Educational Program: How Technology and Innovation Can Bring New Solutions to Life

As companies in the public and private sectors are in the middle of a digital transformation, the emerging tech arm of PepsiCo Labs sources cutting-edge technology to embed into the company and solve real-world challenges. Collectively, the team identifies, pilots, and integrates tech startups to unlock shared potential and develop new solutions in the tech industry.

In an educational program held in partnership with The Association of Foreign Press Correspondents in the United States (AFPC-USA) PepsiCo Labs' General Managers Anna Farberov and Jenny Oh explained how they select innovative partners and how they bring new solutions to life, setting an example of technological innovation and transformation.

Farberov leads PepsiCo’s engagement with cutting-edge technology solutions. As part of PepsiCo’s Global Tech Venturing & Innovation team, Farberov identifies, tests and scales solutions that drive growth and unlock value for PepsiCo. Prior to joining PepsiCo, she was a senior executive for Discount Investment Corp Ltd., Israel's largest Holdings company. She led the company’s emerging growth engine as head of corporate strategy, investments and planning.

Oh leads Commercial Tech Venture & Innovation for PepsiCo. Working with PepsiCo business owners, she identifies and forms strategic partnerships with emerging tech startups that solve critical needs for PepsiCo.  Her key areas of focus are cutting-edge solutions in Retail, Marketing, Consumer Engagement, Data and Ecom/DTC. With 20+ years of experience in strategy, finance, partnerships and innovation, Oh has deep expertise and passion in leading strategic initiatives to business impact.

This educational program was held on Friday, February 9, and was moderated by Thanos Dimadis, AFPC-USA’s Executive Director.

AFPC-USA is solely responsible for the content of this educational program. Below, readers will find a summary of some of the most important takeaways from the presentation.

ON THE ORGANIZATION’S OVERALL PURPOSE AND MISSION

• Oh notes that PepsiCo is “on a massive digital transformation journey, which is touching every part of our value chain” as it explores emerging tech startup solutions to transform the way PepsiCo does business.

• Farberov adds that “disruption is a must for all big companies” and that she and Oh work to enable PepsiCo’s transformation by removing “barriers” and “redundancies.” “How do we work faster with those emerging startups that have a very different culture than PepsiCo?” she says. “How do we succeed or how do we enable PepsiCo to succeed and disrupt different parts of our value chain? That’s what we do on a day-to-day basis.”

ON HOW PEPSICO SELECTS THE AREAS ON WHICH THEY WANT TO COLLABORATE

• Farberov notes that PepsiCo’s value chain is “massive” and says the company defines what collaborations it pursues based on “business priorities.” She says: “We are integrated into the corporate strategy and based on what the PepsiCo as a company wants to drive, we partner with the business to make sure that we identify those specific needs within that area and move forward.”

• Oh emphasizes the importance of aligning engagement with the venture capital (VC) startup ecosystem with the company's priority business needs. She stresses the need to focus on specific areas where emerging startup solutions can significantly impact the company. While considering partnerships with established tech partners or developing internal solutions in some areas, she highlights the value of collaborating with startups that lead in bleeding-edge technology to ensure effective utilization in specific domains.

ON WHY THE COMPANY INVESTS IN TECH AND INNOVATION

• Oh discusses the evolution of PepsiCo's approach to innovation over the years. Initially focused on product innovation, the company has now shifted to a broader perspective, emphasizing innovation across every aspect of its value chain. She highlights the importance of undergoing a digital transformation and embracing tech innovation to stay at the forefront of the industry. PepsiCo is dedicated to a transformative journey to enhance its business processes and capabilities, acknowledging the significant potential of tech innovation in shaping the company's future. “That's why we're so maniacally focused on making sure that we are innovating in the right way,” she says.

• Farberov emphasizes that innovation is a necessity for any company, regardless of size. Given the evolving consumer needs, especially in the context of experiences like the COVID-19 pandemic, companies must adapt. Technology plays a crucial role in revolutionizing business processes, and the pace of innovation needs to increase to stay relevant and meet consumer demands. She agrees with the focus on startups, highlighting their innate innovativeness and positioning at the “bleeding, cutting-edge.”

• Adding to this, Oh observes that “consumers want greater relevance in a much more personalized way” and that the company must “continue evolving or risk getting left behind.”

