Colonel who?

When PepsiCo opted to jettison the Kentucky Fried Chicken (KFC), Pizza Hut and Taco Bell quick-serve restaurant brands with a spin-off in 1997, the new company's future did not look particularly bright. Inheriting $4.7 billion in debt and ROI averaging between 8 and 9 percent while simultaneously losing the brand clout of Pepsi might understandably dismay even the most upbeat business leader. But David Novak viewed the dicey situation as an opportunity and lost no time embarking on a repositioning effort.

"At the time, we were perceived to be just another U.S. fast food company, like Wendy's or Jack in the Box," recounts Novak, who had been group CEO of KFC and Pizza Hut at PepsiCo and was named president of the new entity--then known as Tricon Global Restaurants--shortly after the spin-off. "But we were really a portfolio of brands with tremendous international opportunities."

Upon taking the CEO office in 2000, Novak steered the company through the controversial moves of acquiring Long John Silver's and A & W All-American Food Restaurants and changing its name to Yum! Brands. He followed that up with an aggressive employee-training program dubbed "Customer Mania," intended to both empower employees to resolve service issues and recognize exemplary performance. Finally, he began an ambitious effort to expand internationally and to communicate his vision of the company's growth potential--"like Ray Kroc did when he first started McDonald's"--to Wall Street.

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The result? Today, Yum! boasts more than 34,000 restaurants in 112 countries, revenues of $9.5 billion and six straight years of earnings per share growth of more than 12 percent. "We were making $17 million in China when we started our company; now we're making $300 million," says Novak, who notes that there are 2,000 KFCs and 340 Pizza Huts in China. "And as that economy grows and more people can access our food, we think we'll be bigger in China than we are in the U.S. with 20,000 restaurants."

Yum!'s growth journey is detailed in Novak's new book, The Education of an Accidental CEO, so named because of the circuitous path he traveled to the corner office. "I grew up in a trailer, living in 23 states by the time I was in seventh grade," he says. "Instead of a business degree, I studied journalism at the University of Missouri and took a job as an advertising copywriter when I graduated."

Novak worked in ad agencies in Washington and Pittsburgh before joining PepsiCo, where he held a series of marketing posts before being named president of KFC. "Looking back, it was kind of strange that I was able to become a CEO," he recounts. "I was very ambitious and tried to take advantage of every opportunity I could get. At every job, I surveyed the landscape and looked at what my bosses were doing and what kinds of skills they had."

Novak now does the same thing at Yum!, scouting the landscape to see what competitors are doing and where growth opportunities lie, then galvanizing his team to pursue them. "We had a global McDonald's immersion day where we had every team around the world visit a McDonald's to see how they leverage their brand," he explains. "They've done things on the nutrition front, on innovation in desserts and beverage, and they've extended their hours--all things we can learn from."

But the customer-focused, people-first, performance-driven culture that drives Yum!'s success was shaped by innovative measures that came from within. Novak views hallmark recognition programs like the Floppy Chicken Award at KFC, the Big Cheese Award at Pizza Hut, the Royal Order of the Pepper at Taco Bell and the company's Taking People With You employee development program as key components to the company's global strategy. "When you give away a floppy chicken, it's different than giving away a watch or a plaque," says Novak, whose office--including the ceiling--is plastered with photos of employees being recognized. "It gets people's attention.

"Recognition is a universal trait," he adds, noting that the same employee programs translate well across global markets. "We've taught people all around the world the value of recognizing people. My favorite picture in my office is a picture of close to 2,000 KFC restaurant managers doing a Yum! cheer on the Great Wall."