Everyday Matters: This thing called business acumen

This article first appeared in Forum, The Edge Malaysia Weekly, on March 12, 2018 - March 18, 2018.

For Indra Nooyi and PepsiCo, the secret to their success is to be trusted to do the right thing — for their external stakeholders, for the environment and for their people. Photo by Reuters

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Think back for a moment to your school days. Remember the best teacher you ever had, the one who seemed to know everything about his or her field and had something other teachers lacked — the ability to boil down the complex ideas of a discipline, whether it was chemistry, economics or genome science, so that you really got it?

For me, one such teacher in high school was Mr P S Rao. He taught us physics and he was good — “genius” is probably the right word here. Other teachers may have had great depth of knowledge and fancy credentials but they could not make the light bulb go on in our heads. Instead of making something complex seem simple, they did the reverse — they made it more complex and just plain hard to understand. Mr Rao did not just make the pendulum swing in front of us but he also made us appreciate the science behind momentum force.

Good CEOs and public leaders are like my late Mr Rao. The best of them have a knack for bringing the most complex business down to the fundamentals. They have business acumen — the ability to focus on the basics and make money for their company. They can sense where the opportunities are and take advantage of them consistently year after year.

One such CEO is PepsiCo’s Indra Nooyi, a standard bearer for those who think they operate under a glass ceiling. Indra understands the basic building blocks of her business and uses them to figure out how to make money and operate in a sustainable manner a company that is famous for producing canned drinks and fat-inducing titbits.

When Indra became CEO of PepsiCo in 2007, she asked her management to articulate how the company could manage itself profitably over the long term. That was their introduction to their new boss. She wanted them to understand why they were in business. So they went to work.

Picture a hot, perspiration-soaked afternoon in the middle of a busy city. See yourself passing through a narrow lane where people are selling goods from tables and carts right there on the street. If you buy something from these vendors, the chances are you will make your purchase quickly and be on your way. It probably will not occur to you to talk to these sellers about business. After all, what they do is very simple. What could you possibly learn from them?

But if you do talk to them, you might notice something quite surprising. No matter what they sell or in which town they live, they talk and think about business in remarkably similar ways. They speak a universal language of business. Revenue less expenses equals profit. They practise a universal law of business — demand and supply.

In other words, when it comes to running a business successfully, the street vendors and the CEOs of some of the world’s largest and most successful companies talk and think very much alike. The fundamentals of business are the same. You need a quality product, you need demand for the product and you need a strategy to get the product into your customer’s hands in exchange for a price. And you need to do that repeatedly, day in and day out. Bro, you need trust.

Coming back to PepsiCo, Indra’s management team deliberated for a while and encapsulated their collective thoughts in one phrase: performance with purpose. There, sweet and simple was their calling.

While excellent operating performance has always been the lifeblood of many good companies, in order to make their work sustainable, PepsiCo’s management decided it was vital to add a real sense of purpose to their performance.

There was a noticeable absence of spin in PepsiCo’s new tag line. After all, as I mentioned earlier, when all the convoluted public relations veils are lifted, PepsiCo is simply a manufacturer of sugared water!

PepsiCo articulated three planks — human sustainability, environmental sustainability, and talent sustainability — that together charted the road map for the company’s future.

They determined that to the consumer, value means a lot more than price. It is about a sustainable relationship, the knowledge that a transaction can be trusted, a brand can be trusted, a company can be trusted. It speaks volumes about Indra’s ability to break down and make simple PepsiCo’s business basics.

To be sustainable, a company has to define its mission and serve that mission over the long haul with multiple stakeholders. Doing so responsibly creates trust. But the significant loss of trust in today’s volatile environment requires all companies — big and small — to think again about what they do to build and rebuild trust, and to think again about how to create, give and add value. And most of all, it requires all companies to ensure that we embrace not just the commercial idea of value but also the ethical idea.

After the 2008 global financial crisis, Malaysian companies, like their international counterparts, found themselves thrown into a far more corrosive and painfully enduring crisis — a crisis of trust. Even the banking and finance sector, a stalwart of dynamic economies everywhere, has not been spared.

This corrosion is distressing for countries whose prosperity depends on the dynamics and creativity fostered in international capitalism. And it is especially challenging for companies that rely on a steady exchange of trust with customers, consumers, investors and other important stakeholders.

The question is, is there a solution at hand?

The only answer I can think of is to claw back the trust factor that has been eroded in recent times and rebuild business reputation. And I know it is not going to be easy.

I believe all global businesses today find balancing the long term and short term to be a constant struggle. I think the right answer is the ideal balance of performance and purpose working together.

The company of the future will do better by being better. Companies operate under licence from society and therefore, I believe, have to give something back. When they do so, they will earn trust. When they have that trust from their stakeholders, all kinds of possibilities emerge that simply did not exist previously.

These companies also have to take great care of the emotional bond between their employees and them because unless they have that emotional bond, they cannot achieve their real potential. Again, at the heart of that emotional bond is trust.

Business leaders today need to lead with their hearts as well as their heads — the right side of the brain in concert with the left. For instance, to get your people rallying behind you, you must, according to a business pundit, “declare your intent … and assume positive intent in others”.

This is probably the greatest lesson you will ever learn. That simple step of assuming positive intent in others is an act of trust, and it significantly changes the dynamics of almost any relationship.

The most successful business leaders never lose sight of the basics. It is true many of them lead large numbers of people in huge global organisations and they are often referred to as managers (the legendary Jack Welch of General Electric was voted by Fortune Magazine as the best business manager of the 20th century) or leaders. But they think of themselves as businesspeople first, not unlike street vendors.

Their intense focus on the fundamentals of business is, in fact, the secret to their success. For Indra Nooyi and PepsiCo, it is to be trusted to do the right thing — for their external stakeholders, for the environment and for their people. Like the humble street vendor, Indra has a keen sense of how a business makes money. This ability to apply the universal laws of business is what I call business acumen.

Zakie Shariff is a member of the board of directors at Universiti Malaysia Pahang. He is also a director of FA Securities, a boutique stockbroking firm in Kuala Lumpur.

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