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News Updates - 31
January 2001 The power of Two at Pepsi - Business Week Building a better Bank - The Industry Standard One to watch: IpVerse has the soft (switch) touch - Red Herring Pioneer Edgix makes good - Crain's NY Business magazine
Purchase, NY - The first time Steve Reinemund offered Indra Nooyi a job, he had to work hard to convince her. It was 1998 and Reinemund, on the fast track to run PepsiCo, was head of its $11 billion Frito-Lay snack business. He was revamping the distribution system and wanted her analytic expertise. But Nooyi wasn't so sure. For one thing, she found the former Marine a little too stiff. Nooyi likes to joke around; Reinemund is all spit and polish. Plus, as chief strategist, Nooyi was used to pondering such questions as PepsiCo's role in the 21st century. Reinemund wanted her to delve into real-world operations. He persisted, and she finally agreed to work with him part time. The result: a radical new system that gives sales reps more time in front of customers and lowers costs overall. The next time Reinemund offered Nooyi a job, he didn't have to ask twice. When CEO Roger Enrico announced in December that he would hand over his office to Reinemund after the company's $13.8 billion deal to buy Quaker Oats Co. closes, probably this spring, Reinemund called Nooyi. ''I can't do it unless I have you with me,'' he told her. The comment moved Nooyi to tears, she says, and she quickly accepted the offer to become his second in command, thus forming what could be one of the most unusual management teams in Corporate America. But if they can combine Reinemund's depth of operating experience with Nooyi's talent for big-picture thinking, it could also be one of the most powerful. As the next leaders of a newly reinvigorated Pepsi, the pair inherit a company with real momentum. To expand the company's reach, Reinemund, 52, and Nooyi, 45, will have to put brand names like Tropicana and Quaker on a variety of new snack foods. ''For any part of the day we will have a little snack for you,'' says Nooyi. First, though, they have to digest Quaker, for which Pepsi paid a rich price. Then they have to adjust to the changing competitive landscape. Pepsi can no longer measure its performance only against Coke's fountain and grocery-store sales. The new Pepsi is competing against everyone from food giants like Kraft to any upstart with a great idea for a drink. To beat those rivals, the $20 billion behemoth will have to create innovative products and ways to sell them. Pepsi has made some smart acquisitions; now it must absorb the revolutionary thinking of such prizes as SoBe, purveyor of edgy beverages such as Zen Blend. ''We're a very good suburban-oriented marketing company,'' says Reinemund. ''That's where we've grown over time. But there's a huge opportunity in urban markets.'' To seize it, Reinemund says, the company has to broaden its management. He has made a start. The rate of retention and promotion of women and minorities is expected to be the same as that of white men, and senior managers' performance reviews now take that into account But more than anything, Pepsi's success will depend on Reinemund and Nooyi. The two bring very different skills, not to mention personalities, to the job. Reinemund built his career at Pepsi reorganizing its pizza business and then ramping up its snack division, and he likes nothing better than to roll up his sleeves and pitch in. ''Steve comes from an operational point of view. Nooyi has a very different background, and that's why the combination works,'' says Brock H. Leach, the head of Pepsi's Tropicana Products Inc. unit and a longtime colleague of Reinemund's. ''She brings a lot to the party, things I don't think he'd say he does well.'' WING TIPS AND SARIS. On a more personal level, the two are even more distinct. Reinemund ''always looks like he's ready to go on the cover of Gentlemen's Quarterly,'' says Craig E. Weatherup, CEO of Pepsi Bottling Group Inc.
A tough negotiator who closed both the $3.3 billion 1998 purchase of Tropicana and last year's acquisition of Quaker, she has the unsettling habit of humming during meetings ''to calm herself,'' according to one investment banker. She'll make offbeat comments you would never expect a high-level executive to utter, like mentioning that she has music flowing through her head all day long or that she knows her bosses' astrological signs (Enrico is a Scorpio, which explains why he's so outgoing; Reinemund is a detail-oriented Aries). ''She has a sort of guileless, unencumbered quality,'' says Davis, who first met Nooyi when they both served on the board of Phoenix Home Life Mutual Insurance Co. ''She'll say something almost naive, very personal and romantic in a sense, but totally truthful.'' TOUGH DECISIONS. Most people think this odd couple is up to the task of redefining Pepsi, mainly because they've both proven they can make tough decisions. Nooyi pushed Pepsi to bid for Seagram Co.'s Tropicana juice business despite initial skepticism from a team of executives and negotiators exhausted from the just-completed restaurant spin-off. Soon after joining Pizza Hut in 1984, Reinemund decided the chain had to break into the fast-growing delivery business pioneered by Domino's Pizza. His staff thought it undignified to deliver pies. So he hired new senior execs. Within two years of its 1985 launch, Pizza Hut had the No. 1 delivery business in the country. Part of what connects Reinemund and Nooyi are their attempts to integrate their family and working lives. Nooyi's younger daughter, Tara, sometimes draws pictures in the executive conference room, and more than once her mother has found her chatting in Enrico's office. Reinemund has been bringing his children on business trips since his eldest, now 20, was 18 months old. ''I'm not sure the balancing is particularly successful,'' remarks Reinemund. ''I think it's more like the pendulum of a clock, constantly correcting.'' Come spring, the pendulum is going to be swinging even faster for both of them. Building
