The Art & Science of Design with PepsiCo Chief Design Officer Mauro Porcini | Suzy

First of all, thanks for having me, and it's a pleasure to be here. What I tell them is that we are so much more than designers. We are not in the company just to design pretty products, beautiful packaging, incredible experiences. To enable all of this, to be able to do what I just said, you need first of all to design the right culture. And to synthetize what that culture is for me and for us as a design organization is the idea of a culture based on people in love with people. It's the subtitle of my book, The Human Side of Innovation: The Power of People in Love with People. There are three forms of love. The first one is the love for the people we serve — users, customers, consumers, whatever you want to call them. I love to call them people, human beings — being obsessed with creating extraordinary products, solutions, packaging, experiences for them. So really falling in love with them, looking at them like if they were your kids, your parents, your friends, and being obsessed with creating something that is really meaningful for them. In an industry like the one of food and beverage, for instance, it's trying to understand how to change the portfolio of the company and to change the industry to be more sustainable, more focused on health and wellness, more customized, personalized, engaging for people. So this is the first form of love.

The second one is the love for what we do. You know, we are people passionate about what we do. We're not in the company just to arrive at the end of the year, have our performance review, get our good rating, our salary increase. We are here for the long run, and no matter what is that brief, in the long term we are always driven by this dream of creating something meaningful for people. And finally, the love for the people surrounding you — the people in other functions, in marketing, R&D, in the different parts of the company. This is what designers do: they are connectors, and they connect functions, other people, other capabilities, once again with a focus on the people we serve. This is what we learn at school.

Now, all of this could be a nice-to-have or totally unnecessary. In many companies it could have been totally unnecessary and a nice-to-have for many, many years. But there is something that is changing radically today, and it's been changing now for a few years. Companies like PepsiCo don't compete anymore just with a renowned, obvious competitor, you know, as big as our company, or a few competitors in the market. The big barriers to entry that we used to have to protect our businesses, our brands, are crumbling down under the winds of globalization, new technologies, digitization. So today anybody can come up with an idea, get easy access to funding for that idea through the proliferation of investment funds, incubators, even companies like ours looking for the next startup, the next big idea to invest in. So getting access to money is easier than in the past. The cost of manufacturing, of creating that product, physical or digital, you know, whatever it is, is going down, driven again by globalization and new technologies and the role of digital. And then you can sell your ideas, your products, your solutions to people through e-commerce, and you can communicate your brands through the social media platforms, through the digital world. And so in these areas, big corporations used to build their barriers to entry made of scale, of production, communication, distribution. Therefore, in this world today, the only competitive advantage you can build for companies, big and small, the only obsession you should have above anything else should be the obsession and the love for the people you serve. Not thinking, 'Well, I'm going to grow my business, I'm going to increase my market share, I'm going to invest in these adjacencies because of that.' No, you need to be driven authentically by the need of creating something meaningful, valuable for people.

This is what they teach you at design school. At design school they teach you to create something cool, meaningful, extraordinary, beautiful, functional, convenient for people. Then they tell you, by the way, you need also to sell this stuff to them, so they teach you a little bit of business. In business school they teach you something very different. They teach you to grow a business, to grow a brand, and they tell you you have multiple levels. One of these levels is your product, then you have your brand, you have pricing, you have distribution. But you can be successful as a business leader, your business can be incredibly successful — or at least it could have been incredibly successful — even if your product was mediocre, if you had the right distribution strategy with the right barriers to entry, if you had patents to protect your products, and so on and so forth. Today, that kind of luxury, thank God I will say, is not there anymore. You need to create something valuable for people. If you don't do it, sooner or later somebody else will do it for you in your industry. So yes, I found this truth in the design world. I realized that actually it was the most powerful asset, strategic asset, that designers will bring to a company. So that's what I preach to my boss and to the companies I work for. But then obviously it's not just about designers, else we wouldn't go anywhere. So this culture that you can find in the design world needs to be a culture that is spread across the organization: marketing, sales, strategy, R&D, all the functions. Now, in marketing, I'm sure there are many business leaders here, marketers here, you find people like this. It's not that you don't find them, but it's not the typical culture of that community. And this community therefore needs to evolve and change and put people first and business after, with a deep, profound understanding of the business levers and variables, but really starting with this authentic obsession for creating the best possible product for the people we serve.

