Creativity and Innovation in Pepsi Co.

This article explores the creativity and innovation strategies of Pepsi Co. and their impact on the company's operations and annual sales. It discusses the importance of organizational culture, product innovation, and talent recruitment in driving innovation. The article also includes an interview with the company's CMO and a development of an innovation action plan.

Creativity and Innovation in Pepsi Co.
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Introduction
Pepsi Company is among the largest manufacturer of snack and crisp with very high
annual sales. The company is also known for its manufacture of carbonated drinks. However,
Pepsi Company is not only known for the products it manufactures but also for their methods of
production. The company is very creative and innovative in their activities where the company
invented various brands of sale instead of selling one particular product.
There are various critical drivers of innovation in the company and among them are
strategy and structure. There is a very complicated relationship between structure and policy in
the company. The primary plan of PepsiCo was to enter the new rapidly growth markets, to
achieve this. PepsiCo had to restructure their organizational structure twice within four years
(Alvesson, 2016). To successfully implement this strategy, the leadership of PepsiCo had to
continuously evaluate, adapt and implement new policies across the PepsiCo structure that
supported the primary approach. This would not have been an easy task. It required a lot of
creativity and the management of the company had to consider several factors.
(i) The current PepsiCo structures may not be able to cope with the new radical change.
(ii) The type of structure selected is imperative to the success of the change.
(iii) The new structure must allow the resources of the organization to implement the
selected strategy. It must not limit their implementation options.
(iv)The complexity of the change required to be managed to ensure the successful
implementation of the restructuring.
Another key driver of creativity and innovation in Pepsi Company is Product innovation. Product
innovation is essential to many companies and firms because of competition. Since the
environment is dynamic, product innovation is a strategic priority for many businesses and

businesses. It assists the management of firms to plan for the future of their products and
services. Product innovation increases research and development of companies. Product
innovation is necessary for the preparation for economic growth. The market often responds
positively and rapidly to new products and services. However, not all the commercialized
products are successful in the stock exchange. Radical product performance is the success of the
product innovation in the market area.
The company also came up with a new organizational structure as a creative way of
improving business operations. A new corporate structure provides new opportunities for
employees, although it can be argued it also presents new threats. It’s imperative that the
employees must be consulted and included when planning the restructuring. Employment moral
can’t be ignored by the leadership of an organization. Organizations require buy-in from their
employees. To increase buy-in, organizations may develop rewards systems for their employees.
This practice is highly recommended when an organization embarks on a radical change.
Innovation cannot happen without the presence of talent which means the business has to
approach recruitment of new employees more strategically especially when it comes to nurturing
individuals from diverse environments. However, the majority of talented individuals
increasingly prefer to start their businesses rather than joining an already established business.
For this, PepsiCo has to emphasize to potential recruits that the company will be able to create a
change for them. The company hence built a design and innovation center in the lower parts of
Manhattan, New York which notably made for this focus. The center is staffed with about 70
designers recruited from some of the best design schools and design companies.
However, the company still faces challenges in the effort of spreading diversity across the
business. Some of the difficulties were realized when the company was looking for a recruit to

do a very senior job, and a whole bunch of candidates was all men hence the company had to
create some diversity by finding a female candidate which they couldn’t. Managers of the
company realized that it’s not that easy to develop difference and one requires a strategy where
unless one brings it to the consciousness, the difference cannot happen organically.
Influence of Creativity and Innovation on PepsiCo
Creativity and innovation have influenced the activities and business operations of the
company positively by increasing their production and hence their annual sales. PepsiCo focuses
heavily on the novelty of their packaging technologies. The company has made an exciting step
by filing a patent to make paper bottles. The idea of making paper bottles is apparently not new.
The Green Bottle Company in the UK introduced the first paper bottle in the year 2007 in the
storage of milk. The manifest by PepsiCo proposes a different method of production. High levels
of carbonation will cause Pepsi not to be served in these bottles since they may prove to be
problematic in the design of the packaging (Banerjee et al., 2016).
However, PepsiCo still owns various brands such as Tropicana, Gatorade, and Naked
Juice and the company also has a partnership with Starbucks which offers ready to drink
beverages. All these are possible areas where the idea of paper bottling may be applied. A move
like that will encourage other businesses to produce innovative recyclable products to reduce the
amounts of plastics in dump sites. The company also saw it also creative to make the drinks
aromatic on one of their packaging manifest applications. The plan was to make their products
smell more natural to the consumers.
In the previous years, PepsiCo had put less senior executives in charge of innovation
where they kept innovation at the brand level. However, a recent move by PepsiCo was the
hiring Luke Mansfield, a previous employee of Samsung Electronics. Luke was hired to be the

