A Talk with Indra Nooyi

Phil Le-Brun:
Good afternoon. I'm delighted to have Indra on stage today.

One of the things I find fascinating about AWS, is we seem to spend as much time talking about people and leadership and organization and culture, as we do about the technology.

Indra Nooyi:
Thank God.

Phil Le-Brun:
Absolutely, and you've got a storied career. What I'm curious about is you were a CEO of one of the world's largest companies, operational accountability.

You became a board member. What was the biggest surprise you had in that transition?

Indra Nooyi:
Actually, there weren't any surprises really becoming a board member, because I'd been a board member of other companies before. And I dealt with the board we had at PepsiCo, so there weren't any surprises. When you're an active CEO and become a board member, you go through complex emotions. 20% of you wants to get back into the game and get involved in running the company.

80% of you is just happy you're not in this quarterly earning cycle. And every day that I sit on the HAQM board, I say, "Thank God I'm not Andy Jassy.” Because how he runs such a phenomenal company so well, just amazes me. So I think retired CEOs are useful, but you've got to make sure that they don't try to become a shadow CEO when they get on the board.

Phil Le-Brun:
How do you gate yourself? How do you stop yourself doing that?

Indra Nooyi:
Well, that's a challenge. I think you've got to understand the role of a board. The board is a very important role to play for any public company, because in many ways, you represent the shareholders. But you're also the first line of defense for the company against crazy shareholders or active shareholders.

So the board has a very active role to play and you've got to understand as a board member, your responsibility. You've got to understand the company to a certain level. You've got to understand the people, the strategy, and you've got to learn to step back. And once you've got the right leaders in place, just watch how they run the company.

And you've got to understand that if you meddle too much in the company, you're going to create more problems for the company than you are going to help them. That's one point. The second point is typically, companies appoint retired CEOs to boards. Many companies appoint retired CEOs to the board, but retired CEOs have got to be the type that feel like they should contribute to the company.

They shouldn't think in terms of, "Oh, this is a lucrative paycheck I'm going to take back with me. This is going to be a great gravy train for me for the next 10 years." If you think that way, it's very hard to get you off the board, even if you're irrelevant to the board because the company has changed.

So it's very important you put retired CEOs on boards, who know how to contribute to the board and the company, and then step out if they believe that they cannot contribute to the company. You've got to shape your board, don't stack your board.

Sometimes nominating and corporate governance committees tend to stack the board with people they know or collegial people, but you've got to shape the board based on the needs of the company. And you've got to know when to take out a board member because they don't contribute to the board. It's a very tricky thing, this board of directors issue.

Phil Le-Brun:
I can imagine. I imagine there's a lot of people in the audience who have board memberships or aspire to have board memberships.

It's very tempting to talk about just the things that change. What's been the constants in your leadership style as you've moved from CEO to the board?

Indra Nooyi:
Well, in fact, I'll go back to the early part of my career. One thing that's been constant through my entire life is my desire, my ability to zoom in and zoom out. Having this insatiable curiosity to understand a business or understand the issue that we're studying in great detail. Then zoom out to understand what's the bigger picture that this detail has to nest in?

And then making sure as a CEO, I operated both at the granular level and the 25,000-foot level. As a board member, understand the granular but don't touch it because there's a CEO running it. So I think as a board member, I've learned to operate at these two different levels and it's been hard at times. Because some companies that I sit on the board of, you can put your arms around the company and understand everything in great detail.

Other large companies, you've got to pick which businesses you are going to contribute in, as opposed to the whole company. So in those businesses, you go into detail and understand all functioning of the business. And then you step back and say, "Now as a board member, how can I contribute?"

So you've constantly got to wear your board member hat, as opposed to, "God, I wish I was CEO of this business or this division." It's an urge that you've got to resist, and that's a challenge for all retired CEOs.

