and looked at all the beverages that we're being served on the side

576: tables when we're having meetings. Most of the people will be consuming full sugar beverages.

583: About ten years ago the trend shifted. Maybe 20 years ago they were drinking full sugar.

589: Ten years ago they shifted to diet drinks. But five years ago they were drinking more bottled water.

596: Now the point I make to my guys is guys don't you don't need to hire a consultant to tell you where the trends are.

602: You just have to look at our side table. Remember the number of faces we use to have for regular sugar Pepsi versus diet Pepsi versus bottled water now.

611: If you're all drinking bottled water or drinking zero calorie beverages, why do we think we're not representative of the consumer?

618: Very often I think what happens is we separate out the consumer out there from the consumer in us.

623: We are the consumer. And the more we can bring the two together and say we too are representative of

629: the consumer outside, I think it will be better we go out and our children play with other children, we see other families.

638: And when they moderate certain products that we sell, in terms of what's given to kids, that's a trend, okay?

645: So, we've gotta watch all of these things. And too often, I think, us leaders think what consultants tell us, or

651: what certain reports say, or certain books say, is the gospel. It's really not.

657: We have to become our own data collectors, data analyzers and then shape creators.

664: And I think that's the toughest thing because people who are rewriting the rules

670: have to create the shapes and people don't like that because they have a traditional

676: model of how things work and they hate people who upset status quo and I think

681: both of us are upsetting status quo in a big way and it's tough but it's fun.

686: >> It is. It's sometime to take your kind a business hat off and be a customer or consumer and

692: I'll admit when I'm working, like yesterday I went to Palm Springs and visited a Super Center, I'll put my Walmart badge on and

699: I walk into that store, and I have a certain mindset. On the weekend, I went shopping.

705: Because we needed milk and some things at home. And my vision of that store- >> Did you go to Walmart?

711: >> Of course. >> [LAUGH] I'm not stupid, I mean.

719: >> [LAUGH] But I just experienced out of stocks differently, everything felt different.

726: And staying objective and being in the moment is something that I continue to work on whether it's a mobile app or the store.

732: >> Yeah, I do market tours every weekend. The first few years that I was a CEO, I'd take pictures of what I saw on the store and I'd download it to my people and

742: say, the data stops here, this doesn't look right. I mean I'd go on market tours sort of about a, two,

749: three hour radius from my home. Then I realized that every division in the US had some people

757: waiting in the office for my emails to respond to that quickly and I thought it was a terrible way to run a company, that a CEO's out in the market and you've got

765: a SWAT team sitting in the office waiting for the lousy photographs to come in. So I stopped sending the photographs, but I still do the market too, and

773: I agonize over it. Just like you, I go why is the Gatorade out of stock when the temperature's 75 degrees.

780: Why didn't we have a second delivery, or why didn't we do a second delivery of Frito Lay products when we have a holiday weekend?

787: And now I'm just learning to just agonize internally and dump on people Monday- >> [LAUGH] >> [LAUGH] It's tough, I gotta tell you,

793: it's tough. But when you do that you really experience your business from the consumer's eyes,

801: all the retailer's eyes, because I know how you care about other stocks. So, when I go to the Norwalk, Walmart or look at the shelves and

809: I see out of stocks. I feel for you. >> [LAUGH] >> As I do for me. >> Our in stock set by the way.

815: >> Yeah. >> [LAUGH] >> Let's talk about design for a minute. A month or two ago we were talking on the phone,

821: and you tried to get met to go to Italy, or was it Milan? >> The Milan Design Show.

826: >> Which I thought was kind of a surprising invitation, I don't get invited to Milan very frequently.

832: >> [LAUGH] >> You mean you missed a great one. >> Tell me, why did you go and why were you thinking that I should also be there?

838: >> Do you know anything about the Milan design show? >> Only what you told me on the phone. >> [LAUGH] Okay, let me tell you.

845: A few years ago, we started a design capability inside PepsiCo. What do I mean by design capability?

850: And I have to tell you a little story to bring you into the design loop.

856: When I first became CEO in 2006, as I looked at our products, I looked at our packaging, I looked at how we put things on the shelf.

863: I thought they were singularly all right and in some cases unimpressive.

869: And I thought that we need a dash of design thinking in the company. So I gave all of my direct reports, about 16 of them,

876: a photo album, a blank photo album and a camera and I said. For the next three months, I want you to go around taking a picture of anything

883: that you think constitutes design. Anything, it could be a pencil, it could be a clip, it could be a teapot.

890: Anything, anything you want. Just fill this book for the next three months and give me a copy.

895: Give it to me so that I know what the issues are I have to handle in terms of design thinking.