VP of Global Innovation in the company where PepsiCo’s President Brad Jakeman said that the
company had decided to elevate innovation to a VP-level role. Brad said that this showed their
significance in their commitment to innovation and also the shifts experienced in the consumer
demand for beverages all around the world (Caniëls & Rietzschel, 2013).
As the majority of the food companies around the world, PepsiCo is also prone to
allegations and controversies meant to attack some of the company’s brands. A good example is
an event in February 2011 where the company was accused of adding carcinogenic substances in
their products. In the present times where consumers are well aware of the various issues
surrounding production such as health, social and ethical issues, such controversies will
negatively impact the confidence the shareholders and consumers had on the operations of the
company. The increase in competition also poses a critical challenge to the company wherewith
stiff competition; factors such as legal battles may arise (Ceserani, 2011). An environment with
such problems requires the company to be very creative and innovative when dealing with such
issues.
An interview assessment
An interview with the company’s CMO Seth Kaufman discussed the primary operations
of the company and how the company is using innovation to stay ahead in the marketing world.
The CMO confirmed that the main factors that make the company stay ahead are the constant
evaluation of new technologies and a qualified innovation team. Among the questions asked in
the interview include how the company got into marketing. Seth said that they had always been
interested in the influencing of consumer behavior and hence creating an impact on the response.
Seth said that in the many years of working for PepsiCo, a lot of factors have changed
where this is triggered by the fact that consumer demand is rapidly evolving (In Ashkanasy, In

Wilderom & In Peterson, 2011). The methods and way of communication have changed hence
the company finds it significant to develop regarding how they interact and engage with their
consumers. Seth also added that the company has an innovation team that has actual diversity,
not visible diversity but the difference is seen in both the set of skills and their background.
Hence, as the CMO, the creation of the right culture and the breaking down of various barriers to
support the innovative team is very important. The company creates an environment that allows
the team to prosper, and hence it becomes stronger.
Seth also discussed intensely the company’s innovation team where he gave an example
of how the company makes progress through performing actions. The PepsiCo creator is a group
of the innovative organization that mainly deals with the marketing innovation. The group sets
an example for entrepreneurs, looks at new upcoming trends in technology, are responsible for
finding new partnerships, testing of new equipment and seeing what lost ideas they can bring
back. The group possesses more of foresight rather than insight.
The company has also created the PepsiCo Fast Pitch which comprises internal teams that
are responsible for creating ideas intensive on driving sales, establishing new streams to generate
revenue or creation of content and they then pitch them to the company’s leadership who the
decision whether to fund the ideas or not. The group comes together with a team of very
passionate individuals, and if the team can sell their plans to the management, the management
offers them with the required resources. The process improves the level of creativity and
innovation in the company and maintains the agility, experimentation and the entrepreneurial
spirit of employees. The idea also empowers the employees where they learn to take action on
their ideas and not just to talk about them.

Seth also discussed the methods that the company uses to evaluate the new emerging
trends of technology thrown at them all the time. He emphasized that the company tends to be
considered more of leaders than followers. He continues that the company may find it harder and
harder since technology affects various platforms (Venkataraman & Summers, 2017). The
company believes in people and the ideas they provide which in this case helped by pushing the
company a little beyond their comfort zone. The company invests resources in these new
technologies where they focus more the people and then the platform.
Development of an innovation action plan
In the establishment of an innovation strategy plan, one has to follow various steps that will
enhance the creation of an effective method. The measures include:
(i) Knowledge sourcing
(ii) Knowledge transformation
(iii) Exploitation
Knowledge sourcing
Knowledge sourcing is the process where one gets the required knowledge to undertake
an innovation process. Various factors should be considered where particular information is
collected about the company. In our case, the cultural organization of the company is a factor to
consider in the development of an innovation plan
Organizational culture
Culture means a series of shared beliefs and values that assist the members of the firm or
company to understand the existing regulatory norms. Corporate culture contributes to the
process of product innovation. In many organizations, these values and beliefs follow a given

framework that facilitates teamwork towards innovation of new products (In Ashkanasy et al.,
2013). These values include competition values, the orientation of customers and competitors in
the firm, firm's learning orientation and finally the firm's values about investment in the
upcoming technologies. In competition values, there is the competing values framework model,
which shows that managers to make choices to control tensions organizations. It allows
flexibility and control in the organization.
There exist many types of culture in the firm. The adhocracy type is flexible and has the
willingness to take chances. It helps to enhance creativity and entrepreneurship. The market type
produces competitive behaviors within the organization. These behaviors include aggressive
product development, expansion programs, brand building, and price competition. The clan type
builds relationship behaviors in an organization (In Plucker, 2017). These behaviors include
superior customer services and strong internal selling force. The last culture is the hierarchy that
produces routines that assist in smooth operations of the firm.
Adhocracy culture contains the values of innovation, entrepreneurship, and external
orientation. It is the foundation for radical product innovation. Customer orientation helps in the
creation of stronger customer value based on the nature of the products. Customers assist in
solving the problems that arise from product innovation. Information from the customers helps in
shaping the kind of changes in firms.
There exist two kinds of customer orientation, responsive orientation, and proactive
direction. Sensitive customer orientation deals with solving customers' needs with the current
technology and advancement. However, forms that use this approach may get a challenge on the
technologies they use. In proactive orientation, many firms have intelligence that assists the

