ARJUN:
When you started at McDonald's, the brand was obviously already very successful. You had all the resources on the planet. So what were some of the challenges of leading a big brand with an obscene amount of resources to the next level of success?
LARRY:
We looked at the interdependency of the functions and the transparency you've got to have from the functions of operations, marketing, distribution, franchise, suppliers. We thought about, "Okay, we're multi-functional, interdependent. None of us can work on our own." But oftentimes, everybody was off on their own. You had the marketing department over here, and the finance department over there. They had their own objectives, their own goals, and it really wasn't integrated.
Not only the functions, but the suppliers as well. What we did with suppliers is we told them, "Okay, we've got a few very good suppliers in our big products. How do we make our suppliers feel that they are with us, that they are part of our team?" Think of United States McDonalds like the grocery store. They spend more than $5 billion a year in food and packaging. $5 billion a year just for McDonald's. They use about 3.2 billion pounds of potatoes, seven percent of the entire potato supply in the US. They train more people than the U.S. Army every year.
I would give a presentation and show all these great ads and get laughs and tears in their eyes, and I'd say, "We won such an award," and I'd get a standing ovation from a few thousand franchisees. Then I'd say, "Well, where's the brand?" And they would say, "Oh, yeah, it's..." I would say, "No, this isn't the brand. The brand is in the stores. It's in the McDonald's restaurants. When a customer opens the door and walks in and looks around, that's the brand. It's not just what's on the walls or on the menu or even the food and the products or the cleanliness or the bathrooms. It's the people. You've got to have really good people right there in the store."
Often people say, "Oh, the most important impression is the first impression when they open the door and they walk in?" No, it isn't. The most important impression is when they walk out. What do they really think of the experience they just had? Because it isn't just the product, it’s the whole experience.
ARJUN:
How did you absorb the challenges, and how do you overcome challenges?
LARRY:
You've got to see the opportunity. The possibilities are in front of you. As an example, I was the head of national marketing at Pizza Hut. We started the Pizza Hut Express with pan pizza. We started pairs pizza, two for a single price, because we were competing with Little Caesars. We had all this competition going. And who was beating us? Domino's.
The first thing I did was surround myself with people who were better at their functions than I was. I had a very good operations person, a very good finance person, very good human resources, good marketing. They were all what I call the very high-potential people that we had at Pizza Hut/PepsiCo. We all can do it better. Then I had this idea. We didn’t have that many Pizza Huts in the West, so what about restaurant-based delivery? What are our trade areas? Where could we deliver 20 minutes around us? That'd be crazy.
What we did is we found this donut chain, Winchell's Donuts, that had little 1,200 square-foot locations up and down the California coast. Domino's was just coming to California at the time, and they had about 200 stores. We bought Winchell's Donuts, and we began converting them very quickly. Domino's didn't know what hit them. Now, part of what we did is we had established a point of view. We said, "We want to be the first choice in every location. Not just the first choice for the people who want pizza, but also the first choice for the employees. We don't want them to go to Domino's, Papa John's, or another pizza place, or McDonald's or anybody else. We want them to come to us. How do we do that?"
With delivery drivers, we did smaller trade areas so they could make more deliveries at peak hour and make better tips so they could make more money. Because the employees were making more, we were able to get with the community to really have involvement and want more pizza. We took it from about $100 million in sales to $300 million, from losing money to making more than any other division. Again, that wasn’t just me. I surrounded myself with a group of people who were able to work together.
ARJUN:
Going beyond restaurants and hospitality, you would have been a successful leader in any walk of life. What's your one piece of advice to anybody in any business to be a successful leader?
LARRY:
Look at the opportunity gap versus the performance gap. You do have to manage the present. Too often, leaders and managers are wrapped up in the present, in the mindset, "This is the way we do things, so it's the right way to do things." You also have to selectively forget the past, some of those orthodoxies, and you've got to be curious. “Okay, what is the next thing?” You've got to ask and you've got to listen to what's happening around you, and then create the future. Creating the future is being competitive for the long run.
ARJUN:
What is the one reason businesses fail to win big?
LARRY:
I think they get caught up in the present. They don't think about the future. It's right in front of you.
ARJUN:
What's a word not in Larry Zwain's dictionary?