Phil Le-Brun:
It's an interesting point, though. So leadership principles, we have dive deep, knowing when to go into the detail, think big, learn and be curious. What advice would you give people?

Because it's so easy to go into the detail and start micromanaging, or be so detached from the detail, you don't know what's going on. How would you suggest people find that balance?

Indra Nooyi:
Well, that's the training you have from the time you start your job in corporate America or any corporate world and rise up. At every point in time, you've got to know what the impact of your decisions are on the front line, and then you've got to understand that the front line cannot be on autopilot. At some point, there's got to be direction that comes from the top. That's how companies work.

And typically, boards should be recruiting for CEOs who know how to operate at those two levels. And if you get too much into the detail, you'll actually confuse the organization because now you don't trust them and you feel you've got to be in the detail. If you are detached, people go, "God, this person doesn't have a clue how transformation or change happens at the front line."

So if you want to gain the respect of the people in your organization, you understand the details and you operate at the appropriate level, as the CEO should, which is somewhere in the 10,000 to 25,000 feet. It's hard to talk about it in terms of feet, but in my mind I say just know how your front line is going to interpret what you're saying, but don't get into the muck with them.

Understand their challenges, understand their issues. And when you're out on a route ride or you go to a store visit, as you did in McDonald's, understand the trials and tribulations of what those people are going through. And then think about how to remove those barriers. Don't add to it because you have no clue what their job is. That's the real challenge we all have.

Phil Le-Brun:
I love that. So empathy for what's actually happening at the front line of your business.

Indra Nooyi:
Absolutely. Knowledge and then empathy, yeah.

Phil Le-Brun:
And transformations are very much in vogue and you talk about the role of leaders. The stats on transformation aren't particularly reassuring.

So depending on who you believe, 10% to 30% of transformations see the desired results. In your observations, what are the critical success factors when you're trying to drive a transformation in an organization?

Indra Nooyi:
First of all, I'd use the word transformation very carefully. People throw that word around a lot, and it almost feels like you have to do a transformation when you assume a job. Be very careful, because the minute you use the word transformation, your organization is scared because they have no idea what that means. Are they going to have their job? Do we know why we are transforming?

I think you've got to sit down and ask yourself, "Why do I have to affect a transformation now? Is it an outside-in transformation or an inside-out transformation?" Let me tell you what I mean. If you've got a hemorrhaging business in trouble, you've got to affect a transformation because you're sitting on declining profits, lower growth. And the base platform is not good so everybody understands it.

Now, if it's an outside-in transformation because of disruptive technology, so consumer tastes are changing, you've almost got to paint that picture for everybody to say, "This is where the world is going, therefore, I have to transform." An inside-out transformation is easier than an outside-in transformation, because people see the burning platform. Many times you've got to do both.

You've got a burning platform, at the same time the world is changing, you've got to do both, that's much more difficult. When you're doing transformations, if the CEO is not a student of what needs to happen, gets into the detail, studies every aspect of the outside-in issues and the inside-out issues, and can communicate the need for the transformation, and the story behind the transformation to the employees with great conviction and commitment, you cannot affect the transformation. And more importantly, don't just talk about the transformation. Paint an optimistic picture of what the company could be after the transformation. And to a certain extent, paint a picture of what the company will be if we don't transform. Provide both pictures, but you've got to do it in a vivid, emotional, committed way.

And if you did that, now people would come along with you. If you don't, you'll be fighting city hall all the time because people are going, "I don't see why we have to transform. I think he or she is making up the transformation just to justify the job." So you've got to be very careful in the usage of the word transformation, and then you've got to stick with it until the transformation is done.

Because some people start a transformation, they say, "People don't sign up to this, so I'm just going to give up." Don't do that, because if you did that, you cannot engage in another transformation again. Because people will think that, "Hey, if I push back enough, he'll just back off." He or she, when I say he, it's the universal he/she, mostly he's though.