902: Here's the surprising finding. Half the people didn't turn the book in at all.

908: Half the executives. The few that turned it in, a few of them had their wives fill it in for them.

914: >> [LAUGH] >> Two executives hired a professional designer to fill the book in. And told me they did.

920: But the few that actually filled in the book I still have them with me as a mementos of how bad we were.

926: It was a horror because what they thought was design was not what design was.

933: So let me now tell you what is design? To me design is something that you embed into a product or a service or

940: an offering that romances the consumer and draws them to the shelf or

945: to the product, or to the service or whatever it is. It's how you think about the shape of the product, how it's presented,

954: how it's talked about. Not just the color of the package everything in terms of the experience that

960: actually draws the consumer in. And we never though about design but really thought about it as Is the yellow on the Lays bag right?

968: Should we put an extra swirl of red? Or should we put an extra emoji on the Pepsi bottle?

973: So, our definition of design was very, very, I hate to use the word, but primitive. And I was part of that group.

980: So we all went to design school and learned all about design. Not in terms of the package, but all the way down into design of a product.

988: Example, when you eat Doritos, how many of you are Doritos consumer here? I love it.

995: So when you eat Doritos, when you get to the bottom of the bag,

1000: a typical guy would take the Doritos bag and just do this. >> [LAUGH] >> Okay? Because you sort of eat the crumbs that way.

1006: Women don't do that. Women try to be very delicate putting their hand and taking the last Doritos. But then you're leaving about 5% of the Doritos in the bag, okay?

1015: >> [LAUGH] >> But because they're little crumbs there, which taste awesome. But in our package design, why don't we figure out a product design for Doritos?

1024: That is completely different that a woman can actually put in a put in a purse, so that it doesn't crumple, and you can actually eat it in a more delicate way but

1032: all the way down to last 5%. I'm using Doritos. >> Indra is solving real world problems here. >> [LAUGH] >> [LAUGH]

1037: >> Right in front of you. >> Doug. >> It's good stuff. >> [APPLAUSE] >> Doug. >> [APPLAUSE] >> I gotta tell you,

1042: if I solved the problems you get more sales. >> [LAUGH] >> [LAUGH] So it is a real world problem. At the end of the day, I worry about one thing.

1050: >> [LAUGH] >> Growing my sales at Walmart. >> [LAUGH] >> But leaving that aside, so that's

1055: an example of how you take design thinking all the way to the product design itself.

1060: The other is when you think about a food service machine, in the past with the standard machines.

1066: And now with the new spire machines we have which are slowly rolling out. You can have almost 400, 500 variants.

1075: But the machine looks like a beautiful iPad,

1080: but even more in an aesthetically pleasing way. And so, you bring design into a day to day experience that was quite boring so

1089: that's what design thinking is doing to PepsiCo. We got amazing designers we've hired.

1095: In Milan every year they have a design week where everything from furniture to lighting to day to day products,

1103: you see the best of design from the best designers showcased all around Milan.

1109: The whole city becomes a design, sort of a bazaar of designs.

1116: And it's just a phenomenal experience to go there and just see what's going on. In the last few years, 3 years ago I had just visited Milan for

1125: the first time, from a design perspective. Two years ago we started to build a Pepsi design experience, where we actually had

1134: a big warehouse that we converted design experiences with PepsiCo products. So we had an experience that we called the fizz.

1140: Looked like Willy Wonka and the Chocolate Factory, how do you make your own

1145: soda with all kinds of toppings, just a fabulous experience. We had Lipton Pure Leaf Tea.

1153: How can you serve tea in an authentic way, almost like a tea house cafe?

1159: What can you do with the Gatorade bottle? The new bottle with the sensors that athletes can now drink, and

1165: it'll, sense your saliva and tell you exactly, what extra electrolytes you need to put into your body.

1172: So we showcase some of the stuff in a very, uplifting way. And, what was wonderful is the big magazines,

1179: the design magazines wrote that there were two exhibits that stood out in Milan this year from a consumer perspective.

1186: One was Nike and the other was PepsiCo. And so I thought we'd landed. It was a great thing.

1192: You missed a great one. Next year. >> [LAUGH] >> Next year. >> Next year. >> That's a lot of progress.

1197: >> It is. >> From one story to another. >> And I'd like you to visit our design studio some time. Phenomenal designs.

1202: We have a long ways to go Doug. A long ways to go. But they're making progress. >> Yeah, I think it's going to matter to us.

1208: It feels like what's happening in retail is that the needs that customers have

1213: are being outsourced to the Internet whether it's mobile or voice or whatever comes next in the future increasingly, so people are not going to

1222: have to think about staying in stock on Pepsi, it's just going to happen. And we're going to play a role in that process through our supply chain.