Look, in our industry — but this is true for so many different industries around the world — there are four different levels that are driving change and are driving innovation: sustainability, health and wellness, personalization, and then the fourth one is more of an enabler of these, that is the role of technology. Technology being many things: digitization, AI, data, many, many different things. So when I entered the company, there was a project — I will start with a failure and then I'll tell you a success. I was like, okay, I come into this company, the COO back then, Indra Nooyi, was all about sustainability, health and wellness, under the strategy that she called Performance with Purpose, and still today our CEO, Ramon Laguarta, with pep+ positive, same kind of obsession for this kind of approach. So I was like, wow, you know, new to the company, we're going to change the industry, you know, with the leadership of the COO. I come in the company and one of the first projects I work on is what we later called Drinkfinity. So the brand that went to market is called Drinkfinity. Drinkfinity was — so one of the problems in our industry is plastic. So we decided to create a bottle that was reusable. So check it out: now we have a reusable bottle, you don't ship products anymore because you can fill the bottle with tap water, if you're lucky enough to live in a place, in a country where you have access to clean water, and then you add pods, recyclable, with natural ingredients, focusing on two kinds of needs. One is more of a desire, so the flavors — I like different kind of flavors, we have incredible R&D that can have really good flavors, research on trends, what were the trendy flavors. And then the other one is more functional need, so some functional ingredient: turmeric, matcha, a variety of others that could give you energy or relaxing, and so on and so forth. So you could get the perfect drink for you, personalized for what you need, for what you want, in a sustainable kind of ecosystem. If I was doing this project at school, I would have got, you know, best grades ever. I mean, it's just the solution to the industry, right? We commercialized it in Brazil, that often we use as test market to test ideas. It doesn't work very well for our standards. Keep in mind that we're talking about a company with 20-plus brands that are above a billion dollars of revenue, and 40 brands on top of these between the 250 millions and the billion. So for us, success means that in a few years you reach at least 300, 400 million, and you start to see in the very first year, you know, that the trajectory is that one. So it doesn't work. We try also in the US e-commerce channel, it doesn't work, at the point that some media channels over the years have been pointing at the project as a failure: 'You see, design thinking in PepsiCo, yes, is it really working for innovation? Look at Drinkfinity.' And that kind of perspective is so myopic, because while they were writing this, they were not observing other things that were happening in the company.

And this is another problem that I find in the business community. For 10 years I've been working in a tech company, in 3M, the Minnesota Mining and Manufacturing, based in Minnesota, together with thousands of scientists. You know, for a scientist it's obvious that to arrive at one innovation, at one patent, you need to do thousands of experiments. When you are in the business world, those experiments are called failures or mistakes. If we are serious about innovation — especially considering that the rate of failure of innovation in corporations, depending on the research you check, the data you take in consideration, is anyway between 70 to 90% — so innovation keeps failing continuously in these companies. Maybe we need to change vocabulary. Maybe we need to change. To do that, we also need to change culture, processes. We need to understand that you need to prototype, you need to experiment, and not just behind the scenes, but eventually also in market, maybe through the e-commerce channel that is giving us new opportunities, or in different kinds of countries. If you are a multinational corporation, you need to build a system not to punish the people that are making these mistakes, but to protect corporate reputation in front of customers, consumers, shareholders. I mean, you need a full system to do that. But the point is, you need to innovate, you need to experiment, and you need to try things to innovate.

So anyway, here we are. Drinkfinity didn't work, and we're like, why? I mean, you look at research and everybody tells you that you need sustainable solutions in our industry. You go online and everybody's accusing these corporations of polluting the world. So why, once we create something that makes sense for people, they don't buy it? And the reason is that, you know this very well: one thing is what they say and what they try to rationalize, one thing is what they do and their behaviors. The problem of Drinkfinity is that in that specific moment — by the way, Drinkfinity may work in 20 years' time, but in the specific moment, in the culture of the world, in the moment in those countries, people didn't want to take the trade-off inconvenience of carrying a bottle with them. Now I'm saying that in the future it may work, because thank God our kids are going to school with reasonable bottles, they're getting used to that, they're changing habits. But in general, back then, for the masses, this was not working. So that's when we realized that we still needed to invest in those kind of solutions, they're really important. That's why, for instance, we acquired SodaStream, you know, it was a major acquisition for us. So we still need to invest in that, but we need to figure out how to add additional value so that if you have a trade-off inconvenience, you're going to buy the solution because there is something more that you're getting out of that solution. And that's where we invented Gatorade GX.

Gatorade GX is an ecosystem where you have Gatorade, the sports drink that you probably are familiar with, you have these smart patches that you put on your skin. So these wearable technologies, they monitor your sweating, amount of sweating and composition during your performance as an athlete, and then they send information to an app. The app suggests you what kind of Gatorade is perfect for you on the basis of your body, you're sweating. Then you get your Gatorade, your concentrate of Gatorade in a pod. The system then is exactly like Drinkfinity: you have a reusable bottle, you put water, you put the pod, and you get your perfect Gatorade. The bottle is a smart bottle, so monitoring on what you're, your intake, what you're drinking. And then we understood, so there was this functional additional benefit, and then on top of it we realized that we needed to do more. And so very briefly, we started to add customization to the system. So today you can go to gatorade.com and you can put your name on the body of the bottle, on the cap, the name of your team, you can totally customize the patterns, the graphic. And this is working very well. In the countries where we launched the product, we have been the best-selling SKU for two years in a row after launch. We were almost not present in one of the biggest sporting goods retailers, and now we are the best-selling SKU in the store.