Conversation #11 — Luke Mansfield, VP Innovation, PepsiCo
I met Luke at the FEI Innovation Europe Conference in June, where he gave a great presentation about the challenges of running an innovation programme in a large corporation. I was taken by his in-depth understanding not just of how to run successful innovation programmes, but how to navigate the politics and priorities of the organisation to maximise the chances of success.
Many of the themes he talked about have emerged in other, subsequent conversations (system change and immune responses, for example, which was the focus of my most recent chat with Rowan Conway at the RSA — watch this space for the write-up), and he is also responsible for telling me one of the best analogies about innovation I’ve heard in a while. You’ll need to read to the end to find it, though.
One of the reasons I do these interviews is to get different perspectives on what innovation is. I feel that FMCG, particularly, has a very product-led view of innovation and I wondered what innovation means for you?
I think people spend way too long thinking about that. Innovation’s like happiness, it’s more of a concept and an outcome than something you can actively try to be. If your objective is to be happy you’re best off going and doing other stuff and then that will ladder up to happiness at some point in the future. Innovation’s the same. When people say they need innovation, what does that really mean? Do you need more profit? Do you need more products in the market? Start there, and then the activities that you run through to achieve those can loosely be termed innovation.
Innovation’s like happiness, it’s more of a concept and an outcome than something you can actively try to be.
Are you saying there’s a fashion for innovation for innovation’s sake?
I think businesses are shy about saying what they want. If you want to increase top line and boost your profits by X, Y or Z, then just say it. There’s some weird doctrine that saying that stuff out loud is somehow filthy and uncreative, but actually it focuses the mind and makes it much easier to do your job.
So how did you get into innovation, and then into this current role at PepsiCo?
By accident, really. I’d worked in a couple of big corporates for some years at a middle management level, and then joined a start-up TV shopping channel. About a year and a half in to that one of our investors ran out of money, I was made redundant and met innovation consultants ?What If!, and my background of corporate and start-up experience was interesting for them.
I did about 22 projects with them overall, and that got me deep into innovation. Later I set up Samsung’s European innovation function and built the team there. We did projects across the entire Samsung portfolio: home appliances, mobile, TV, heating, cooling, medical, lighting, everything you could imagine. Over the course of four years we had a lot of success: we had some home appliances, camera and TV concepts commercialised, the Galaxy S5 core concept was one of ours.
Then, about four and a half years later, I got a call from Pepsi and I met my current boss, Brad, who’s a maverick change agent. His pitch was that he was trying to turn the oil tanker around, and in a fairly short time we’ve managed to get things moving and get some big things happening in the world.
That’s quite a journey, isn’t it? From a live TV start-up all the way to PepsiCo, one of the biggest brands in the world.
Yes: my first job was in architectural glazing, and at ICI I spent two years in China selling fragrances. I have a very random past, which means when people ask me how to get into innovation I generally say don’t try to get in to innovation, just go and do stuff you’re really excited about and then loop back to innovation later once you understand how businesses work.
What are the current challenges you’re addressing at PepsiCo?
It’s mainly about top line growth: how do you grow your business when some of your categories move in to decline? People are concerned about health and are wanting to consume less sugar, salt and fat in some countries, but not all. PepsiCo’s point of view is that we need a very broad range of options, so that whatever people want to eat or drink we’ve got something in our portfolio that satisfies that.
Do you think the FMCG sector is vulnerable to being disrupted in the same way service or tech is?
It depends on what kind of FMCG you’re talking about. If you take a ‘jobs to be done’ viewpoint, then people still need to wash their hair, so the shampoo category is probably in good shape for the foreseeable future. Weirdly, I don’t think tech companies are focusing on that when they could probably make a ton of money if they figured out how to wash hair without a shampoo.
In the food and drink categories, the threat for us comes from the fact that the things that made our company successful may no longer be success factors. Many people are looking for more local, they’re looking for less processed. At PepsiCo we take a lot of care about food safety and the veracity of where our ingredients come from, our supply chains need to be squeaky clean. There’s a new class of smaller company, many of whom have lower standards than we do and yet consumers view them more favourably.
It’s a bit like Uber. What have Uber actually done? They’ve indulged in regulation arbitrage. They’ve taken a very heavily regulated market, where costs are high, and have created a zero regulation version of it. Because governments take forever to figure out what to do, it’s taken a long time for the regulatory environment to catch up. By the time they do that they’re so big that you can’t just erase it because livelihoods depend on it, there’s a lot of money at stake. By skirting around those regulations at an early stage and creating a position, they’ve then got a beachhead from which to fight existing industry.
But if you’re a taxi driver and you’ve had to get your badge and license and your insurance together and you’ve got to comply with a thousand regulations just to stay on the road, it doesn’t feel fair.
And presumably that’s something that PepsiCo can’t do?