1230: >> But even on something like a Pepsi, if we keep thinking of it as the cola that was invented in 1893.

1239: That's like being the custodians of a utility. That is not the business we are in.

1245: Question is how do you bring excitement into this category again and again? Because this is a heritage brand, so we're doing several things.

1251: Whole range of craft sodas, lower sugar offerings, trying to make Pepsi more of make my own beverage at home.

1262: So we're playing with Pepsi in so many ways. 1893, the new, cola that we launched, is a craft soda.

1269: Doing very well where it is. The make my own Pepsi that's being sold,

1275: interesting consumer base it's bringing in. And the lower sugar offerings of Pepsi with great taste,

1281: will go into to the market. Will they all be as block buster as the original Pepsi? Probably not. But they will stem the decline of a category while we launch all kinds of

1290: new beverages on top. So- >> The emotional component, not just the utilitarian aspect of your product.

1295: >> That's exactly right. Yeah, because Pepsi is not a drink, it's an experience, it's a brand that as time, timely I would say,

1303: because it defines culture, it defines sports, it defines music.

1308: And, I still remember a famous music producer in California once said to me,

1313: when I ran into him he said, I don't have any young musical artists that are worthy of a Pepsi contract.

1320: That's a big statement, that are worthy of a Pepsi contract. Because, to be associated with Pepsi, that launched so

1326: many young faces was a big thing. Whether it was Micheal Jackson, or Britney Spears, or Madonna, or Christina Aguilera,

1333: they all made their success working with Pepsi, they were known as Pepsi stars.

1339: And so, he said I don't have any young people that are worthy of Pepsi contracts so the Pepsi brand is absolutely associated with culture-defining moments.

1350: And so, we have to figure out how to make the product come in tune with the brand even more as the consumer changes.

1357: >> You can probably pick up on some of the themes, but what happens is as companies get older and larger, they start specializing within the business.

1365: And it replicates what you've done before. So in Walmart, we have logisticians, and merchants, and marketers, and

1372: lawyers, and everybody specializes and you end up with these silos that are, by design in some instances, created to just keep doing what you're doing.

1381: And then, disruption happens, and you have to figure out how to take an older company and a larger company and change it back to being more entrepreneurial

1389: move with speed and change it. And you can hear those names and then their story and it's the same on our story and I think a lot of what we're believing at

1398: the moment is that we're going to help transform the company using technology. We can hire talent, we have hired talent, we can invest, and do a lot of that.

1407: But over time, what will differentiate us, and ultimately enable us to win and have a role to play in society is still humanity.

1415: It's still our culture, it's still our people, but getting from where we are now

1421: to there will require cultural change in addition to advancements in technology.

1427: And that's an interesting business challenge to take on when you at our scale.

1432: >> I think the big question for all of us, Douglas, there's been a lot written about, you've got to preserve history and

1438: the heritage of the company while you make the change. Sometimes I wonder if it's a ballast.

1443: I'll tell you why, because, yeah, you should respect the heritage. You should respect the culture.

1449: Be cognizant of where you came from but, I'll speak for myself, I'd say maybe I was a little too respectful of the heritage and

1459: culture because what happens is. When you have companies where people are in the company for long time and

1465: PepsiCo's got a lot of long tenured employees. They've come into PepsiCo young. They retire from the company, and

1472: then as they leave the company, they still remain attached to the company. And they are talking about PepsiCo all the time.

1478: At some point you've got to make the break. You know what I'm talking about. They still think they're part of the company, they're running the company, right?

1484: And so, this book club has to be kept happy. But I don't think you should let them run the company.

1490: And in many ways you've got to make a break with the past. Because if you don't, you're spending more time appeasing the heritage employees.

1500: And the heritage voices as opposed to saying guys we don't have the time we have to make the change.

1507: >> Right. >> And guess what? it's going to be painful, but the sooner we make the change let's do it and the one thing I learned again I'd say

1515: I wasn't may be a little bit more patient than I should have. When you know you have to make a change and people don't come along.

1523: You wait for little while, but then after that a some point you've got to say enough is enough.

1529: Every third week there's going to be a series of retirement parties you're out, because if we don't do that, again the people who have been in the company 20,

1538: 30 years pull you down. And they create sort of environments of saying the good old days were great.

1545: And people start to believe that there's still those good old days that could exist, and they really can't.

1551: And I think, if I had to do it all over again, I might have hastened the pace of change even more.

1557: >> Seize that opportunity to actively shape the culture. >> Yeah, and then say you know what, guys I'm not going to sit here

1565: doing workshop after workshop and trying to convince you to come along. I've tried, you're either in it or you're out.

