Find episode transcript below.
ANNOUNCER:
00:00:01:00 Welcome to PwC Pulse a podcast to provide insights to help you solve today's business challenges.
TIM RYAN:
00:00:09:19 Hi, I'm Tim Ryan, PwC’s US Chair and Senior Partner and I'm excited to be your host for this episode of the PwC Pulse Podcast. It's difficult to understate the challenges we've all experienced over the past few years, but I believe business leaders have emerged stronger and smarter as a result.
00:00:30:19 But the rollercoaster ride hasn't stopped yet. We're still in a dynamic economic and geopolitical environment, but we have the opportunity to apply the lessons learned to the long view and continue the path towards growth.
00:00:46:09 Part of that means focusing even more than ever on the fundamentals of business, like putting your people first and reimagining our businesses through your customer’s eyes. And we know we can't accomplish this without technology as a tool and trust as the foundation. Here to talk about how leaders are navigating the headwinds of today's environment is Miguel Patricio, CEO and Chairman of Kraft Heinz.
00:01:16:12 Miguel brings decades of experience as an executive at international consumer products companies that are household names. Miguel, welcome to the podcast and thank you for being here.
00:01:29:12 So before we jump into the heavy stuff, I want to give everybody a chance to get to know you a bit better. You're a global citizen, so I got a couple of rapid-fire questions. The first one is: favorite city and why?
MIGUEL PATRICIO:
00:01:40:27 Oh, favorite city, I must say Lisbon, the city where I was born. Lisbon in Portugal. Number one reason is because I was born there. But it's more than that. I mean, Portugal is a pretty cool country that is finally being discovered by everyone in the world. It's warm, has incredible food. If you like seafood, Tim, it is the best place to have seafood in the world.
00:02:03:26 People are pretty warm and friendly. It’s a country with incredible heritage. There's so much history in every corner.
TIM RYAN:
00:02:11:22 Miguel, I have to tell you, it's in my top three. My wife and I went there right before the pandemic and we had the time of our lives. I agree with everything you said. Next, rapid-fire question, your favorite book and why?
MIGUEL PATRICIO:
00:02:23:01 Oh, I have a lot of books, but I like always to talk about the last books that I read that were important or interesting for me. And I would say “The Black Box Thinking” is from a guy called Matthew Syed and it’s an incredible book because it makes a parallel about business that learned from failure and the ones that don't.
00:02:45:03 It's an incredible book for business, but I would say overall, not only for business. And in business, so many people are afraid of failing every day.
00:02:56:03 And what I try to tell my teams is that it's okay to fail, it's part of the journey. What is not okay is not learning from the failures. And so we have to learn every time that we fail and talk about it openly.
TIM RYAN:
00:03:08:02 Miguel, thank you for that. I have not read it, but I'm a huge believer in admitting mistakes and learning from them, so I'm going to add that to my list. So with that, I want to jump into some of the harder questions. I think that would be really interesting for our audience. You came to Kraft Heinz after having many decades of experience at a number of global companies.
00:03:27:21 I love to have the audience understand what drew you to Kraft Heinz. And also when you look at your experiences you've had globally, for example, developing playbooks for global markets, like, what drew you in? How did your experience help you to be successful?
MIGUEL PATRICIO:
00:03:42:00 Tim, you're right. I had the pleasure, the honor to manage some incredible brands that the audience knows very well, brands like Coca-Cola, brands like Johnson and Johnson, Marlboro, brands like Budweiser, Corona and more recently, Heinz and Kraft. I lived in seven different countries, and I think that's really part of my fabric: liking the uncomfortable. So getting out of the comfort zone has been part of my life.
00:04:08:22 And so when I came to Kraft Heinz, I think that's exactly what attracted me. It was a company that needed change, that needed transformation. And I love that. I love these challenges. I would probably have said no if it was a very stable company. I like this instability, this need for transformation. That's what brought me here.
TIM RYAN:
00:04:31:03 Thank you, Miguel. Really helpful, and you mentioned the idea of change. And I want to go to something that we have learned in our global CEO survey and then bring it to Kraft Heinz. As you know, we do an annual global CEOs survey. We survey 4000 CEOs a year.
00:04:47:03 And this last survey, 40% of CEOs shared with us that they don't believe their company will be economically viable in ten years given the current conditions. It begs the question, when you look at reinvention and the need to constantly change, like, how do you think about reinvention of Kraft Heinz?