management to know the customers' needs. There is anticipatory intelligence on customers that
focuses on understanding the potential and future needs of customers (Kittlaus & Fricker, 2017).
Firms should combine both responsive and the proactive customer orientations.
Sometimes responsive orientation generates incremental innovations. Incremental innovations
help to reduce the risks of the firm. It acts as a driving force that produces funds necessary for
radical innovations. Proactive orientation help in developing market intelligence for the
development of fundamental innovations (In Alvesson, 2016). It sets the foundation for a future
measure of cash. The measure of the money is a critical component that drives the stock prices.
Culture affects the behavioral norms in product launch strategy. For instance, Pepsi's
executive may develop a new strategy to enhance competence, but the culture of the firm may be
a barrier to realizing this project. Culture also affects the organizational structure and
composition. The culture in the organization must offer room for changes that enhance product
innovation. Since the society is dynamic, there should be room for technological advancement in
the marketplace.
Knowledge transformation
After gathering this information, the knowledge should be transformed into actions. The
innovative plan is to create a product launch strategy. Product launch strategy is the mechanism
through which the company communicates its value proposition to a given group of customers. It
is the key to adoption of new products by the customers. Product Launch Strategy becomes
difficult when customers have little experience with the new products. In organizations, this
component is costly and risky (Treffinger et al., 2013). The most crucial part of this model is
commercialization process and the development of the product.

Product Launch Strategy as a process follow the following steps, selecting the target
markets, establish a marketing procedure, predicting capital results and formulating a system for
adjustment and control. Launch strategies should advocate the diversity in product innovation
and the available markets. Pepsi Corporation has utilized the organizational culture to enhance
product innovation. Through learning the demands and the desires of her customers, they
produce products that are of quality making their changes relevant.
The primary objective of creating this innovative plan can be divided into three main parts:
(i) Financial objectives
(ii) Consumer objectives
(iii) Internal objectives
Financial objectives
The financial objective of this innovative plan is to grow the value of PepsiCo to its
shareholders and stakeholders. The plan is also aimed at increasing earnings per share were to
achieve this; we have to increase the production and hence profits. Also, the innovative plan is
aimed at increasing revenue which represents the growth of the business. Increasing the income
will mean that the industry is performing normal operations (Sierk, Dvora & Ida, 2011). The plan
is also meant to maintain appropriate leverage for finances. The plan will create an optimal
amount of debt that the company should stay within.
Consumer objectives
The product launch strategy will ensure that the company provides the best value for the
cost where the consumer knows that the product they are purchasing is not the most expensive
nor is it the highest quality, but it is the best deal they got. The plan also aims at providing a

broad product offering. The strategy will be able to offer the best product in the industry
regardless of the cost. Another objective of establishing an innovative plan is to increase the
share market where through innovation and product launch strategy, PepsiCo will be able to
increase the number of customers they will be serving due to increase in production and product
promotion.
Internal objectives
Among the domestic purposes of the innovative plan is the production of innovative
products where the company prides itself on cutting-edge and constant innovation. The project
will help PepsiCo to differentiate their products by separating some of the features of their
products to make a difference (Shalley, Hitt & Zhou, 2016). PepsiCo should shift their
investments in the research and the development of innovative operations. The innovative plan
also aims at improving the percentage of which new innovative products are sold. By this, they
will acquire new customers from the creation of a new market.
Measurement and evaluation success
After the plan of improving organizational culture and the product launch strategy,
various changes should start to be observed in the company. The changes can be evaluated by
assessing the number of sales which will have been reported for that financial year and compared
with sales from the previous year. The variation observed will be the increase in earnings per
share which is among the objectives of the plan. Also, assessing the market size they serve will
also show the change in which the plan brings about. An increase in market size shows the
innovative idea is significant and is working in favor of the company. In conclusion,
organizational culture plays an essential role in the process of product innovation. It enhances

competitive markets for the goods and services offered by many firms. These components of
product innovation are as well critical to the success of many firms as seen in Pepsi Corporation.

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