1572: And that sort of brute actions I didn't take.

1578: >> One of the things that gives us a chance to make it through this transformational period is that our founder loves change.

1585: And while we can respect the past, you must invent the future. And our founder passed away in 1992, but the one thing I know for

1593: sure from being around him a little bit and from all of the stories and experiences is that if he were here today, he would be changing things.

1600: And it gives you that mandate. You can stand in front of a group of Walmart associates and say the only thing

1606: that's constant at Walmart is and the group will say back change.

1611: And that gives you an opportunity to say okay, let's talk about what we need to change, why we need to change and what this is aimed towards.

1618: And if we don't, we're done. It's only a matter of time. >> Change is scary. Change is very, very scary,

1624: especially when you're living the comfort of the large company. Where you had fabulous salaries, benefits, pension plan that was terrific.

1634: And all of a sudden you're going to be cast out. >> Isn't it interesting, it's perceived safety. But it's actually the opposite.

1641: This safety of a career, of a company, the future is actually on the change side of things not on the status quo.

1649: >> But if you know that you have a role in the change you embrace it. But if you don't know if you have a role in the change or

1656: because you're sure you don't have a role because you don't have the skills. That's a problem. >> So communication today is different.

1662: >> Totally. >> I joined Facebook last week. I've been on Instagram for a while.

1668: What do I need to be on next? >> Snapchat. >> Snapchat's next. There'll be something after that probably.

1675: But Sam Walton was not on Instagram or Facebook and I know I'm a little late to the party, but there's power in it and

1682: it's all about getting the word out on why are we doing what we are doing and and what is it that we're trying to accomplish?

1688: In giving people a voice, you know, communication is not one directional, it's multidirectional.

1693: >> I'm just on Twitter and I'm scared to death. Because I have no idea what's going to happen. Look, for you kids, you're reckless, all right.

1700: >> [LAUGH] >> For us, for our CEO it's terrifying because if you make one mistake on tweeting one word out.

1708: They'll be millions of people who sort of kill you in the public domain about how dare a CEO say what they do.

1715: I'm envious of my kids because the stuff they tweet out, the stuff they put on Facebook. My God, scares me to death, but

1721: you know what this is the great thing about being young. What they don't know yet is all of that is going to follow them for

1727: the rest of their lives. [LAUGH] >> [LAUGH] >> That's the tough you know? You and I don't have anything to worry about.

1734: [LAUGH] Ted, I wanted to ask you a question.

1740: How do you manage to be CEO of Walmart, living in this small town where every move that you make is tracked all the time?

1749: >> [LAUGH] What do you mean tracked? You mean everybody knows everybody?

1754: Like Mayberry? >> [LAUGH] Something like that. But we're bigger than Mayberry, yes?

1759: >> Yeah, we live in a cool place that's actually changing a lot, but it's still small and it's a bubble.

1765: It's not like the rest of the world in some ways and so it's really important for us as leaders to be out and we travel a lot, we're all over the world,

1774: but go back to this really small place where you can go to Walmart, which I do, everybody's like hey Doug how you doing?

1781: People follow you around the store to make sure that everything was in stock. >> [LAUGH] >> So

1788: we have to be cognizant of the bubble. And not let it cause us to be comfortable.

1793: It's not the most competitive market in the world. >> That's very true. You know when I go in market research it's the same thing.

1800: They set up the market for me so I always see the perfect execution. So now when I go to any city and they say,

1807: we're going to the following three streets to do marketer I go, guess what. I'm going to decide where we're going.

1813: And now they're terrified because I could pick a place that's completely off the beaten path and

1818: I don't want to see a prepared market I want to see the market as it exists. >> Okay. >> Normally for the consumer. >> That's when we don't tell stores we're coming.

1825: >> Right. >> When yesterday when I popped into the store. One associate once told me Doug you're just like the Queen of England.

1832: And I said in what way? And they said everywhere you go you smell fresh paint. >> [LAUGH] That's a good one.

1839: >> You gotta remember that, right. >> Yeah. >> You gotta remember that and stay real. I think we've got time for maybe one more subject and

1846: the one I'd like to pick is making a difference in the world. So you ended up in this position,

1852: probably growing up as a kid you knew I'm going to be the CEO of PepsiCo. I mean you probably knew that.

1858: But now you find yourself here, and you have this responsibility in this platform really to try and make a positive difference in the world, how do

1866: you think about that, and how do you help lead the board and your management team

1872: towards making that difference and what's that mean to you personally? >> You know Doug, the more I deal with this whole idea of making a difference,

1880: sustainability, I'm convinced that unless you feel it, unless you feel it deep down

1885: in your heart and you really understand it, you'll be doing good service. That's the whole idea of sustainability.