ON WHETHER THE APPROACH OF MEETING CONSUMER DEMANDS THROUGH INNOVATION AND INVESTING IN INNOVATION ARE COMMON PRACTICES IN THE PRIVATE SECTOR

• Oh emphasizes that PepsiCo sees itself at the forefront of tech and digital transformation, especially in engaging with the tech startup ecosystem. While acknowledging other companies' efforts in this space. She notes that different companies adopt varying approaches to tap into and harness the power of the tech startup ecosystem. PepsiCo Labs has defined what works for them, shaping their unique engagement strategy within this ecosystem.

• Farberov agrees with Oh and says that there's “no one-size-fits-all” approach to innovation. Different companies have various objectives for innovation, such as putting bets on horizon three needs or enhancing their reputation as an employer of choice. She acknowledges the support from PepsiCo and leaders in driving innovation, expressing confidence in having found the right model that works for PepsiCo's transformation and success in innovation.

ON EVALUATING VARIOUS FACTORS AND COLLABORATING TO DETERMINE THE MOST EFFECTIVE PATH FORWARD

• According to Oh, the process involves being anchored on business needs and strategically identifying solutions that align with the core of the business. She defines needs upfront in close partnership with business leaders, ensuring alignment with the organization's goals. The approach focuses on quickly understanding innovation drivers and identifying leading startups in relevant areas. Additionally, PepsiCo runs through a systematic and holistic process with business leaders to test a small subset of solutions rapidly in the market. This enables them to identify scalable solutions efficiently and avoid random, ad hoc experiments, streamlining the process for optimal outcomes in the fastest way possible.

ON HOW THE COMPANY PARTNERS AND FORMS RELATIONSHIPS WITH STARTUPS

• Farberov says the company values a strategic approach that includes identifying the problem, assessing business impact, and determining critical KPIs and criteria for optimization.

• She adds that the company follows a comprehensive project management model, filtering through thousands of startups based on defined needs. The process involves months of evaluation to narrow down to approximately 10 startups that align with pilot requirements. During the pilot phase, success criteria are clearly defined, enabling a straightforward decision post-pilot. Farberov highlights the proactive approach of sharing needs on platforms like LinkedIn and the company website, actively reaching out to startups and VCs, and maintaining an open and collaborative stance to seek help and innovation.

• PepsiCo has a record of extensive engagement over the last four years, says Oh. The company has established connections with VCs, accelerators, startups, and other leaders. She emphasizes the proactive outreach for each program and set of needs, aligning with Farberov’s previous points. Regarding helping startups, she acknowledges the challenges for startups working with corporations and the potential difficulties arising from corporate processes.

• Oh also discusses the challenges in the collaboration between corporations and startups due to differences in understanding and processes. She highlighted PepsiCo’s role in bridging this gap by unifying the language between both entities. The focus is on helping startups navigate PepsiCo's organizational landscape, streamlining conversations among various stakeholders, and expediting decision-making processes. “We're really enabling this capability and helping the startup, but also helping PepsiCo figure out how to work with these startups,” she says.

PRESENTING AN EXAMPLE OF A SUCCESSFUL RELATIONSHIP WITH A STARTUP

• Farberov discusses the importance of preventing machine breakdowns in manufacturing and the partnership with a company that uses sound vibration, heat, and other parameters to monitor critical equipment. The system alerts when abnormalities are detected, allowing proactive maintenance to avoid unplanned downtime. The partnership, initially tested in one North American food site, successfully expanded to multiple sites across North America and is being rolled out globally, including Europe, Latin America, and Australia. She underscores that PepsiCo plays a crucial role in testing and scaling up such innovative solutions, collaborating with startups and business units to ensure successful implementation: “Each step of the way we work with the startup on the initial pilot, but then we also work with the businesses to make sure that we can take that across.”

• Oh shares an example of a marketing solution called Rembrand that focuses on virtual product placement in existing content. This solution addresses the evolving landscape of content consumption and the challenges in influencer marketing, especially for engaging with macro and micro-influencers with smaller but highly engaged audiences. The technology allows PepsiCo to programmatically insert custom content into relevant media, opening up new opportunities. The company aims to explore making these placements shoppable and personalized based on viewer preferences, aligning with marketing trends like social commerce.

