As time passes, businesses across the world are making efforts to thrive in their respective field. There are coming up with different approaches to succeed and beat their competition. The modern business trends suggest that the majority of the businesses are either making use of ‘Lean project management' or ‘design thinking' to improve their business performance. This report talks about the innovation strategy implemented in an organisation. For this assessment, PEPSICO has been selected and the business trend selected here is “Design Thinking.” The report talks about various important concepts such as innovation strategy and trend, value creation and capture. In addition to this, it also elaborates on the significance of design thinking for Pepsico. The business canvas model of Pepsico in regards to design thinking strategy is illustrated. Some recommendations are also provided at the end of the report.
PepsiCo Inc. is one of the leading food and beverage firm that deals in manufacturing and distributing products in over 200 nations. The products of PepsiCo comprise chips, pasta, rice, cereals, aerated drinks, snacks, coffee, bottled water, sports drinks, and much more. The company is headquartered in New York and currently employs 274, 000 people all around the world. At present, PepsiCo has 40 largest trademarks in the food and beverage industry, namely Pepsi, Lays, Gatorade, etc. Each of its trademarks generates a revenue of over $1 billion.
Talking about the design thinking approach, according to Geissdoerfer, et.al(2016), it is one of the significant non-linear and iterative process that focuses on understanding users, testing assumptions, and redefining issues, and providing innovative and out-of-box solutions. Design thinking comprises 5 phases, namely “Empathy, Define, Ideate, Prototype, and Test. The approach is very useful in tackling problems that are unknown or ill-defined. In today’s day and age, it is very important for the business to develop new and refine the existing skills which allow them to act and understand the transforming environment and behaviour (Camisón& Villar-López, 2014). Design thinking helps the business to deal with the complex and interconnected business environment in a human-centric manner. This process helps the designers to emphasise more on exploring more options and dig deeper into solving the problem.
There are certain important concepts that are important to understand in the context of business and design thinking and their relationships. These are discussed below:-
The organisational environment comprises various forces and factors affecting the performance of a business, operations, processes, and resources. Different organisations operate in a different organisational environment. There are two types of the business environment, namely internal and external. The former comprises conditions, entities, and events that affect the activities and choices (Kupp, et.al, 2017). These comprise the strengths and weaknesses of the company. The external environment is characterised by the factors surrounding the environment. It is often called the operating environment. These can be economic conditions, public opinion, government laws, competition, etc. PepsiCo manufactures beverages and food product and deals in a very dynamic business environment that changes very rapidly with a change in technology and has high competition. All these factors affect the working of PepsiCo (Liedtka, 2015).
According to Volkova& Jākobsone (2016), innovation in the modern world is not only about implementing or introducing new ideas or methods but also about involving multiple ways to get the task done. The new innovation is directly linked to creativity and it is required for people to think outside the box and develop incremental enhancement. PepsiCo has a very holistic approach to innovation. It started with a business of beverages but did not restrict itself in that domain only. It is currently employing the principles of design thinking in its operations. For instance, it has innovated packaging technology.
It is a growth plan that is formulated by the business entity to thrive in the market by beating the competition and increases its profits and market share. It is usually focused on job execution and job segment to target the growth by getting the job done in a better way. When it comes to PepsiCo, it is formulating innovation strategy to gain a competitive advantage and unification and fulfilling the needs of the customers (Volkova& Jākobsone, 2016). The research and development have been strengthening for market research that would help in identifying the needs of the customers. This information would help in developing the products as per the demands of the customers.
These are the abilities of an enterprise to make values out of an idea which is creative and viable, thereby increasing the net profitability of the company. It all depends on the company's abilities to identify and match the external opportunities for delivering new and innovative products that are advanced and superior to those offered by the competitors in the market (Liedtka, 2015).
This is all about creating value from innovation and capturing it for a longer duration. The company's profitability increases in this process and goodwill also increase in the due course.
In the past 10 years, PepsiCo redesigns its innovation process and designing experience for its patrons. Design thinking as an innovation strategy is helping the company to improve its majority of business operations, especially the packaging. PepsiCo is making use of design thinking to connect with its patrons and potential customers at an emotional level and in the process, it increases the growth of the company. Design thinking approach is a human-centric approach and therefore, it is not only focused on the customers only but also considering the interest of the employees working at PepsiCo. The senior management is working with design thinkers to put the focus on employees' need and motivates them to carry out innovation at their personal level. This resulted in many outcomes benefitting the company. The first and foremost is it resulted in new and innovative human-centred communication tools for customers and employees. This helps in attending to the complaints and suggestions given by the patrons. In addition to this, PepsiCo started a new GBS service which is end-to-end based on journey mapping and user insight. Furthermore, design thinking improved the ultimate user experience and internal digitalised resources. On a high note, design thinking toolkit helped the company in reinventing and building services and scenarios based on an in-depth understanding of customers and the employees of the company.
