Bob's Gutsy Leadership Blog

Beware of a Flawed Objective!

PepsiCo was highly embarrassed when recently released beverage market shares showed that Pepsi-Cola slipped to #3 behind Regular Coke and Diet Coke.

Industry analysts were quick to point out that this result was not surprising since PepsiCo has been pushing hard to “create a corporate culture focused on health and global social responsibility.” From a product perspective, this push placed huge emphasis within PepsiCo on “good for you” products such as fruit juice, oatmeal, and Gatorade. This caused PepsiCo’s flagship brand Pepsi-Cola to take a back seat, receiving no new adverting for the past three years. For example, PepsiCo skipped soda ads in the 2010 Super Bowl for the first time in 24 years, and instead put millions of dollars behind an online charity competition called the Refresh Project that had nothing to do with selling soda.

What can we learn from this? A leader needs to be very careful about selecting the objective. In the case of PepsiCo, from a share holder and consumer perspective, it should strive to be the leader in beverages and snacks, and aggressively support its current products and new products with high future potential in those areas. They shouldn’t be focusing almost exclusively on something that is only 20% of revenue (PepsiCo’s “good for you” products).

Here are some relevant lessons:

1) Allocate talent and resources in proportion to the importance of the various components of the organization.

2) Don’t significantly under-support areas that are currently critical to the organization’s success.

3) Staff with your top talent the areas that represent the future of the organization.

Beware! What you ask the organization to do will likely get pursued, so ask carefully.

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