MIGUEL PATRICIO:
00:05:06:07 Well, we think about it all the time, and we come from a position of disadvantage. I mean, four years ago, we were behind, we were in trouble. And naturally, transformation was a question of survivors. And for us to survive, we had to transform the company. And I think that in that sense, Tim, it's been easier to explain to the people the need of change and transformation.
00:05:32:05 I think it's harder to transform companies where people don't see that need. We've been transforming the company from all angles in all areas, and the way that I tried to bring this to life, this transformation is showing them on the stages where we are in the transformation. So like this year, what I told the people was we were really one of the worst couple of years ago.
00:05:56:23 We were on the bottom. We are not anymore. We are in a very different situation. We should all be very proud, but we are just good today and should be proud of the journey. But good is not good enough. We need to have the ambition to be great and to be great is to be one of the best.
00:06:16:24 And the way we did that Tim, was in each one of the functions was transforming or defining what greatness looks like and build a plan for the future, which is the plan of transformation for us is where we want to be and plan it for the long term to get there. And so it's constant transformation in all areas of the company.
00:06:38:05 In some areas, we are ahead than others, but we are all evolving, being in marketing or in sales or in logistics or in supply. We are all evolving and we have a map on the necessary evolution, which is the greatness that we are looking for.
TIM RYAN:
00:06:57:01 Miguel, thank you. The lessons in terms of what you shared are incredible. You talked about the need for a burning platform or creating one and getting people to rally around it, you talked about multi-years and having milestones in transformation and then transparency around where you're going. And then what you also talked about was the need to push people that good is not good enough.
00:07:17:21 And greatness is what drives distinction. And I appreciate you sharing that and leading that which brings me to another thing that I like to ask you about. At Kraft Heinz, you have been incredibly innovative in your products.
00:07:30:21 In fact, you used AI to create plant-based singles and mayonnaise. Technology plays a big role in innovation, maybe a two-part question, how do you create a safe environment for employees to innovate and experiment? And then what is the role of technology in making that happen?
MIGUEL PATRICIO:
00:07:49:13 Very important question, because going back to my first point about The Black Box Thinking book, if you are in a company where people are afraid of failing, you never innovate, because innovation by definition is risk. And so if you are averse to risk, you never innovate.
00:08:06:13 You need to have a mindset of innovation, of creativity. And by the way, Tim, here comes the second book, a book I gave to all my direct reports on the first week I arrived in the company is Mindset from Carol Dweck, which I think is an incredible book.
00:08:22:17 Mindset is absolutely necessary in all companies and especially the ones that are going to get on a journey of transformation. And I would start exactly with that. You know, change the mindset of people. It is not easy to change mindset. Going back to your example of AI and the example that you mentioned NotCo and doing or innovating through AI on food.
00:08:43:21 You know, we were behind on plant-based and we knew we were behind on plant-based, and we thought about acquiring a company or developing ourselves, and we gave up on these ideas, one was too expensive, the other one would take too much time. And we looked for a partnership and we found on NotCo. We have the scale,
00:09:04:14 they didn't have the scale, but they had the knowledge on developing foods through artificial intelligence and plant-based foods in a record time. We launched three months ago a plant-based cheese in six months. Absolutely record. And as you know, we launched in the market, this is already the leading brand in plant-based cheese. And I think that this concept of partnerships Tim, it is very important.
00:09:29:11 If you try to develop everything by yourself; first, you don't have the resources for that. Normally, the solutions for your problems already exist and they are outside. Someone has it. And so I've been really keen on developing partnerships. This example of NotCo is a good one. Instead of re-inventing, instead of buying, find someone to partner with you that complements your skills, that needs you when you need them and you can do incredible things.
00:09:58:20 I can give you different examples of partnerships that we are working with. But let me give you another one related to artificial intelligence. Recently in our factory here in Champaign, we started placing cameras on the lines, trying to learn why machines break. So we were trying to improve efficiency in the lines and through artificial intelligence coming from the images, trying to predict when the machine is going to break so it doesn't break and it was very successful. And we are improving the efficiency of our lines because of that.