1891: In my case, I grew up in Madras in India where those days and even today I think there wasn't much water in the city.

1899: And we had so little water to live on every day, that this

1905: whole notion of water availability and water use was a crisis for me all my life.

1911: I didn't know a time when water was aplenty until I came to the United States,

1916: okay. So water was seared into my head. The second is we grew up eating and drinking a certain way.

1923: And all of a sudden I realized that as you look around the world, as you look around all of the health issues around the world,

1930: food played a very important role in the people's health and wellness. So, one had to worry about that aspect too.

1938: And then my daughter went to work for the environmental defense fund, EDF, and

1943: I got a whole new appreciation for all of the environmental issues beyond water.

1948: Whether it was the carbon footprint, whether it was fisheries, whether it was any issue, she would actually show me all of the statistics,

1957: what it was doing to the world. Overfishing in certain coasts or plastic in oceans. And when you start to really feel these issues and

1965: think of what your kids and their kids. You ask yourself, what is my role as a steward of a large company?

1972: To make a difference in the world through this incredible platform that I have called leader of a big company.

1979: That could either contribute to the issues or help alleviate the issues.

1985: I knew that I didn't want to contribute to the issues. I had to start helping the issues and to the extent that society had changed and

1994: I was perceived to contributing to some of the issues, I had to make a change to my business model.

1999: Therein was born our notion of performance of purpose which is, how can we keep performing while changing the portfolio,

2007: while fundamentally changing our environmental footprint. And then third one, which is really the one that I am really most excited about is, what can we do for

2016: our employees so that they can come to work at PepsiCo feeling like PepsiCo is a place where you cannot just make a living, but have a life.

2024: So that you can bring your whole self to work, the company treats you in a fair and equitable way, provides you the support system to be who you are,

2032: to allow you to be who you are. And we embrace you completely. And so, performance and purpose is not a corporate social responsibility program.

2042: It is not. It is how we make money. Because our belief is that if you don't change the portfolio,

2048: we can't keep delivering performance. If we don't change our environmental practices,

2053: we won't get a license from society to operate. And our cost goes up because we pay for water.

2058: We'll end up paying more for plastic recycling. So we have to do that. And if we don't get the best and brightest in terms of people, we won't be able to deliver performance.

2067: So performance and purposes how we make money, not how we spend the money we make.

2072: Which is what corporate social responsibility is all about. So that's really what we are all about. >> Very well said.

2077: We see it the same way. I feel the same way. We want to open it up for questions. Fire a difficult one to Indra if you could to start us off.

2084: >> The first question comes from Twitter, it's actually to you both and it's a classic. What organization, and what leader do you most admire and why?

2096: >> [LAUGH] >> Need time to think. I got to be around Sam Walton a little bit, Sam was the founder of Walmart.

2104: He's the first person that comes to mind. There are a lot of positive characteristics there that we're still trying to live up to today.

2112: In terms of who I admire at the moment, rather than one person I think I would characterize a group of people.

2120: One of the awesome things about what we get to do is we get to meet a lot of leaders and what comes to mind is that there are people out there that

2127: are genuinely taking risk to try to make the world a better place. And this would be a very logical time to play it safe.

2135: It'd be a very logical time to try and stay off the radar screen. But sometimes you gotta step up there and

2140: you gotta put some personal equity on the line and try to change something. And there are people that are doing that. Some of the CEOs that live in this part of the world are doing things like that to

2149: try and improve the world, and I admire that. >> I'm going to give you two.

2155: One is something that sounds tested and tried. When I became CEO, I called Steve Jobs and

2162: I said, I'd like to spend a little bit of time with you. Just to sort of understand what it is to run a company the way you have changed it.

2172: And he graciously agreed to spend some time with me. And he gave me two or three hours, I think, of his time.

2177: And some of the lessons he taught me about design. How do you take something that you truly believe in, and stick with it?

2184: As opposed to changing your point of view because the outside world wants you to change your point of view.

2190: Phenomenal lessons, that he was so gracious to give me the time. And that he gave me those lessons I'll never forget.

2196: I think the world lost an incredible person in him. He did tell me a few things like don't be too nice.

2201: When you really don't get what you want and you really believe it's the right thing for the company, it's okay to throw a temperature tantrum, throw things around.

2208: People will talk about it and they'll know it's important for you. And I think that in itself was a valuable lesson.

