Strategic vision is more important than operational chops?

By raheem

The latest issue of Fortune magazine features a list of the most powerful women in business. It includes an interview with Indra Nooyi, the CEO of Pepsico and this year’s chart topper on that list. She mentions something quite striking about a CEO’s ability to run a business versus defining a strategy for the business:

The most overrated skill is “running a business.” To me, the single most important skill needed for any CEO today is strategic acuity. [Former PepsiCo CEO ] Roger Enrico believed that.

When I was going to run the European business in 1996, he said, “I’m pulling that. You’re going to stay back.” I said, “Why? I put my kids in school. I rented a house. Why do you want me to stay back here?” He said, “I can get operating executives to run a P&L. But I cannot find people to help me reconceptualize PepsiCo.” That’s the skill in shortest supply.

Although strategic vision is certainly important, surely it is no more important than the ability to run a business well. One could arguably develop an effective strategy by hiring the best management consultant.  But the really hard stuff involves executing on the strategy within current operations.

One reason Nooyi may value strategy so highly is because of the strategic shift that Pepsico has been involved in during the last 10-15 years. In 1997 then CEO Roger Enrico took the bold step of spinning off the fast food division of Pepsico consisting of Taco Bell, KFC and Pizza Hut. It reduced Pepsico’s revenues by 30%. That followed by acquisitions that included Gatorade, Quaker Oats, etc that has diversified Pepsi into the convenience snack foods business. It has shifted Pepsi’s focus from being a soft-drink and restaurant operator, both of which are highly competitive and low-margin businesses towards an arena where it is the market leader.

Nooyi is continuing that strategic shift by moving Pepsico more into the healthy snacks category. Such major shifts are certainly difficult to pull-off because of the operational challenge of  assimilating large acquisitions. Strategic vision and operational mastery go hand in hand and it speaks highly of Pepsico’s management talent that they are able to execute so well on a good strategy.