a Better Bank Anil Arora remembers the precise moment when he bagged Citibank as a client. It wasn't when the biggest bank in the country finally signed a contract with his fledgling startup, Yodlee. Nor was it when he left a key Manhattan meeting with a handshake deal. No, what Arora recalls is the look on the face of the Citibank executives when he first demonstrated Yodlee's key achievement: a simple Web page for consumers allowing them to see all their financial data in one glance. "At the demo, all their conceptual thinking about it stopped, and it was like boom!" Arora says. Nine months later, Citibank launched MyCiti.com, built with Yodlee's back-end infrastructure just as Arora presented it that day. The secret to Arora's presentation – and to his company's success – lies behind the latest buzzword in banking: aggregation. Aggregation companies like Yodlee collect data from customers' financial accounts and put them on a single Web site. Instead of having to log on to three different sites or read five different monthly statements to track the retirement accounts you've amassed from various jobs, you can see them all in one place, along with checking and savings account information, credit card balances, interest rates, stock portfolios and so on. Your funds may reside in different institutions, but aggregators make it look like a single virtual bank is holding them all. To Noor Menai, Citibank managing director of portals, aggregation is a "disruptive technology." Disruptive, he says, because it's one of those rare instances where a product or service improves customers' lives even as it increases marketing opportunities. Chase, like Citibank, hired Yodlee; FleetBoston is set to sign a deal with an as-yet-unnamed firm. Arora, who in a previous life built recognizable brands like Kraft and Gateway, says the partnerships work because he's accepted that Yodlee can't be its own brand. "What the Citis and Chases represent to their customers is miles ahead of what we could ever do for them." Aggregation companies like Yodlee, which in December merged with former rival VerticalOne, never imagined they'd need to make partnerships with the Citibanks of the world. Yodlee began by offering its all-in-one services directly to consumers, as did similar startups like Paytrust and PayMyBills.com. But no one came. It turned out that not many people wanted to turn over their financial secrets to an unknown company called Yodlee. But Citibank – ah, there was a name consumers could (and did) rely on. Citibank, for its part, got a quick and happy lesson in the power of its brand. And talk about stickiness – if you're returning several times a week to pay your bills and check your stocks, the bank has plenty of opportunities to sell you other services. Mortgage refinancing. Debt consolidation. A new car loan. Maybe it'll notice you hold Fidelity mutual funds and offer you one of its own with lower fees. "Absolutely that's the intent, to get the customer base exponentially multiplying," Menai says. "With MyCiti, this is the first time a customer will get the entire breadth of Citi products in one place." Even so, it's been slow going. By October MyCiti.com had signed up just 50,000 users. And nationally, there are barely a million customers using aggregation – less than 1 percent of the online population. But the future looks bright: Giddy analysts put the number at 36 million in 2004, though 4 million by 2002 is probably more realistic. New entrants into the field, like Yahoo and CNBC, and independent sites like OnMoney.com are going to find stiff competition. Menai, with some swagger, touts his advantage this way: "If you ask us why we're excited about aggregation, it's because we enjoy market leadership. If I were trying to enter the market today, I would consult my Marketing 101 textbook and realize how hard it will be to take on the market leader." If Menai's right, Citibank is the market leader in aggregation services only because execs there had the good sense to do a deal with Yodlee back in the dark ages of early 2000. But Anil Arora doesn't mind if Citibank is feeling flush, since Yodlee's reaping close to $10 million a year in license fees alone for lending its aggregation expertise to more than 30 banks. "It will definitely be a race for the advantage," Arora says. "This really seems to be one of those cases where whoever gets there first wins." One
to Watch: IpVerse has the soft (switch) touch The venture capital firm Kleiner Perkins Caufield & Byers rarely injects itself into any deal in the third round, but it made an exception in the case of IpVerse. That's just one sign that IpVerse is one of the hottest networking startups around. Why all the buzz around this two-year-old company in Sunnyvale, California? IpVerse makes an operating system that lets service providers deploy cool new applications on the converged network. "If you look at it, the mainframe was usurped by the personal computer, and the same thing is happening in the telecom space, where the telecom switch is being disaggregated," says Paul Singh, an IpVerse cofounder. Just as Microsoft built the OS for the PC, IpVerse has built the OS for the new telecom universe. It's called a "soft switch," and it's a market that the consultancy The Yankee Group expects to grow from $104 million in 1999 to $4.3 billion by 2004. SOFT
SERVICE The idea for IpVerse came to Mr. Singh and cofounders Gursharan Sidhu and Vijay Nadkarni in 1998 when they saw huge changes in the telecom infrastructure. They started IpVerse with a $3 million investment from Norwest Venture Partners. Since then, the company has raised $39 million more from Kleiner Perkins, Battery Ventures, and Norwest. The company has signed on important customers like Telocity and Electric Lightwave. It seems only a matter of time before the rest of the world gets to know IpVerse. Stranger
In a Strange Land: Pioneer Edgix Makes Good Rangnath Salgame has never done things the traditional way. While fellow college students in Baroda, India, were hunched over their term papers, Mr. Salgame and his pals were in the lab building a low-cost, solar-powered generator to provide electricity to rural Indian communities. "We got funding, which is unheard-of in Indian undergraduate colleges," says Mr. Salgame. The school later sold the patent for the generator to one of the investors. More than 16 years later, the precocious student is still doing things the nontraditional way. Mr. Salgame founded Internet infrastructure firm Edgix Corp. two years ago not in the technology development mecca of Silicon Valley but in Times Square, in the new media capital of Manhattan."One of the things about leadership is to be different," he says. Paring
telecom costs The growth potential is impressive. Technology research firm IDC expects the market for caching services to grow at an eye-popping rate, climbing from $514 million in 2000 to $4.5 billion in 2004. Observes Alex Benik, an analyst for The Yankee Group: "The value Edgix brings is pretty unique. And given the capital constraints that are being placed on the service provider community, the service is timely." Worldly-wise In a sonorous voice inflected with a musical Indian accent, Mr. Salgame brushes off the current technology-industry funk. "For long-term Internet infrastructure companies like ours, these things are small perturbations," he says. |
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