2214: >> [APPLAUSE] >> I honestly believe that. In terms of people I admire, I tell you the people I have really begun to admire

2220: these days are people who head up these NGOs. Because they don't make much money, in fact, they barely make ends meet,

2228: but yet they feel so deeply committed to a cause. They do the research, they go visit companies in their headquarters,

2236: they'll do goofy things, but you know what? It's goofy if you look at it strictly from the point of view of, they're bugging me.

2243: But if you look at it through their eyes, walk a mile in their shoes, you have to be proud that they feel so strongly that they want to make the world a better place.

2252: So all of these people who run NGOs, even though one side of me says god, I wish they didn't have such a big megaphone.

2259: The other side of me is so proud of what they do and I think we're all going to change and become better companies because of their leadership.

2269: >> Who'd like to go next? How about right here? Hi, my name's Nadu Lawson, I'm an MBA too here.

2275: My question for you was, you mentioned international growth before, and I'd love to hear how PepsiCo and Walmart are thinking about the African market,

2285: specifically in the mid and long term. What do you think you're going to have to do differently to win the consumers there?

2294: >> I tell you PepsiCo in Africa doesn't have as big a footprint as we would like to have, but I think it's an actually wide open market in so

2304: many ways and I'll tell you why. The African consumer is, the economic plight of the African consumer

2312: is improving enormously, so that's a very good thing. Second, the continent is hungry for the right supply chains,

2319: the right products to come in. So I think the market is just now sort of taking off.

2326: I wish we'd been there earlier, but now that we are increasing our footprint there, I think the challenge we

2334: have is how do we go into Africa with healthy products right off the bat. And not start with the fun-for-you products, start with more the good-for-you

2343: products, the more grains, fruit and vegetable, stuff that contributes to the nutritional quality of the African consumer which means, we have to setup

2350: the agricultural supply chains, which is really what we are working on right now. So I think especially the sub Sahara Africa region because in parts of

2359: Africa like Tanzania or South Africa or Nigeria we're in already, but the rest of Africa I think we're working on setting

2367: up the agriculture supply chains and there's a lot of it available in Africa. We think the potential is huge.

2374: >> I'm really excited about sub-saharan Africa and personally was involved in the investment that we made there a few years ago,

2380: in what I believe is the best management team on the continent. The best management team in Africa from a retail point of view.

2386: We have various store formats where going to end up with an important business in Nigeria someday, in Kenya, in South Africa, where most of the business is now

2395: and we're today in about 12 different markets there. Personally, I've been to five or

2400: six different countries in the region in the last few years and I feel an energy. And an optimism and an opportunity that I believe will be a very good business for

2409: us over time. We want to be local. We decided not buy a 100% of the business because we wanted

2414: others to be able to benefit from the business that we were growing there. We're sourcing locally to the extent possible, which is not that hard because

2422: most of it's food and we are not moving it a great distance anyway. So I think there's an opportunity to grow there for a long period of time and

2430: reach a lot of people and fulfill our purpose, which is to save people money and help them live better. But we're going to have to generation-skip in some ways with technology.

2438: You, I'm sure, know how advanced mobile is and how advanced some things like payment are and some parts of Sub-Saharan Africa.

2444: And so, just like the rest of the world, we've gotta be on the front edge, as it relates to technology, and do it in an African way.

2451: I'm very excited about it. >> All right, my name's Ben, I'm an MBA too.

2456: First of all, thanks so much for coming. So you talked about having to be a bit conservative, or the pressures to be conservative, as the CEO of a big company.

2464: You have to be conservative on Twitter. You have to be conservative with your investors. So having to innovate, to succeed, in this fast-changing world, how do you resist

2472: those pressures and what can CEOs like you do to resist those pressures?

2478: >> I think personal conservatism versus taking risks with the business are two different issues. So, with innovation, you've got to write the rules for our products because

2489: very often, if you really want advantage, you've gotta be the first mover. So I think on the product side and the product experience side,

2496: we can take as many risks as we want. When I was talking conservatism, I was talking about

2502: personal messages going out or messages that we put out on behalf of the company. We just got to be careful about putting up personal messages.

2510: I tell you something on innovation. The bolder we can be, the better. The more we can break the rules, the better off we're going to be.

2517: Because you know the world is full of ideas today and if we don't do it somebody else is going to do it.

2523: In fact, I'd say that little start ups are capturing a lot off the growth today even in our space, even in the food and beverage space.

2530: So, in many ways in our company, we have to act as if we are a bunch of little start ups. That's what we are, a bunch of little start ups.

2537: So, in order to do that, we have got to allow people to be bold,

2543: write the rules any way they want, and that's what they're doing in our company. When we have $22 billion brands, and now we've got another three or

2550: four in the pipeline, each of them is a little start up. And they're not conservative at all.