Phil Le-Brun:
I love that, so let's ban the word transformation. Your role as a CEO in storytelling and bringing people along with you.

Phil Le-Brun:
One of the other observations we have working with leadership teams is often, everyone will sit around the table and nod when, “Let's digitally transform, become a customer-centric organization.”

Everyone nods and then has a very different impression of what it means and goes back to their function and does something different. How do you drive that alignment across leadership teams?

Indra Nooyi:
Well, you're raising a very interesting point because I was listening to Matt Garman's amazing keynote, and looking at all the exciting changes that are coming down the pike over the next three or four quarters. I'm thinking, "If I was running PepsiCo today, what would I do?" Because every CEO is probably looking at the changes coming and saying, "How can I handle this and how can I put my arms around this?"

My basic advice would be given the nature of the changes that are happening because of technology, if the top three layers of the company don't get trained and retrained and re-retrained on all these technological developments that are happening, you cannot have a conversation as to what we need to do as a company, because it gets to the problem you just talked about.

Some people think they know what the technology is about, others have a different perspective of the technology and there's no meeting of the minds. So this is the one time, I think, everybody has to come together and get trained together. And it requires commitment from the CEO, who should be at the training, and not just make a set of opening remarks and leave.

I think the CEO's got to become a servant leader, and sit with the other people and say, "Hey, let's go through this training together.” And let's make sure the CTO speaks the language of business, not the language of technology that most of the people can't understand. I remember when I had to put an ERP system into the company when I was CFO and president. My IT guys and I had very, very good people.

I asked him to give me a picture of the “as-is” architecture of the company and the “to-be” architecture of the company if we've put in all of the changes that they're suggesting. They turned in three binders, yea thick to me, on the “as-is” and the “to-be” architecture, as almost to say, "You're the president and CFO, why do you have to know all that? I'll know it."

No, this is a multi-billion dollar CapEx. If I'm going to sign it, I've got to know a bit more than three binders of material, and you saying, "Oh, don't worry, we've got this under control." So I said, "Okay. Three binders of material, I'm going to read the whole damn thing. I'm going to get textbooks, professors, I'm going to learn everything about ERP systems."

Then I went through every page of the binder and said, "Here are the questions." On every other page, I said, "Give me all the answers in a week and we can talk." So you've got to be willing to get into that level of the muckity-muck, if you want to call it, to be able to have a conversation with the technology experts.

Because otherwise, there's going to be a technology-driven transformation, which the business people are going to ignore and reject, so training is critically important. Get the right CTOs, get them to talk the language of business and focus on culture change. I think especially what we are talking about here in re:Invent, is an enormous culture change for companies.

And if you don't start thinking about who can be learning executives? Who can change? Who can drive the transformation? Who is so stuck in the past that they can't change, that we may have to retire them? You've got to have these conversations because if you don't do it, culture's going to eat your transformation. And some of the people are going to have pocket vetoes and they're going to actually torpedo the transformation.

So this is as much a culture change on the company overall and on people, and you need the right CEOs to lead companies through this transformation. It's got to be the right CEO. Without the right CEO, that's not going to happen.

Phil Le-Brun:
And we know if you don't lead with culture, those transformations aren't sustainable.

Indra Nooyi:
Absolutely.

Phil Le-Brun:
You talk about the role of people and it starts at the top with the board. About five years ago, about 4% of board of director members in the UK had a technology background, 4% had a people background, which is a bit worrying.

We're seeing that start to change. With more people who understand technology on the board, how's that dynamic changing organizations in your mind?

Indra Nooyi:
Well, you've got to be careful about one thing. If you put too many technology people on the board, nobody's going to understand what they're saying and governance is going to be difficult. There's very few people who understand technology and governance, and there is a governance rule to be played.

So I think as you think about shaping the board, you've got to think about, "What percentage of the board is technologically experts? Who understands the businesses of the company? And who understands the broad issues related to geopolitics, or regulation, or whatever?"

