The 3G Way: An introduction to the management style of the trio who’s taken over some of the most important icons of American capitalism.

75 Pages·2014·0.78 MB·English

by  Francisco S. Homem de Mello

The 3G Way
An introduction to the management style of the trio who’s
taken over some of the most important icons of American
capitalism.
Francisco S. Homem de Mello
Copyright © 2014 Authored By Francisco Souza Homem de Mello
All rights reserved.
ISBN: 0990457516
ISBN 13: 978-0990457510 (Ajax Books)
Library of Congress Control Number: XXXXX (If applicable)
LCCN Imprint Name: City and State (If applicable)
“You can’t connect the dots looking forward; you can only connect them looking
backwards. So you have to trust that the dots will somehow connect in your
future. You have to trust in something – your gut, destiny, life, karma, whatever.
This approach has never let me down, and it has made all the difference in my
life.”
-Steve Jobs
“The reasonable man adapts himself to the world: the unreasonable one
persists in trying to adapt the world to himself. Therefore all progress depends
on the unreasonable man.”
-George Bernard Shaw “I knew that if I failed I wouldn’t regret that, but I
knew the one thing I might regret is not trying.”
-Jeff Bezos
“Whether you think you can, or think you can’t — you’re right.”
-Henry Ford
The 3G Way
Contents
Preface
Introduction: What Is—or Better, Who Are—the 3G?
Section 1: People
Chapter 1: Meritocracy
Chapter 2: Informality
Chapter 3: Candor
Chapter 4: Growth
Chapter 5: People Processes
Section 2: Dream
Chapter 6: A Big Dream
Chapter 7: The Importance of Gaps
Section 3: Culture
Chapter 8: Ownership Mentality
Chapter 9: Client Focus
Chapter 10: Leadership
Section 4: Operations
Chapter 11: Vicente Falconi and the Systematization of the 3G
Way
Chapter 12: Costs and Budgeting
Section 5: The top-down view
Chapter 13: Picking Industries
Chapter 14: What’s in for the future
A Five Forces model analysis for AB Inbev
A Five Forces model analysis for Heinz
Attachment 1: The Eighteen Commandments of the 3G
Attachment 2: The Eighteen Commandments of the 3G in original
(Portuguese) text
Bibliography
Preface
Before telling you what this book is, I am going to tell you what it is not.
It is not intended as a comprehensive management manual; it’s not
intended as a definitive guide; it’s not intended as a biographic account;
it’s not intended as cheesy, entertaining Business nonfiction; It is
intended as a no-frills introduction that I hope will give you some
management ideas to apply yourself, and inspire you to research the 3G
Way further. My intention is to provide you a door into the methods
applied by the trio.
In being true to 3G’s philosophy, I have kept the book as short and as
simple as possible. I am just trying to bring a little more color and detail
to the methods Jorge Paulo himself has repeatedly reduced to “hard
work and discipline.” For the sake of your time, and mine as well, I have
also avoided current trends in Business nonfiction such as telling stories
for every single point I wanted to make. Although it makes the read
more entertaining, it sounds manufactured and takes up precious reader
time, that should be spent in applying the content anyway.
I based myself on various public sources in writing this book. Videos
recorded for Stanford Graduate School of Business and Endeavor,
magazine articles from HSM, Fortune, Forbes, and other top-notch
business publications, books, and informal talks with a dozen or so
former employees of Banco Garantia, AB Inbev, Burger King and 3G
Capital. In doing so, I hoped to form a cohesive view of their method,
while keeping the text as objective as possible.
I received no help from the trio on my research. The most I got, from
Jorge Paulo himself, was a hint that I was on the right track1. This is
easily justifiable: i) I am a newbie author and ii) they have historically
shunned any publicity. Nonetheless, I think the management world
would greatly benefit from a more complete, and technical, account of
their practices.
Lastly, I write this from a position of great admiration for the success
these three Brazilians have achieved in Business. First, because I have
these three Brazilians have achieved in Business. First, because I have
worked on great companies and bad companies, and know firsthand the
challenges that management presents. It’s much harder to produce the