ON THE VALUE IN PEPSICO’S INVESTMENTS IN INNOVATION

• Farberov emphasizes the business impact of working with startups, citing the example of preventive maintenance that avoided unexpected line breaks. She mentions another example with N-Drip, a company transforming irrigation methods, leading to significant water savings and increased yield in potato fields. The focus is on achieving tangible business benefits, such as securing a potato supply for PepsiCo, supporting farmers' livelihoods, and creating more sustainable agricultural practices. Farberov underscores the mutual benefit, where startups gain a global influence, aligning with the broader goal of driving “business impact” globally through strategic collaborations.

• Oh echoes the focus on business impact, emphasizing that projections at scale are consistently assessed for startups' contributions to PepsiCo's top and bottom lines. The significance lies in moving the needle for PepsiCo, aligning with financial and sustainability goals. Unlike approaches solely motivated by financial returns from investments, PepsiCo's engagement with startups centers on achieving strategic business objectives and driving results in their core business.

ON WHETHER THERE ARE “MINIMUM REQUIREMENTS” FOR STARTUPS TO APPLY OR PURSUE A PARTNERSHIP

• Oh highlights the success with startups that are slightly more mature, having a proven product in the market and gaining enterprise customers. PepsiCo's focus is on solutions with the potential for scaled growth. The sweet spot for engagement tends to be at the series A funding round and beyond, as startups at the pre-seed stage may be considered too early. However, exceptions are made for earlier stage startups with a differentiated technology critical for PepsiCo's needs.

• Adding to this, Oh notes that in some instances, PepsiCo has engaged with startups in co-developing solutions. The emphasis is not solely on startups presenting a complete suite of solutions; some startups may have a core capability or product. PepsiCo's industry experts and business teams collaborate with startups, contributing to the startup's future product pipeline. This collaborative approach has proven successful, she says, adding: “We've started working with startups and co-created sometimes with some of those to advance the needs for PepsiCo, but also the capabilities of the startup as well.”

ON HOW PEPSICO HELPS STARTUPS CREATE ASPECTS OF THEIR PRODUCTS AND/OR BUSINESS

• Oh highlights that the approach to partnerships with startups is flexible and varies case by case. PepsiCo Labs plays a key role in negotiating partnership agreements, aiming for strategic collaborations. The focus is on creating win-win situations where both PepsiCo and the startup benefit. By forming partnerships, there's potential to increase the overall business opportunity, allowing both parties to share in the success. The emphasis is on establishing agreements that create value for all involved stakeholders.

ON DIFFERENT SECTIONS OR SEGMENTS OF PEPSICO THAT ARE DEPENDENT ON THEIR WORK

• According to Farberov, PepsiCo Labs has a “broad scope,” working across various sectors within PepsiCo. This includes agriculture, mobility, fleet management, truck-related initiatives, electrification, autonomy, warehouse and automation in manufacturing, consumer and retail, digital marketing, content creation, customer partnerships, and more. The team collaborates across the entire organization, including support functions like HR, IT, and finance.

• Regarding electrification of automobiles, she adds that PepsiCo has a goal to achieve a zero-emission fleet by 2040, acknowledging the significant impact of its large fleet on emissions in the supply chain. The main strategy to reach this goal is electrification, encompassing both class A and smaller trucks. The company has already made substantial progress in electrifying a significant portion of its fleet. PepsiCo is actively working on infrastructure development and seeking grants to support this initiative. Despite the challenges, such as long routes and inadequate infrastructure in certain regions, the company is implementing multiple efforts in parallel to meet its ambitious target.

• Farberov says PepsiCo's interim strategy for achieving its emission reduction goals involves the use of biodiesel. The company collaborates with a startup called Optimus, a PepsiCo Labs project, to upgrade existing diesel trucks to run on sustainable biodiesel. This initiative results in emissions reduction by over 90% on long-term routes where electrification may not be feasible. The success of the project was evident as PepsiCo rapidly scaled up its involvement, starting with testing four trucks, purchasing 200 trucks by the end of the same year, and planning to acquire an additional 300 trucks by the end of 2024.