TIME RYAN:
00:10:34:00 Miguel, I love that story, both of those stories. And if I pull out a couple lessons, I think it's really important. You talk first about this need to be open to partnerships, which is actually a different behavior than maybe when many of us started in business decades ago, when it was do it all yourselves. So this mindset of partnering and creating win-wins is really important.
00:10:54:10 You also talked about people and the role they play, like explaining why you're doing things and why you're not. All critical elements of innovation. So I appreciate that. You mentioned people and what's interesting is in your business, it's laser focus on the customer and what the customer's buying habits are, what they want, what their needs are. But these days, employees carry equal weight and they're incredibly important to drive our strategies, transform our companies.
00:11:23:25 And maybe if you could, a little bit from the people side, what steps do you take and can other leaders take to ensure the employees who drive our strategy are being treated the right way so you can get the most out of them for them personally in the company as well?
MIGUEL PATRICIO:
00:11:41:06 Let me start by saying, I spent three days per year on our people review, three full days. I go through the evaluations of all my direct reports and their teams plus top talents of the company, trainees. These three full days, we look at not only the achievements that these people have, but also the engagements that they have in their own teams as leaders.
00:12:08:09 What people say in the 360 evaluations, the turnover rates and why is that so important? Because great leaders have incredible levels of engagement. They have superior levels of engagement. Great leaders have lower levels of turnover. And so that is a great way to - on a company that believes on meritocracy - to define who great leaders are not only by the results that they bring every year but also by the quality of teams that they form and they develop.
00:12:39:01 So this is one very important thing. We really believe that engagement is crucial. I mean, if engagement in a company is low it’s because the company is sick and we need to treat the company. And the engagement was pretty low a couple of years ago. And so we had to understand why, and act. Today that situation is very different.
00:12:58:18 I would say that one of the reasons we improved so much were the engagement councils that we put in the company, multi-functional teams using the learnings from the Agile that we implemented in the company to bring and to improve engagement and make people listen and I’m very proud of that. I'm also very proud of how we evolved in the company on inclusion and diversity.
00:13:21:04 I know that you are a big champion on that Tim, and we learned a lot from you and from your company in that sense. We are evolving big time and I'm a big believer on that chapter as well, not only because it's the right thing to do, because companies should represent the communities where they operate, but also because diversity brings better results
00:13:43:17 to companies. And I mentioned a lot of different things, but the chapter on people is the number one chapter in our company and was the first thing where I put really my hands on, on people and culture, and it will continue to be my number one priority forever.
TIM RYAN:
00:13:59:12 Miguel, thank you for sharing that. The wisdom in that comment that I want to really put out for our listeners if engagement is low, the company is sick, and that is so clear and helpful for our listeners as they grow. And your point around not just results in terms of financial results, but what is happening with people in their development, that is how people can move up in their careers, which is if you're creating opportunities in development for others.
00:14:25:21 So thank you for that. I want to now go a little bit to: you’re a global, both Kraft Heinz being a global company and your experience over a number of decades; supply chain is a topic that is getting a lot of attention. It used to be several decades ago supply chain was primarily built: where can you get the lowest cost?
00:14:46:27 Today you've got other elements dictating supply chain costs clearly, but also reliability, predictability and now climate as well. Could you maybe share what's the role of digital in supply chain and how are companies like Kraft Heinz is thinking about supply chain diversification, managing things like risk?
MIGUEL PATRICIO:
00:15:06:28 Here at Kraft Heinz, we rely on California to produce tomatoes to the world. And look at the problem we have, right, because that was built on scale, of incredible big facilities of processing and transforming the tomatoes in puree that then we can export to the world to produce Heinz Ketchup. The problem is that the yield is being reduced every year because of drought, right?
00:15:32:10 And so you have to start changing that equation and not depending so much in one place or one crop or one country or one state. So this applies to absolutely, I think, everything in the world. Now, technology and supply chain, they start mentioning a little bit of that example of artificial intelligence and cameras in the lines trying to predict failure of machinery instead of waiting for the machinery to fail or to stop and then to fix it.
00:16:02:23 And that is a big area that we are using technology trying to predict in all areas of the business. Here today in Chicago, we have a - we call “tower control” - is a room where we can see all factories in United States and have a pretty good control from here in a centralized manner. What two years ago was totally decentralized and you could not learn from a factory to the other in real time.