So you've got to shape the board based on the needs of the company and the environment in which it operates in. It's not that each group is operating in silos. They do overlap, but you've got to make sure that you don't have too many of one so that they become meaningless for the company.

Now, if you really need technology experts in abundance, you can have a technology committee that's an advisory committee for you. You don't have to have them in the fiduciary board of directors. So you've got to think through interesting mechanisms to make it work for the company.

I think the way HAQM has crafted its board now with Andrew, and John Rubinstein, and Dan Huttenlocher, they've been CEOs of public companies, they know how governance works, but they're all technology experts too. Some of us know consumer businesses better, others know regulation, so it's a very well-crafted board.

So I think I'm as much in awe of the HAQM board, as I feel privileged to be a part of it because it's been shaped just right. And I think we have to learn takeaway lessons from companies that have shaped the board's right, because that's the only way to be a good steward of the company, but I'll tell you one other thing.

If a board member believes that they cannot contribute as effectively to the company as they did five years ago, they should offer to step down. And this goes back to the first question you asked me, because sometimes retired CEOs never want to step down because this is a wonderful gig.

So I think you've got to make sure you have people who feel confident enough to say, "I should step out and make room for somebody else, because I cannot contribute to this board anymore." That's the challenge.

Phil Le-Brun:
Yes, absolutely. And it's almost that humility and self-understanding, and willingness to say that. So I agree, having two or three people who are deep technologists may not make sense, but you understand people leadership, you understand finance, but you're also very comfortable with technology.

Indra Nooyi:
Totally.

Phil Le-Brun:
Just like people or financial management, how did you develop those skills?

Indra Nooyi:
Well, the different jobs I did in my life, and in every job I did, I had to dig deep. I'll give you an example. When I was at the Boston Consulting Group, I have a physics and chemistry undergraduate degree, so I had a little bit of technology in my head. But when I went to work at BCG, I did a lot of client work, which was focused on R&D and efficiency of R&D departments.

But then I went to Motorola and I was in the automotive electronics group. I didn't know anything about cars. I thought I married somebody who will fix my car, and I didn't know anything about solid-state because I started physics during the valve days. So here I am in Motorola, all about semiconductors, two-way radio, cellular telephony, and how am I going to contribute?

So for the first six months, Motorola agreed to hire me two professors, one who taught me the automotive, everything about it because Motorola made engine controllers, ABS, and all that stuff. So one professor taught me that and I had another professor from the local college who came and taught me semiconductors.

So every day, I had one or the other professor, started at 7:00 in the morning till 9:00, and I studied as much as I could to be able to talk to people. I'm never going to design circuits, but I wanted to be able to understand the business enough, the value drivers. What does it mean to see progressions of technology? How much capital has to go into a fab?

All of that stuff, I understood the language of this business, and that's been my MO as I've gone from job to job. Now, when I went to Asea Brown Boveri, it was a power generation and transmission. I went to school on generation and transmission and distribution. Down to detail, walked the factories, talked to the workers, talked to the engineers, go see customers.

How do they specify power plants? How do they build transmission lines? I loved it. I had a real passion for it. But if you don't and you want to be a CEO, and you can't skate through being a CEO these days. You have to love the businesses and the underlying technologies that the company is part of. Even in PepsiCo, you would think making chips and soda is easy. Holy cow, it's not.

I'll give you one simple example. We wanted to lower the salt levels in our potato chips, okay? It's not just putting 20% less salt. Unlike bread, where salt is a leavening agent, in Lay’s potato chips, salt is a surface salt. So we said, "If we were to lower the salt levels, what if we could cut the crystal by half?" Imagine tiny crystals, if you could cut the crystal by half.

So the scientists came back to me and said, "Indra, we can cut the crystal by half." And because it's surface salt in a Lay’s chip, the minute you put it in the mouth, it's going to taste salty. And because Lay’s is a product where you just can't eat one, you've got to eat quite a few they're so delicious. The minute you put the next chip, the saltiness stays.