IN RESPONSE TO A QUESTION ABOUT POTENTIAL DISAPPOINTMENTS AND/OR SETBACKS

• Farberov emphasizes that the team at PepsiCo Labs operates with dissatisfaction with the status quo in a positive way, pushing for continuous improvement and evolution within the company. She also acknowledges the positive impact they have achieved over the last five and a half years, demonstrating a commitment to ongoing progress and innovation.

• Oh mentions that she has been “pleasantly surprised” by the company's openness to change, with different organizations welcoming them. Despite being part of a large and heavily matrixed organization like PepsiCo, she acknowledges the challenges of navigating through it. Oh reiterates the goal of operating as disruptors within the company, highlighting their intention to continue evolving.

ON THE COMPANY’S FIVE-YEAR PLAN

• Oh discusses the company’s active engagement in conferences and interactions with various entities in the innovation ecosystem, including corporate innovators, VCs, and startups. She mentions ongoing considerations and explorations of different partnership models with other companies, potential funding arrangements, collaborations with investors, and the exploration of co-creation and incubation for developing new business models.

• Farberov highlights the company’s commitment to addressing PepsiCo's evolving critical needs, mentioning their core model involving more mature solutions and numerous pilots annually. Farberov notes that the team is willing to explore earlier or later-stage startups when necessary to meet strategic needs.

ON THE IMPACT OF ARTIFICIAL INTELLIGENCE ON THE COMPANY’S FUTURE PLANS

• PepsiCo recognizes the potential in AI and generative AI, says Oh, who mentions the company's commitment to responsible AI, with leaders speaking about a framework that incorporates AI into various use cases while prioritizing risk minimization. Oh specifically focuses on her areas of interest within commercial spaces, such as marketing, highlighting the exploration of AI and generative AI to enhance efficiency and speed in current processes.

• On that note, Farberov says that many startups include AI in their tagline, and PepsiCo engages with companies at various AI stages, from simpler models to bleeding-edge generative AI. The company is actively developing a responsible AI framework and testing AI applications across diverse use cases, expressing a commitment to staying at the forefront of AI advancements. She concludes: “We’re not afraid of AI.”

ON THE COMPANY’S BIGGEST PRIORITIES FOR 2024

• Oh emphasizes the importance of geographic expansion and broadening capabilities across functional areas. She highlights a strong focus on not just finding and testing startups but ensuring their successful scaling within the company. The challenge lies in operationalizing solutions and driving change within a large organization. 

• While the responsibility for scale-up rests with business and function owners, PepsiCo actively supports them throughout the scaling journey. Oh also expresses a desire to evolve the model to extend the innovation capability to partners, specifically customers in the retail space and the hospitality industry. The goal is to unite efforts with partners to achieve more significant and mutually beneficial outcomes through innovation.

ON HOW THEIR WORK WITH PEPSICO HAS “TRANSFORMED” THEM AND ADVANCED THEIR INDIVIDUAL SKILLS

• “I’ve been really fortunate in PepsiCo,” says Oh. She reflects on her diverse career trajectory, starting from roles in mergers and acquisitions and progressing through strategy, finance, and innovation. She expresses her current role as the most enjoyable and emphasizes the importance of understanding PepsiCo and engaging with the external ecosystem effectively. Oh acknowledges PepsiCo's support in enabling employees to shape their career paths according to their preferences.

• Farberov highlights her diverse background, having worked at Procter & Gamble for many years, providing her with a comprehensive understanding of the business side. She emphasizes the uniqueness of their team, not just being tech-oriented but also having a deep understanding of the business. With a background in finance and strategy, she gained experience across various aspects of the business, from marketing to handling both small and large markets and new brands. Farberov values the combination of hands-on experience and board-level perspectives, and she expresses her satisfaction with her current role at PepsiCo.

ON WHAT THEY LOOK FOR IN FUTURE TEAM MEMBERS

• Oh stresses the importance of capabilities such as understanding the business, applying strategic frameworks, and being creative. She values personal characteristics like being action-oriented, willing to disrupt, and having a creative mindset. Given the nature of their work, where they often encounter roadblocks and establish new ways of doing things, creativity is considered a crucial factor in navigating challenges.

Farberov says individuals should be comfortable with ambiguity. In their dynamic environment, each role is unique, and job descriptions are crafted anew with each hiring. The team doesn't follow a set pattern or established norms, and individuals must be adept at learning on the job, building their roles from scratch, and working with minimal guidance.