Can Cost Improvment Be Affected At Frito Lay

To flatten inflationary costs to prevent price rises and maintain profitability.

The Solution

After interviewing 36 different consulting services, Frito Lay brought in Basadur. Using the Simplexity Thinking method, their team of vice-presidents, skilled in problem-solving created a culture change within the company.

The Result

Using the Simplexity Thinking Process, the Frito Lay corporation found savings of $500m over a five year period reaching their target a year ahead of schedule.

The Summary

When summarizing the results of this particular case study, we were fortunate enough to have Jim O’Neal provide his input on the value we uncovered as a team when implementing an innovation process.  His summary on “Managing the Paradox of Innovation” also helps to stress the value of developing a culture of innovation within a company.                       

Here are his thoughts below…

Managing the Paradox of Innovation

By  James  H. O’Neal .  Retired President and CEO of Frito-Lay International 

A broadly accepted definition of strategy is that it’s fundamentally about “choice”.  (i.e. what to do or what not to do).  Savvy managers have gradually learned how to incorporate innovation into this process and then manage it as a “function”.  This technique can provide a major boost to economic, cultural or competitive initiatives.

A strong, persistent managerial commitment to the systematic “practice of innovation” can eliminate the need to wait for the next big idea (“inspiration” is hard to schedule) or the quandary of how or when to squeeze in attractive opportunities when they pop up.

At Frito-Lay we also discovered that  a simple consistent  process of creative problem solving was applicable from our boardroom (“How might we reduce our costs by $500 million” or “Flat Costs Forever”) down to the floor of a manufacturing plant (“HMW reduce accidents 50%?).  This top to bottom approach was an important distinction.  Big corporate strategies had to be compatible with our maniacal focus on daily operational excellence.  There could be no loss of focus on the superordinate goal of satisfying 99.9% of the demand from the vast supply chain making daily deliveries to virtually 100% of every mom and pop corner grocery, convenience store and supermarkets in all 50 states.  

To the untrained eye, focusing on daily operational effectiveness may appear to be mundane and much less important than strategy or innovation.  Actually, this is what keeps a business exciting, vibrant and viable over an extended period of time.  More importantly, it’s directly correlated with customer satisfaction, short term volume and profitability. 

By training multiple layers and multiple functions in this process, we were able to create a common language and mitigate cross-functional trade-offs as changes were adopted.  It also allowed us to tap into the enormous pool of innovative brainpower that is underutilized in too many organizations.

And by baking all of our “How Might We’s” into our strategy and operating plans, we were able to set outsize goals that the entire organization could help solve.  It also fostered development of a learning organization that managers could tap into easily. 

One skill that distinguishes leading edge managers is their uncanny ability to quickly recognize and solve business problems.  The challenge, of course, is to balance personal involvement with appropriate delegation.  The manager has to make very deliberate choices on how and where they spend their time.

Since there will always be more issues and opportunities than time available.  Identifying the most important ones is much more valuable than solving or exploiting them.  The objective then becomes one of simply tasking the people who know the most about the problem to focus on practical solutions or breakthroughs.  

This will provide an exceptional amount of leverage for the key operating people and significantly improve the ROI for the manager’s time investment.

Have a tough problem to solve?  Ask the people How might we?

Unsure about the practicality of an innovative idea?  Ask How might we get this evaluated and/or implemented?

Along the way we also incorporated other proven concepts including continuous improvement, best practice, methods improvement and a process to leverage learning across the entire system.

As a result, the organization was too busy contending with growth to worry about paradoxes and more intent on innovating every product and every package or process (every day).

We were always paranoid and mindful of the old maxim that “If the rate of change on the outside, exceeds that of the inside, the end is in sight”.