PepsiCo Bottles Tech Collaboration Effort Into New Digital Hubs

PepsiCo, which is calling the units digital hubs, plans to staff them with hundreds of software engineers, data scientists and analytics experts, along with sales and marketing staff, designers and product managers, the company said. It expects to hire more than 500 workers within the next three years. The cost of the initiative was not disclosed.

“We are not a tech company,” said Athina Kanioura, PepsiCo’s chief strategy and transformation officer. But by relying solely on enterprise applications on the market, and racing to keep up with short technology cycles, non-tech businesses end up spending most of their time updating existing apps rather than developing new ones of their own, she said.

Beyond that, she added, most software from third-party tech vendors only meets about half of the company’s needs. They either lack the business-specific data in the development process or are simply misaligned with its problem-solving goals, she said.

Instead, the company—which, in addition to its namesake soft drink, owns Cheetos, Doritos, Lay’s and other snack brands—wants to take applications from outside software vendors and customize them to better suit its distinct way of doing business, Ms. Kanioura said.

To do that, PepsiCo needs to get technology and business experts under the same roof, she said: “You can have an amazing technologist, but it may be hard for them to grasp business problems.”

Ms. Kanioura, who is overseeing the development of the new units, said she wants to mix and match people with tech experience and business-domain experience who “understand how the processes work and how the business works.”

For instance, she said, digital hubs can address issues spanning the entire company, such as unifying separate and often incompatible planning systems across business divisions, as well as end-to-end processes that extend from the supply chain to factory floors and grocery store shelves. It can also include product development, personalized customer services and targeted ad campaigns, she said.

Based in the company’s Frito-Lay office building, the Dallas unit will be responsible for global software development with a particular focus on the company’s North America-based businesses, including PepsiCo Foods North America and PepsiCo Beverages North America.

The Barcelona unit, which began hiring workers earlier this year, will act as a corporate “center of excellence,” setting companywide priorities and standards for the implementation of digital technology, while steering its broad digitization efforts, the company said.

Ms. Kanioura said both Dallas and Barcelona were chosen for their proximity to the company’s regional operations, but also to emerging tech centers, research institutes and other nearby resources. The Dallas area in particular has begun attracting Silicon Valley tech workers who shifted to remote work during the pandemic.

Companies with similar stand-alone digital units—outside of traditional enterprise information-technology shops—include Morgan Stanley, which operates what it calls a “Data Center of Excellence,” that aims to make sense of the complex enterprise data needed to develop artificial-intelligence apps.

Fiona Mark, a principal analyst at IT research firm

Forrester Research Inc.,

said bringing business and technology workers together allows companies to leverage deep technology know-how paired with business expertise. That combination can drive specific software customizations targeting real-world business problems, she said.

During the pandemic, she said, many retail organizations had to pivot quickly to changes in operations such as curbside pickup. “They found that these customer-centric partnerships with technology, and these shared teams focused on targeted customer-centric problems, were able to deliver solutions quickly,” Ms. Mark said.

The number of digital hubs and centers of excellence outside of traditional IT units is growing “because companies have realized that they work,” said Enno de Boer, partner and global head of operations technology at McKinsey & Co.

He said early adopters of the digital hub model in the manufacturing sector have seen up to 90% improvement rates in standard productivity measures, lead-time reduction of up to 80% and energy improvements of up to 50%.

Write to Angus Loten at [email protected]