2555: Pepsi is not a conservative brand. As an individual, I am.

2560: I'm sure that next year's going to be less conservative than me. But I am a conservative person, because I'm terrified of all of you.

2566: [LAUGH] >> I think the advice I would give you,

2571: whether you're going to start a business or you're going to join a business, would relate to values. And pausing for a little bit of time to know who you are and what you stand for.

2581: In our case, at Walmart, we have four core values. We respect the individual, we strive for excellence, we serve the customer and

2587: we act with integrity. Those four core values resonate for me personally, so it's been quite easy

2594: to be part of Walmart because those are the things that I personally believe in. And the reason that matters,

2599: in the context of your question is lots of things are going to come your way. There's going to be an emergency tomorrow, something's going to come up, and

2607: I'm going to have to deal with it, or when you're in these jobs, you're going to have to deal with it. And we need some sort of a foundation to stand upon.

2614: And pausing to remember what are our values, my personal values, and how does my response here relate in that context.

2624: If you don't have that foundation, you're going to be moving around trying to figure out one instance at a time what to do.

2631: Whether it's a question about risk-taking or how you handle a crisis or something else.

2636: So it sounds a little bit hokey, I suppose, to pause and write down or think about what you want your end story to be.

2645: But I think it's valuable. Pretend that you're at your retirement celebration someday.

2652: What do you want them to say about you? What legacy do you want to have left? And predetermine before you start that that's going to be your outcome.

2664: >> Yeah. >> Not sure who's deciding who goes next. >> Hi.

2669: >> Go for it. >> Yup, thanks for sharing. I have a question. So Amazon is a huge competitor, like if you were-

2676: >> Who is that? >> [LAUGH] >> Amazon. >> Amazon, got it. >> I mean, if both of you could talk to Bezos right now,

2684: what would you say to him? >> Go on vacation. >> [LAUGH] >> [APPLAUSE]

2691: >> All right. [APPLAUSE] >> Jeff doesn't need any money, but

2697: I'd be happy to pay for his vacation. >> [LAUGH] >> They are doing such a good job, and,

2702: as a retailer, and somebody who grew up serving customers, I admire the innovation

2707: and the solutions they're bringing to customers, and I'm challenged by it. And part of our culture is to embrace what competition's doing and learn from it and

2718: try to move quickly to adopt what we should adopt within our own company. In some cases, that's dangerous because it can look like following and be following,

2727: and if you are following somebody you are only ever going to be second best. So you have to, at the same time, be who you are and

2732: innovate within the context of who you are. But, clearly, what they and other e-commerce companies, mobile commerce

2739: companies, are teaching us is that technology can be used to solve customer problems in a different way, and it saves them time, it makes life simple and easy.

2749: And we did that for a period of time in one way. And now we've gotta do it in new ways. So I welcome the challenge.

2756: I like a competition. The one thing that I know for sure is that customers are going to win.

2761: And they will decide who's here and who's not here and, thankfully for us, we don't compete against just one company, we compete against a lot of companies.

2769: And what matters the most is how much we're improving and getting better. So I like it. Gets me up in the morning and

2774: I feel challenged and I wouldn't want it any other way.

2780: >> You said it all. [LAUGH] >> Thanks for coming and sharing.

2785: My name is Erin Jung, I'm from China and now MB 1. So I have a question for both of you,

2790: as more personal career development, so one is for Doug. Doug, you have spent all your career life in Walmart, but

2799: actually for now in our years, it's not very common. So I really want to know what drives you to stay with one organization for

2806: your whole life? And then another question is for Indra. You have tried different kind of role and different kind of industry.

2813: I want to know when you find your passion and how you get this passion for it.

2820: Thanks.

2825: >> I think I've learned from all the industries I've been in because it's ranged from when I was a consultant,

2831: you learn everything from chemicals to banking to high tech, healthcare. I did everything.

2836: So it was fantastic to learn strategy through the eyes of a BCG because

2842: you realize that strategy is not industry-specific, it's frameworks and how you think about a business, so I learned that.

2849: And then through my journeys at Motorola and ABB and then coming to PepsiCo, just going from high tech to utilities and

2858: power plants, again, I learned so many different facets of business. When in came to PepsiCo,

2864: even though I hadn't really worked in the consumer space, I could think differently.

2869: And that point when I joined PepsiCo, PepsiCo needed new thinking. So I came in and started to shake up status quo from day one.

2876: And PepsiCo gave me the leeway to go ahead and make all the changes and suggest all the changes that need to be made.

2884: And I think why I've stayed in PepsiCo and why I put down roots in PepsiCo From the day I joined the company and

2889: this is one part of the culture that has not changed. I feel like PepsiCo's my company.