So it was heavy technology to get something like this off the ground, but we never done it in PepsiCo, so they had to educate me. I would go into their labs and spend hours understanding what they were doing. And the reason I did it is not because I wanted them to educate me for the sake of education.

I wanted them to educate me so that I could defend them with the critics and say, "Leave them alone. Leave the investment alone. This is the right thing for the company to do." So I was in there with the scientists trying to understand what they were doing. Because if you don't do that, the scientists feel like they're out there and the branch could get cut off anytime, so that's really what I was doing.

Phil Le-Brun:
Well where you spend your time, I think, sends a message too about how important you think something is. The good news is valves are coming back in audio, so always another career there.

And one of the other things I'd take away from what you said, Indra, or a question, I guess, is can you be a leader and not be curious nowadays? How do you keep that curiosity alive, or is it just innate in the person you are?

Indra Nooyi:
I'd reframe it just a little bit. A leader might have been curious all the way to C-suite minus one, and then all of a sudden they say, "I've arrived. I don't need to be curious." Shame on a board that picks a leader who's not curious to be in the C-suite or a CEO, because when you become a CEO, the game just begins. The tough life just begins, okay? If you think you've landed, you're mistaken.

I think that was in the '60s and '70s, there was a joke that we always had in consulting where we say a consultant works 24/7. When you get to the C-suite, you get home to watch the 6:00 news, in those days when we had 6:00 news, and a CEO goes to play golf at 4:00. Those days are gone. When I was CEO, I was usually the last one out of the office walking with two or three bags of mail, because there was no email in those days.

I was walking out with bags of mail and I would read a lot of stuff to just get ready for the next day. I think curious CEOs are what makes successful companies. And if you don't have them, boards better rethink the caliber of their leadership, because the world is changing at such a pace, that you've got to keep up with it or be a step ahead of it, I'd say.

Phil Le-Brun:
There's a tension there, though. So as a board member, you're contending with a couple of things. One is, how do I manage the risk for an organization, but how do I also enable innovation in the organization too? And they're often seen as you do one or the other or where's that slider? How do you mentally think about risk and innovation?

Indra Nooyi:
Well, very often, not innovating is a risk by itself. So in the HAQM lexicon, since we have this Day 1 Culture, always think of us as being in day one. We always think about, "If we didn't invest in this, what would happen to this company?" And I think that's equally important, if not more important these days, than it is when you say, "Oh my God, why are you putting so much capital into this technology? What's the risk associated with it?"

Everything today is risky. I'll give you an example. 10 years ago, if you didn't have a China strategy, you were considered not a very great company. Today, how quickly you get out of China is the best strategy. Russia, 15 years ago, we were dragged into Russia to say, "Come on, we need to open up Russia. Everybody go in there and invest." Everybody fled Russia because of sanctions, so I come back and say, "Where is the risk?"

You've got to understand geopolitics. You've got to understand all the risks that go with it. Not investing in a certain technology's the risk. Risk is no longer static. It changes all the time, and so as board members, we've just got to be agile. We've got to understand the environment surrounding us. And we've got to think about, "How do we keep this going, concern going, and growing and thriving?"

And that's all we have to focus on all the time, for the sake of shareholders, for the sake of the employees, for the sake of this incredible entity called the corporation. And that's why it's important boards do their duty and understand the company, and its businesses and its environment very carefully.

Phil Le-Brun:
There's no such thing as the status quo anymore. And as soon as you stop, you go backwards.

Indra Nooyi:
Zero, that ended long time ago. And I'll be honest with you, as I look at the organizational pyramid of any company, I'll just give you some numbers. From the time I was at PepsiCo, in the entry level, maybe 25- 30,000 people. By the time you get to the CEO minus three, there's about 400 people. CEO minus one, there's 15 people. CEO is one.