According to the PepsiCo's CEO, in the world of rapid reinvention, design thinking can be comprehended to involve creativity and systematic way to problem-solving by placing the users at the pivotal point. Majority of the employees in the organization were resisting the changes brought by design thinking but the company was aiming at beating the competition by bringing design changes in the internal environment of the company (Wattanasupachoke, 2012). Design at PepsiCo is playing two key roles: 1) working across the existing brand portfolio that comprises Doritos, Pepsi, Lays, and Quaker for developing consistent experience across all the brands 2) bringing or initiating innovation. The second role is helping the company to explore new opportunities for its brands and products in the futuristic society that is more dependent on digital technology and social media (Kupp, et.al, 2017).
As a result of design thinking, the company came up with a unique product called ‘Pepsi Spire' which is a digital fountain that provides control to the customers to personalise their drink. This device is said to be as intuitive as possible and PepsiCo could be able to find the right balance between customer engagement and efficiency.
To understand the impact of design thinking on PepsiCo, a SWOT analysis is provided below:-
PepsiCo is able to build an innovative and differentiating product of high quality and at a reasonable price.
Creativity and innovation in operations
Good reputation in the market and development in the market.
Lack of expertise and skills to undertake a design thinking process at all levels.
It is not budget friendly and thus, receives criticism from various stakeholders.
PepsiCo is not able to implement design thinking for all brands.
It helps in exploring new markets and grabbing new market opportunities
Governments are also promoting design thinking approach in businesses.
Employees can be able to improve their skills and efficiency.
Competitors are also making use of the same approach, thereby reducing the differentiation impact.
Resistance form 270,000 employees for implementing design thinking in business operations.
For better understanding, the business model canvas is presented below:-
National Football League
Providing a high supply of beverages and snacks across the world.
To be a major human-centric company
To be a number one in the health and nutrition domain.
Forming a strategic partnership with local leaders in the same field to ensure worldwide growth.
Worldwide Sales through distributors
Arranging events and sponsoring fests.
Research and Development
Marketing and sales
Revenues from sales
Loan protection insurance
For the strategic alignment, PepsiCo is recommended the following suggestion:-
This report illustrated the innovation strategy implemented in an organisation. For this assessment, PEPSICO was selected and the impact of “Design Thinking” was tested. The report talked about various important concepts such as innovation strategy and trend, value creation and capture. In addition to this, it also elaborated the significance of design thinking for Pepsico. The business canvas model of Pepsico in regards to design thinking strategy was illustrated. Some recommendations were also provided in here.
Camisón, C., & Villar-López, A. (2014). Organizational innovation as an enabler of technological innovation capabilities and firm performance. Journal of business research, 67(1), 2891-2902
Geissdoerfer, Bocken, & Hultink. (2016). Design thinking to enhance the sustainable business modelling process – A workshop based on a value mapping process. Journal of Cleaner Production, 135, 1218-1232
Kupp, M., Anderson, J., & Reckhenrich, J. (2017). Why Design Thinking in Business Needs a Rethink. MIT Sloan Management Review, 59(1), 42-44.
Liedtka, J. (2015). Perspective: Linking Design Thinking with Innovation Outcomes through Cognitive Bias Reduction. 32(6), 925-938.
Parida, V., Westerberg, M., & Frishammar, J. (2012). Inbound open innovation activities in high‐tech SMEs: the impact on innovation performance. Journal of small business management, 50(2), 283-309.
Volkova, T., & Jākobsone, I. (2016). Design thinking as a business tool to ensure continuous value generation. Intelektine Ekonomika, 10(1), Intelektine Ekonomika, 2016, Vol.10(1).
Wattanasupachoke, T. (2012). Design Thinking, Innovativeness and Performance: An Empirical Examination. International Journal of Management and Innovation, 4(1), 1-14.
Zawislak, P. A., Cherubini Alves, A., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2012). Innovation capability: From technology development to transaction capability. Journal of technology management & innovation, 7(2), 14-27.
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