00:16:33:21 And today we invested in technology and, by the way, a partnership with Microsoft, to change that picture big time. So that is a very good example with Microsoft as well. We are improving our forecasting big time, linking the data from our clients by store, by warehouse with our warehouses. And instead of having people on Excel spreadsheets forecasting the sales of next month of Lunchables, we do the opposite.
00:17:04:20 Now everything is done through the machine. And then, of course, we have a look because it's based on the past, not based on the future, but with a much, much better level of accuracy.
00:17:17:21 So I would say that, yes, technology has been a big part of the transformation that we are doing in supply and not only in supply, but the question was in supply - big, big transformation going on in supply.
00:17:30:01 And again, I think that if you try to develop everything by yourself, Tim, it's going to take too much time and too much money. And finding partners to help you on the journey, I think it's critical.
TIM RYAN:
00:17:42:05 Yeah, Miguel, thank you for that. There are so many nuggets in there. Your subtle but important point that supply chain is not just in Asia issue. It is a global issue and it exists in the United States, I want to call that point out. But also the way that you laid out, if I think about all the other questions we talked about the willingness to fail, the willingness to try something different, the willingness, the partnership, the willingness to let people innovate.
00:18:05:08 And then you look at what's happening with your supply chain just over the last couple of years is actually very remarkable. And it ultimately leads to something better for the consumer, lower cost, more reliability. So I applaud you on that level of innovation and transformation. I have one more question. When you look at the role of the CEO, it has never been more challenging.
00:18:26:11 When you look at the pace of change, the need to motivate and inspire, what's happening geopolitically, the rising expectations that exist on CEOs and companies. If you were to give advice, and you’re standing in front of that future talent that you evaluate every year, what's the skill set you would tell them that is most important as they aspire to continue to grow in their career and ultimately as they shoot to become the CEO?
MIGUEL PATRICIO:
00:18:51:17 It’s a very important question. Tim, let me answer this question in two ways. The first one, I would say if you had asked me this question probably four years ago, I wouldn't probably answer that agility is crucial and this sense of urgency nowadays became absolutely critical. Everything is changing in such an incredible speed that people that don't have the sense of urgency, that do not understand that, they will just not be successful.
00:19:20:16 They can be very smart, they can develop incredible solutions. But if it's not at the speed that is necessary, will fail. Someone will do faster. So agility becomes the superpower. And then I think that CEOs have to be kind of neurotic, kind of crazy, because they have to be very optimistic, but at the same time very pessimistic. Pessimistic to predict the worst scenario.
00:19:45:21 I mean, during this winter in Europe, we were ready for not having gas. All our factories are run on gas, but what about if we didn't have gas because of the war, right? So we were ready. We didn't need to use anything else, but we were ready and we were ready because we need to be paranoiac. We need to be pessimistic and believe that the worst can happen.
00:20:13:11 But at the same time that you are ready for the worst, if you have leaders that are only pessimistic, they are in trouble. The CEOs have to have an incredible level of optimism and be ahead of time and bring the teams with him or with her, make them believe in the future. So being predicting the future and running the future and being very optimistic about the future I think is crucial as well.
00:20:38:09 So I would say this neurotic combination of optimism and pessimism at the same time helps CEOs.
TIM RYAN:
00:20:45:25 Miguel, I cannot thank you enough for being with us today and sharing the wisdom that you have accumulated over multi decades. And as you transform Kraft Heinz, I want to thank you on the behalf of the firm, but also our listeners. And I do want to close reminding our listeners, they heard it here first: to be a successful CEO, you need to be neurotic.
00:21:05:09 You need to be pessimistic and optimistic. And I couldn't agree more based upon the number of CEOs that I see. And I'm really happy that you're leading Kraft Heinz. Thank you so much for being with us today. Very appreciated.
MIGUEL PATRICIO:
00:21:16:08 Thank you so much.
TIM RYAN:
00:21:17:28 It's clear that no matter what the economic environment brings, business success will hinge on reimagining our employee and customer experiences. And to our listeners, thank you for joining us on this episode of PwC Pulse. For more information on these topics, visit pwc.com.
ANNOUNCER:
00:21:38:05 Thank you for joining us on the PwC Pulse Podcast. Subscribe to PwC Pulse wherever you listen to your podcast or visit pwc.com/Pulsepodcast to hear our next episodes.
ANNOUNCER:
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