kind of stellar results they have than it seems. Second, I feel proud for
them being Brazilians, whose private sector has frequently thrived
despite serious macroeconomic headwinds, corruption, a bizarre tax
code and an even worse law framework.
So I hope you enjoy this.
Francisco S. Homem de Mello
Sao Paulo, July 15th, 2014
Introduction
What Is—or Better, Who Are—the 3G?
3G means os três do Garantia, or the three from Garantia. They are Jorge
Paulo Lemann, Marcel Herman Telles, and Alberto “Beto” Sicupira, who
I will also call the “trio.” They are businessmen from Brazil who started
their careers at Banco Garantia, a local investment bank, and went on to
form one of the world’s most successful business legacies. To better
understand the span of their influence, it is enough to say that they
currently control AB Inbev, Heinz, and Burger King (these last two
American icons via their private equity firm, 3G Investments). as well as
a number of companies in Brazil, such as Lojas Americanas and São
Carlos Participações.
What sets this legacy apart from other great corporate stories around the
globe is its management style, which is applied to every company the
trio lay hands on, and has produced consistent and impressive results
since the 1980’s with great scalability. This style, which I am calling “the
3G Way” in allusion to the equally influential “Toyota Way” (from which
they have copied their share of techniques). is a combination of different
management theories, cultures, and practices which executives, business
owners, and employees can use to the benefit of their companies.
A bit of history
Banco Garantia: a partnership from the tropics
Garantia was the first large venture undertaken by Jorge Paulo Lemann.
A Harvard economics undergraduate with a passion for tennis, (which
took him up to the Davis Cup,) Jorge acquired a small broker dealer
called Garantia in 1971, with financing partially provided by family
acquaintances. In 1976, after rebuffing an acquisition offer from JP
Morgan, the broker dealer was converted into a bank.
The model for Banco Garantia came from the American behemoth
Goldman, Sachs & Co., which was founded in the nineteenth century and
was the most successful financial partnership of the century. Goldman
was the most successful financial partnership of the century. Goldman
Sachs worked as a meritocratic partnership, which meant that the most
talented up-and-coming executives were invited to buy into the firm’s
capital. Senior partners provided financing.
Garantia admired Goldman Sachs so much that at one point, Jorge Paulo
arranged for one of his partners, Luis Cezar Fernandes—who would later
go on and found Banco Pactual (now known as BTG Pactual)—to attend
an “internship” at Goldman Sachs to learn its ways. Cezar, as he was
called, took an aide to help him understand English: the recently hired
Marcel Hermann Telles. Jorge Paulo’s resourcefulness in asking for the
internship, and his eagerness to copy successful models from the world’s
best, would become a trademark of the trio. Later they did the same
benchmarking with Wal-Mart and Anheuser-Busch.
The final member of the trio is Carlos Alberto “Beto” da Veiga Sicupira,
who joined Garantia just a year after Marcel, in 1973, having met Jorge
Paulo in a spearfishing getaway.
Lojas Americanas and Cervejaria Brahma: the first steps into the
“real economy”
In 1983, after a couple of smaller investments in publicly traded
companies like Lojas Brasileiras and Alpargatas, Garantia performed the
first hostile takeover of the Sao Paulo Stock Exchange, Bovespa,
acquiring Lojas Americanas for twenty million dollars.
This was before the advent of public corporations’ management
entrenched themselves with poison pills and golden parachutes2. The 3G
are great skeptics of the efficiency of publicly traded corporations
(companies that have diffuse shareholder ownership, and thus no clear
owner with controlling rights.) These companies are fertile ground for
the development of principal-agent conflicts of interest, when managers
(agents) fail to maximize shareholder (principal) value because in
practice, management becomes the controlling shareholder by means of
influencing the composition of the company’s board of directors.
Lojas Americanas’s poor financial and operational performance, due to
the lack of management accountability, plus the desire to apply a
management style that was working at Garantia on the old line sector of