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Who, How & What: Design Innovation

QUICK SUMMARY

Phil Sage from PepsiCo Design shared insights on how their 400-strong global design team drives innovation through human-centered approaches, cross-functional collaboration, and AI integration. The presentation demonstrated PepsiCo’s innovation journey from high-level design strategy to practical implementation, showcasing examples like Bear snacks expansion and Cheetos’ AI-powered consumer engagement. The session emphasized the importance of defining human-centered problems, embracing talent, championing integration, and implementing short to long-term innovation strategies to drive business growth.

KEY QUOTES

  • “Human obsession and understanding the real problem to solve is the only way that you’ll commercialize excellent product and product execution.”
  • “When you take those four lenses very early in the problem solving, it’s important that you connect to the organization in the most authentic and meaningful way possible. That is where you will build trust.”
  • “Define the right human-centered problems to solve, embrace talent, build and nurture relationships, champion integration, test and learn.”

FULL SESSION SUMMARY

PepsiCo Design: Structure and Mission

PepsiCo Design operates with a mission to elevate design thinking as a function, process, mindset, and culture throughout PepsiCo and the broader business world. The organization spans 30+ countries with 400 designers working across various disciplines. Sage emphasized their human-obsessed approach, considering it fundamental to solving real problems and commercializing excellent products. The design team is structured to facilitate cross-pollination between different functions, ensuring knowledge sharing across organizational verticals.

The design organization is split into multiple disciplines including brand design, merchandising and licensing, experience design, structural packaging, and innovation equipment. Recent developments have expanded into culinary experiences, exemplified by a Lay’s kitchen installation at Disneyland Paris that transforms potato into innovative food products. This comprehensive approach has earned PepsiCo Design significant recognition, culminating in being named “Agency of the Year.”

Innovation Process and Methodology

Sage detailed PepsiCo’s innovation methodology, which employs a double diamond approach focusing on four key lenses: feasibility, viability, sustainability, and desirability. This process involves bringing these perspectives to the forefront of problem-solving to accelerate meaningful thinking. A critical success factor is connecting with the broader organization early in the innovation process to build trust and investment in outcomes.

The innovation mindset requires system thinking, human-centeredness, asking “why” repeatedly to identify root causes, and building-testing-learning to solve problems effectively. This approach helps determine where to play, how to win, what to make, and what to fund. The presenter emphasized the importance of working backward from the end customer to identify necessary competencies and potential gaps that might require M&A or venture investments.

AI Integration in Design Innovation

A significant portion of the presentation focused on how PepsiCo is leveraging AI to enhance design innovation. The presenter shared insights from a recent AI conference, noting that AI will unlock $6.6 trillion in productivity across major economies. Key observations included:

  • Clear design innovation strategy and leadership supports AI transformation
  • Organizations with digital transformation are 4.3 times more likely to impose significant restrictions on AI use
  • Well-executed AI strategies can create 19% value
  • Prompt design is crucial for productive AI use
  • Human oversight remains essential in AI implementation

PepsiCo has integrated multiple AI tools including ChatGPT (called “Om Chester” internally), Adobe Firefly, and Microsoft Copilot. These tools are used for storyboarding, journey mapping, food design visualization, and even customer-facing applications like a customizable bottle design service.

Innovation Case Studies

The presenter shared several innovation examples spanning short to long-term horizons:

Bear Snacks Expansion: PepsiCo reframed Bear fruit chips from a niche nutrition product to a broader nourishment offering, expanding into an $18 billion category. This involved analyzing consumer behavior, growth categories, and potential technology platforms to leverage. The team created “springboards” into consumer demand moments, considering global ingredients, sustainability, and nutritional factors. This resulted in launching new Bear bar and granola product lines.

Cheetos AI Engagement: Recognizing that Gen Z consumers are digitally immersed but often face unanswered brand messages, PepsiCo built an AI pilot for CES that created personalized one-to-one content using intelligent messaging. This system pulled public information to craft personalized recipes and promotions, curating known data into a single engagement stream.

Wing Drone Delivery: For a longer-term innovation, PepsiCo partnered with Wing to pilot drone delivery of snacks during the Super Bowl. The team created predefined snack boxes available to consumers through Wing’s platform. The pilot was so successful it repeatedly crashed the system due to overwhelming demand, demonstrating strong consumer interest in convenient, shareable snack delivery for home gatherings.

KEY TAKEAWAYS

The presenter concluded with four essential takeaways:

  1. Define the right human-centered problems to solve
  2. Embrace talent and build nurturing relationships
  3. Champion integration through test-and-learn approaches
  4. Develop innovation strategies that test from short to long-term horizons

How This Session Delivered on the Event Focus:
Aligning Innovation with Business Strategy

This session directly addressed aligning innovation with business strategy by demonstrating how PepsiCo Design integrates human-centered design thinking with business objectives. The presentation showed how design innovation functions as a strategic asset driving business performance through cross-functional collaboration, systematic problem-solving, and technology integration. The case studies illustrated how innovation initiatives are tied to specific business goals like category expansion, consumer engagement, and new delivery models.

How This Session Delivered on the Event Theme:
Harvesting Innovation & Sowing the Seeds of Future Growth

The session embodied the “harvesting innovation and sowing seeds of future growth” theme by showcasing PepsiCo’s balanced approach to innovation across multiple time horizons. The Bear snacks expansion represented harvesting existing brand equity to grow into new categories. The AI engagement tools demonstrated cultivating current technologies for immediate business impact. The drone delivery pilot illustrated sowing seeds for future growth by exploring emerging distribution models that could transform consumer experiences.

Action Items for Innovation Experts and Corporate Changemakers

  1. Implement cross-functional innovation teams that bring together design, marketing, R&D, and other departments early in the problem-solving process to build organizational buy-in.
  2. Adopt a four-lens approach to innovation by evaluating ideas through feasibility, viability, sustainability, and desirability perspectives from the beginning.
  3. Create AI experimentation zones with appropriate guardrails to allow teams to learn and implement AI tools while maintaining necessary governance.
  4. Develop a balanced innovation portfolio with initiatives spanning short-term wins to long-term transformational opportunities.
  5. Reframe business challenges by looking beyond current category definitions to identify larger market opportunities, as demonstrated in the Bear snacks example.
  6. Build human-centered research capabilities that combine traditional insights with design thinking methodologies to uncover deeper consumer needs.
  7. Establish pilot programs to test innovative concepts in market conditions before full-scale implementation, gathering real consumer feedback to refine offerings.