So as you're rising up this organization, it's a pyramid. It's not a cylinder, it's a pyramid. There's a process of elimination going on. And as you get to CEO minus two, everybody below you is trying to get you out of there because they want that job too. And the world is changing around you, so you've got to remain even more curious.

Because you've got to keep up with the changes and you've got to justify your job, because in those levels, people don't realize that it's  up or out. So I think curiosity, being committed to the company, being a servant leader and constantly reinventing yourself, is an even bigger challenge today than it was maybe even 15 or 20 years ago when technology was progressing at a much slower pace than it is today.

Phil Le-Brun:
You talked about some of the challenges in communication. I hate that phrase, the business in IT. There's a lot of folks in the audience who understand what technology can do for the business.

What advice would you give them in terms of breaking down that business versus IT mentality, helping coach others in the organization and having a bigger impact in their role?

Indra Nooyi:
I think many CTOs know how technology could improve the business. Many CTOs that I know, again, there might be an exception of people who are attending re:Invent. Many of the CTOs that I've had to deal with, they were called CIOs then, they're CTOs now, spoke in a language that very few people understood.

And they always came in with billions of dollars of investments needed, and always came in with projects that were supposed to take two years. But at the end of year three, we are still halfway through the project and there was always a project overrun, and so that's the history that you're fighting. So now you come in and go, "We need to do 15 pilots on GenAI. If you don't do it, we'll be left behind."

There's death by 1,000 cuts because there's all these pilots going on, but nobody's baselined the numbers properly. There's no prioritization. Unless the business people get involved, there’s no Pareto that's done on exactly where could you get the maximum benefit, so that's not done.

So I think CTOs trying to drive the transformation on their own, big mistake, big mistake. Make sure the CEO is driving the transformation, the C-suite is driving the transformation. All the division heads and the functional heads reporting to the CEO, should be begging the CTO to come to the table to drive the transformation.

If you try to do it on your own, it's going to be tough. I'm not saying it's not doable, but it's going to be tough and it's not going to stick. And you've got to get everybody speaking the same language and not refer to the CTO as, "God, he wastes our time, or he's just got a lot of dollars that he's spending. I don't see the benefit."

Make sure you have a scorecard, which lays out the baseline and where the benefits are going to come from. And go back and revisit that scorecard at every meeting, so that people understand that this is not an extracurricular activity you can just chop off at any point. This has a scorecard, this has deliverables, this has tangible benefits that's going to take the company to a different place.

So you've got to be highly, highly specific on these developments. And again, the onus rests on the CFO, the CHRO, it's a big talent challenge, and the CEO to work with the CTO to make it happen.

Phil Le-Brun:
I find that really interesting, as you talk about what you look for in leaders, you've talked about curiosity, empathy, humility, storytelling, communications.

If you were hiring a CIO or a CTO today, what else would you be looking for?

Indra Nooyi:
First of all, they've got to be technically very good, I want to make sure.

Phil Le-Brun:
Useful skills.

Indra Nooyi:
Useful. I'd like somebody who's been in multiple industries. I think I'd like people who've seen implementations in different industries. How do they bring people along? Have they had success? And if they had failures, have they learned from it?

I'd love to quiz them on what was your project that didn't go so well and what did you learn from it? And I'd like to see if they can actually translate what they're doing across multiple geographies, multiple functions, multiple businesses, because there's very few narrowly focused, single businesses in one country.

So I'd like to quiz them on how dexterous they are in switching between geographies, and businesses and functions, so I'd put them through their paces. It's a great job to be in. I wish I was technically adept to be a CTO, but I think it's a great job to have today. You're one of the most important people in companies today.

Phil Le-Brun:
Remind me not to interview with you. Indra, we're at time. Thank you so much for your time today.

Indra Nooyi:
Pleasure, thank you for having me. Thank you all. Thank you, sir.

Listen now

Listen now

Listen now