It’s worse and better than that simultaneously, in that it’s not that we can’t do it, we won’t do it. PepsiCo, as a global corporation, wouldn’t engage in that kind of behaviour because effectively it’s putting consumers at risk. In the same way that Marriott would never build a hotel and not bother putting fire escapes in.
So your asset, the trust in a long established brand comes back to bite you because that means you’re not going to behave like a disruptive, devil-may-care, irresponsible organisation?
Yes. The challenge is how do you feel a bit more like that without being like that? The way a lot of people approach it is to have separate venturing arms. But I’m not a massive fan of that because even if you put something out on the market through a third party, at some stage you have to bring it back in and the work is actually the same whether you do it in-house or you do it outside.
Does that mean you’re generally in favour of keeping innovation in-house in a corporate innovation team?
It depends a little bit on the corporation. If you’re a marketing-led corporation you can do it in-house. You should have your innovation in-house and make it a smallish team focused on putting all the right people in a room and helping them think through their individual aspect of a problem.
Your conference talk (at Front End of Innovation Europe) was all about making sure your innovation programmes survive — how do you make sure that the shine doesn’t come off too quickly?
When you start you have to dig around and find some things that are already half done. If you’re starting from scratch with everything, you have no chance of ever getting there.
But every company has some half-done projects and the chances are that some of them are not bad. It’s about finding the best of the half-done stuff, figuring out very quickly which ones have global potential.
Why are there half-done innovation projects in an organisation?
Many companies tend to move people through roles quite quickly. A lot of innovation people are internal hires and they see innovation as something that they’re going to do for 18 months to two years, and then they’re going to move on and do something else. And in 18 months to two years you can’t really get anything done and so one of two things happens: either people rush it and it’s shit, or they don’t finish it.
The other reason is that a lot of ideas are kept very pure for a long time. People don’t want to compromise and they don’t want to drill out the complexity of it. In a new thing, a company typically will tolerate about two vectors of complexity. If the packaging’s a bit tricky and there’s a little fix or a little tweak that we need to figure out on the manufacturing side, that’s okay. But if the packaging’s difficult, the manufacturing’s difficult, the sourcing’s difficult, the branding and the trademarking’s difficult, the naming’s difficult, you’ve got too many vectors of complexity and eventually the business will just implode around the idea.
What about connective partnerships, is that something in which you see value?
We spend more money on insights than almost anyone else in the world. Our organisation can tell you more about food and drink trends and where consumers are likely to go than pretty much anyone else in the world. When we look at a start-up we should be able to get the jump on a VC in terms of the future viability of that business from a product and insight perspective.
But if that’s all you’ve got, there is no way that you’re going to deliver the kind of cash returns that a business will need to see to still have faith in you in five years. If you get to the point where you have more mainstream innovation than you can cope with, then that’s the point where you can experiment with venturing and some early stage investments.
How do you decide where in the business you’re going to innovate?
A lot of the time it’s driven by commercial need. One business may be in decline, another business is growing and we don’t have a credible product in that space, or the product we have in that space is somehow disadvantaged, so that will be a space in which we’re encouraged to innovate. Sometimes we look further ahead and we can see that in the long term consumers are going to lean against a product or an ingredient for some reason or another and that might be the impetus for doing something.
In Samsung we spent time with people and saw what they wanted to spend time doing. Some of those things they lacked a solution for, so we figured out a way for them to do it faster, better or cheaper.
The most important thing is that the business is committed to the problem.
Yes — there’s a school of thought that many companies are indulging in innovation theatre: setting up skunkworks, or a lab, hiring a team and then three years later it’s quietly disbanded and everyone goes home. What does the organisation need to do to demonstrate commitment?
Over the years I’ve been approached for a number of roles which were theatrical roles rather than business roles, and you can sniff it out in a heartbeat. You need to ask people what the problem is to which innovation is the answer. If there’s not a credible answer to that question then you know that they haven’t thought it through, they’ve just been told by their shareholders they need to be more innovative.
What else would show you that an organisation that is committed to it — resources, budget?
Resource-wise you don’t need a lot of people, I think under ten is optimal. An innovation team should always be able to share a pizza, because once you get beyond that you start to get silos and then your TV innovation people don’t know what the mobile innovation people are doing and suddenly you’re the least innovative people in the world.
An innovation team should always be able to share a pizza
In terms of cash it needs to be three or four years of significant project budgets — in the millions — as well as funding to get the business projects done there should be a little for side ventures or ‘black ops’ which have a high risk of failure but potentially high returns. Those things need to happen out of sight in order to survive.
And finally, you need to have a sense that there’s enthusiasm all the way up to the top.
You’ve talked about large organisations having a system immune response to innovation. What’s your approach to overcoming that response?