LARRY:
Impossible. Everything is either known or knowable. Go find out.
ARJUN:
So now that you’ve learned what you’ve learned, what if today’s Larry went back and met young Larry, just graduating from high school. What would be one piece of advice he would give to that kid?
LARRY:
If instead of high school I’d be going back to when I graduated from grad school in 1980, it would be about the environment, that there's an existential threat to our planet. We're destroying the planet, and it's right in front of us. Back in 1980, I probably would have thought, "Okay, LA, the smog is getting better, and cars are having less lead in the gas, and we're making some big changes." Well, no. The temperature of the world kept going up, and now it's going up even more. There are big opportunities to correct this problem and correct it faster. Tesla is one small example of one that is working on a very big opportunity, which is how electric cars get rid of the carbon footprint. But it can't be alone in doing that. That's got to be a worldwide effort.
ARJUN:
What is something you think about often pertaining your life or business?
LARRY:
I've had a successful career, and I'm very happy, but I moved a lot of places in order to do that. I have five kids. So they went to different schools in different cities with different friends. That is something I thought about every day when I woke up and went to sleep. The first thing I would have on my mind is, "Okay, how are they doing with where they are?" And being international, I was gone a lot and for long periods of time. So that was the personal thing that I would think about all the time.
On the business side, the number-one thing to me is the team, and not just the team that surrounds me. As an example, at PepsiCo Restaurants International, we had a big office. We had a lot of infrastructure all in the headquarters. What did I say to them? "Time out. Our business is all over the world. Why have them all come back to Kentucky, to Louisville for a meeting? Let's take the headquarters people and put them out in the field. Get them out of here." So five or six of us would go around the world, and we'd have a few ideas that we would bring to the field. But that's always a dilemma. If there was one thing that I saw in multiple roles, its headquarters/field dilemma. The headquarters does have to have big things that we say, "Here's what we want to accomplish for this year." Or three years, or the next 10.
We were at PepsiCo, and they wanted us to go to Europe. “McDonald's is doing great in Europe. Follow them. Do what McDonald's does, just like we did in the United States.” They couldn't get anybody to put Pepsi in their restaurants, so they needed a leader to be able to show why they should. They didn't have much. That's why they wanted us to do that.
We studied McDonald's a lot, and by studying them, we found out where McDonald's wasn’t. They really weren't in Southeast Asia. They were in Japan, but not much else in the region. They weren't there partly because how many cows do you see in Southeast Asia for milk for cheese? How much beef is eaten? None. They do eat chicken, and they do eat fish. “Aha, this would be a great idea for KFC!” So we did that. Today there are 38,000 McDonald's and 23,000 KFCs worldwide. They're both successful corporations. But in Southeast Asia, there are 2,000 KFCs and 1,000 McDonald's. Two to one. If you add in China and Japan for both, they're even, about 7,500 each. That's just remarkable what we did in Southeast Asia. We did it very quickly, and we didn’t follow the rules of the road.
ARJUN:
Before we finish the conversation, is there anything else you would like to add?
LARRY:
It’s something you've asked before. What's a myth in leadership? It’s that leaders aren't born, they're made through a lot of hard work. But it's also that oftentimes curiosity is an annoyance. That is an absolute myth. Curiosity is a driver of success and innovation. Ask questions. Listen.
I can give you an example of that. In Korea, we weren't getting off to a great start with Pizza Hut. They wanted delivery. We couldn't really deliver well, and we couldn't figure out why. We did a lot of research on it, and we paid a lot of money for a lot of big companies and a lot of advertising agencies to help figure it out and sell it. What we didn't do is talk to our own employees. When we did talk to them, they were scared at first. But then we asked them, "What do you think we can do better?" One person came up with an answer that made everyone else start talking. They said, “Yes, that’s it!”
It turned out that we were delivering pizza in a brown box, and in Korea, that’s considered garbage. It's like you're delivering garbage. So we turned it into a white box with a red ribbon, so it was like delivering a present. Business took off, and we did a lot better. It’s so important to listen to people, and be curious to be innovative.
ARJUN:
Thank you Larry. A wow conversation on how to take every member of the team across the finish line and win. You showcased the power of possibilities. Thank you again.