What great leaders know about not knowing it all

This episode of the McKinsey podcast features Eric Kutcher, McKinsey's chair of North America, in conversation with David Novak, co-founder and former CEO of Yum Brands, and a best-selling author and podcast host. The discussion delves into leadership, career experiences, and lessons learned from both successes and failures. Novak's journey into the restaurant business began when he transitioned from the advertising agency business to a marketing role at Pizza Hut, which was then part of PepsiCo. He found the restaurant business to be highly responsive to marketing efforts, allowing for quick feedback on campaign effectiveness. After successfully turning around Pizza Hut, he moved on to lead marketing and sales for Pepsi, then served as chief operating officer for Pepsi, and later became president of KFC. These experiences provided a foundation for his leadership philosophy. Central to Novak's view on leadership is the idea of "taking people with you to get big things done." He emphasizes the importance of understanding consumer perceptions, habits, and beliefs to drive business growth. He likens knowing your people to knowing your customers, stating that understanding both is crucial for success. Novak subscribes to the adage, "If you want to go fast, go alone, but if you want to go far, go together," highlighting the necessity of involving people. He stresses the "law in leadership: No involvement, no commitment." To achieve this, leaders must bring people into the room, solicit their opinions, and truly listen before making decisions. He uses a "people map" to identify key individuals for influence and involvement, believing that involvement leads to commitment. His approach involves understanding reality, developing a plan, structuring around that strategy, and ensuring the culture reinforces it. He admits that his only business failures occurred when he neglected to involve people and dismissed their insights, believing he knew better. The conversation touches upon the strategy versus culture debate. Novak considers attempts to force a choice between the two as "naive," asserting that strategy without execution is nothing, and execution is driven by a culture that reinforces it. He emphasizes that strategy, structure, and culture are intertwined and equally vital. He also highlights the importance of understanding resources, particularly in areas like technology, to ensure the right people are in place to execute the strategy. Regarding continuous learning, especially as a CEO, Novak believes he received ample honest feedback because he actively sought it. He emphasizes the importance of curiosity and learning. With the rise of AI, he believes a crucial cultural shift will be teaching people how to ask better questions, as AI's effectiveness will depend on the quality of the questions posed to it. He notes that the best leaders have always excelled at asking questions. Intellectual curiosity is a key attribute he advises for young professionals. Novak addresses the issue of toxic work environments, which he attributes to ineffective leadership. He identifies an "uncanny combination of confidence and humility" as a hallmark of the best leaders. Confidence, he argues, must be rooted in competence, as people will only follow a leader they trust to know what they're talking about. This confidence, however, must be balanced with humility, acknowledging the need for others. Additionally, top leaders possess a "healthy dissatisfaction with the status quo," constantly striving for improvement. Curiosity, he adds, is what builds competence over time. When asked about balancing dissatisfaction with the status quo against "change fatigue" among employees, Novak admits he "never really did" find a perfect balance. Instead, he focused on creating a "winning fatigue" by motivating people to be part of "greatness and winning every year." He called this "Yum Dynasty-like performance," believing that people naturally desire to be part of something special, not mediocre. He constantly "sold the dream" and the excitement of pursuing it, emphasizing that standing still is not an option when competitors are constantly trying to "kick our butts." He also stated that he preferred to "manage out" individuals who constantly complained about change fatigue, believing that pursuing excellence requires an excellent team that shares the same drive. Tolerating mediocrity, he asserts, is the worst way to demotivate a team, as people want to be on the "A team" and are motivated by high standards. He encourages everyone, regardless of their position, to "be the leader, act like the leader," and bring forward ideas for improvement. Novak shares a significant learning experience from the failure of Crystal Pepsi. During a period of declining carbonated soft drink sales, he observed the growth of clear beverages and conceived the idea of a clear Pepsi. Despite initial excitement and positive customer feedback in test markets, he overlooked critical input from bottlers who warned that the product, while called Pepsi, "didn't taste enough like Pepsi." Convinced of his idea, he rushed the product to market for a Super Bowl launch, even introducing it at a premium price, which was unusual for Pepsi. Three months later, repeat purchases were very low, primarily because it didn't taste enough like Pepsi. Additionally, rushing the product led to quality control issues. His key takeaway was his failure to genuinely seek and value input, believing he "knew better." He also recounts a story about a successful KFC franchisee, Billy Ball, who managed buffets profitably by observing customer behavior. Ball noticed that if a buffet had an abundance of chicken, customers would take fewer pieces initially, knowing they could return for more. This led to a lower "piece count" per customer and better food cost management. Ball also strategically placed low-food-cost items like Jell-O and mashed potatoes at the beginning of the buffet line. This demonstrated the value of understanding the business at a granular level and having the courage to implement unconventional solutions. Reflecting on hundreds of interviews with leaders, Novak identifies a widely held, yet incorrect, leadership trait: the belief that a leader must have all the answers. He argues that leaders become better when they admit they don't have all the answers. Looking ahead, if he were leading a company today, Novak states he would be "much better at technology," being more proactive and aggressive in that area. Regarding the impact of AI on leadership, he believes things will happen quicker, with unbelievable data becoming rapidly available. The winners, he predicts, will be those who leverage their "curiosity advantage" to a new level, with a learning mindset being a key differentiator. However, he emphasizes that the core tenets of leadership will remain unchanged: a deep respect for human dignity and making people feel valued and appreciated. He advocates for identifying three to five key behaviors that drive results and then relentlessly recognizing those behaviors, as people will do more of what is recognized.