There’s a few things you can do. The first thing is to behave and act like everyone else in the company, not be standout and weird. I would never take an innovation role with a brand I wasn’t personally excited about because people can smell it a million miles away. We have to be the most enthusiastic people about the business and go and engage with the parts of the business that everyone else forgets about. Once you start to couch your concepts and your ideas in the context of solving people’s operational problems, then suddenly it becomes interesting to them. It generates goodwill, and so that’s one of the most important things.
Secondly, you have to be really, really fast. You have to be a moving target, because if decisions are made and you’ve made a couple of degrees of progress away from that decision it becomes very difficult to undo that decision. The business ends up being dragged along in the wake of the innovations.
You have to be a moving target, because if decisions are made and you’ve made a couple of degrees of progress away from that decision it becomes very difficult to undo that decision
You also need a new way of presenting data to the business so that they’re forced to look at it with fresh eyes and assess everything from first principles.
Do you rely mostly on statistical data, or do you also use qualitative insights, stories or interviews?
Both. One thing I have learned over the years is that a story is more powerful than an idea, so if you can get a couple of great consumer-led anecdotes to wrap around an idea, they become more powerful than the idea.
A lot of people are doing very boring qualitative work, talking to people that they feel they already understand about stuff that they think they already know. We do consumer experiments rather than consumer research. For example, I want people drinking a new drink regularly in the future, so we pay people to live in the future for a while and see how it goes. Through that work you learn a lot very quickly about what you need to do and what you need to be like to make that future be a reality.
When you start to talk to people about the work their first question is, “Hang on a minute, you did what?”
For instance, we’ve taken families who fully reject sparkling products and had them only drink sparkling things at home for a full week, from sparkling water to flavoured seltzer waters, to regular soda to some of the more progressive products like juice with sparkling water. By giving them everything we get to assess whether people can find a role for it in their life. Doing that experiment churns out interesting insight, which is very motivating for the team.
But more importantly, when you start to talk to people about the work their first question is, “Hang on a minute, you did what?” Before you even tell them the outcome they’re genuinely interested because you’ve done something weird and mad. That sort of insight theatre around the innovation process can be very, very powerful.
I love that because it goes way beyond the normal thing of asking consumers what they want, when as we know consumers don’t know what they want till they’ve tried it.
Yes, it’s more like ‘Here’s what I want you to have, how do you feel about it?’
There’s three ways you can experiment with consumers: substitution, which is you have something, I take it away and give you what I’d prefer you had; deprivation, where you have something, I take it away; and then my favourite, saturation, which is I give you a ton of something and see what you do with it. The saturation exercises tend to be the most interesting. If I just give you lots of stuff, do you give it to your friends? Do you throw it away? How people deal with surplus is fascinating stimulus for innnovation.
I noticed PepsiCo getting involved in social impact with the solar lighting project. Is that an area where the innovation team gets involved or is your work mostly product-led?
Sometimes. The perfect place to be is where all those things coincide, and if social impact projects are a separate endeavour, then they’re almost doomed before they begin, but if they’re linked to a bigger business objective it’s easier to get businesses to buy in and invest in it properly which increases the chance of success and eventual impact.
Are there any projects that your team has done at that intersection?
We’re working with a group called imagination.org who were inspired by a YouTube viral video called Caine’s Arcade. He’s a young boy in LA who built an entire amusement arcade out of cardboard boxes. This organisation has formed around that idea, to start getting kids building stuff and making things out of packaging.
What they want to do is get companies to start putting a re-imagine symbol on their packaging: reduce, re-use, re-imagine, recycle. Before you recycle it, build something. We’re looking at how we can partner with them to a) encourage kids to build stuff out of our packaging and b) make it easier for them to build stuff out of our packaging.
They came in to the office the other day and we built massive arcade machines out of PepsiCo packs with the design team, and we’re currently figuring out how can we make this a big deal within PepsiCo.
People want less and less packaging, as do we, because we don’t want to have to create, pay for and ship stuff that people don’t want. But if the packaging you do put out there becomes the fuel for imagination then that’s fantastic.
Final question: what do you see yourself doing in the future? Do you see yourself carrying on in innovation? Is there an area you want to tackle personally?
I’ve never stayed in the same industry twice so if I ever moved it would be to a completely different industry. Actually, I would love to completely change the way innovation is taught to businesses and in academia as well. I think academia’s approach to teaching innovation is very case study heavy and, in my experience, when you dig beneath a case study, they’re a radical simplification of a very complex story. It leads people to think that there’s a magic bullet solution to changing businesses, but the reality is it’s a very, very complicated, very meticulous, process that you have to go through to slowly move an organisation from A to B.
Innovation’s a little bit like teenage sex: lots of people talk about it but very few people have actually ever done it.
The best analogy I heard once which made me laugh out loud was that innovation’s a little bit like teenage sex: lots of people talk about it but very few people have actually ever done it. The people that are doing it are way too busy doing it to talk about it to anyone else, and they won’t know how remarkable it was until they look back 10 years later. And then they probably won’t remember much about how they managed it, and will make up an over simplified romantic story.