2895: It's embraced me, and now I make sure we embrace other employees. I feel it's my company, it's not some public company called PepsiCo,

2903: it's my company. Every aspect of the company, I feel I can change it any time I want.

2908: I felt that way when I was head of strategy. I felt that way when I was CFO, when I was president. I feel that even also as a CEO.

2915: When you have that sense of ownership about the company, why would you leave something that you own?

2921: And so, I put down roots and I don't regret for a moment the 22 years that I've been at Pepsi Co and it's the greatest ride of my life.

2929: Whether I was CEO or not is irrelevant. It's been the greatest ride of my life.

2936: >> My dad was a dentist and dentistry's hard. None of you are going to be dentists, right?

2941: That's why you're here. >> [LAUGH] >> [LAUGH] >> He was a dentist for 40 years and it is hard.

2947: You get up every day. You go to see people who don't really want to see you. They're there, because they need to be. >> [LAUGH] >> [LAUGH]

2953: >> And so, I was influenced in a big way to try and create a career for myself that was flexible, because I didn't want to be trapped.

2959: Trained for one job and have to do that job forever, if I didn't like it, so I went for a business degree.

2965: I went for my MBA and my MBA was primarily driven, so that if I got into a situation where I wasn't happy, I could change jobs.

2971: I thought it would help me move but then, I ended up working at Walmart. And I really started just because I needed a summer job to make money for school and

2980: I loved it and that's why I'm still here. I have had a blast. I have gotten to do more than a dozen different jobs.

2986: I've worked across countries, across formats. We deal with everything from marketing to logistics to finance to legal to Africa.

2999: How fun is that? So, when I'm not having any fun anymore, I won't do this anymore, but for more than twenty five years now, it's been a blast.

3007: And I've come to care about it an awful lot and I haven't been bored. If I was bored,

3012: I'd do something else or if I'm working around people I didn't like, I'd leave. But there are lot of great people around where I work.

3020: >> Thank you very much for coming. My name is Sarah Foo and I'm a second year MBA student and and I'm told I very lucky got the last question.

3027: [LAUGH] So, my question to you is, so obviously you talk about a lot of changes and taking risk.

3036: But a lot of that is only going to be measured or seen or evaluated over years. But also today, if you look around the world like investors or

3044: just the market in general is very short sided. And then, there is that so much noise in the market. So, how do you balance this short term demand for

3049: you to deliver versus the long term vision. To take risk and make long term changes that are actually good for the business?

3059: That's really well said. >> I know. >> I think you get it. >> [LAUGH] >> Now what do we do about it?

3065: >> What do we do about it? You know I'll tell you something. I think you got to look at the investments you make in the company, as a portfolio.

3073: There's a bunch of stuff that delivers in the short term and that gives you the breathing room into further to invest in the long term.

3080: Because I don't think, especially now, industries that are more established unlike a startup.

3086: I don't think you can say, look, wait for three or five years and five years, you'll start seeing huge results.

3092: Nobody is going to believe you, because we are expected to deliver, because we established legacy companies.

3099: So the way it is, I look at things in Pepsi, because I know what we need to invest in. Constantly balancing projects that will deliver today,

3107: countries that will deliver today. Which can then provide the ammunition for us to invest in long term initiatives.

3114: You can't have too many long term initiatives or too many short term initiatives. Because you don't want to spoil the investor with too many short

3121: term programs. That then don't give you the position to invest of the long term. So, this judicious balance is what we worry about all the time.

3131: And I can tell you, the only way you can do that is if you have the support of your board of directors. For public companies, the board has to completely buy into your program and

3140: back you. In case investors say, we don't like the shape of your delivery.

3146: >> If we ran these businesses for one quarter of one year, we would harm them greatly and we care too much about them to do that.

3153: But as we're articulating that long term vision, which in some cases may be beyond one investment cycle.

3161: We have to communicate clearly what our strategy is and be held accountable to milestones along the way.

3167: So it's not enough to say, I am managing this business for the long term get back to me in five years, we'll see how it goes.

3173: >> We'd like to try that. [LAUGH] >> So I think as long as you are deliberate, thoughtful, you build relationships.

3180: And communicate, whether it's the investment committee or your board, you can do it. In our case, we have a family that owns almost half the business, so it helps a lot.

3190: If they believe in what you're doing, it helps us have a long-term perspective,

3195: not just a perspective that's >> [CROSSTALK]. >> If you ever have the chance, I recommend it.

3201: >> Please join me in thanking Doug and Indra. [APPLAUSE] >> [APPLAUSE]

3206: >> Thank you very much. >> Great job, thank you. >> Thank you. [APPLAUSE]