True Power - Vicente Falconi

True Power - Vicente Falconi

The Brazilian management guru reveals what the true power of companies consists of. There are three fundamental ideas that, together, bring extraordinary results.

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Have you ever stopped to think that companies are like schools, and are always learning in search of better results? In this summary of the book "True Power", Vicente Falconi shows that there are no good results without knowledge, and explains how to acquire and apply it in your organization.

Through knowledge it is possible to make the best decisions, no longer based on opinions, but on facts. Falconi's results prove by themselves that management is not a game of luck or chance, but a combination of technical knowledge, method, and leadership. .

Ready to enter this journey of learning and excellence? Then come with us!

About the book "True Power"

Released in 2009, the book has 159 pages and addresses the most important aspects to build a successful organization.

To do so, it goes through 10 chapters that alternate between theory and practice, addressing the focus that all management must have, the concepts behind management systems, what their method consists of, and how to practice it and cultivate it through knowledge.

About the author Vicente Falconi

Graduated from UFMG, Vicente Falconi is the greatest consultant in Brazil, some call him a living legend, and it was not by chance that he received this title.

Board member of Ambev and Gerdau, Falconi searched in Japan what was behind the business excellence of Japanese companies. After some years, he returned to Brazil, and applied with tremendous success here what he learned there, both in the public and private sectors.

To whom this book is indicated?

Falconi himself replies:

"I am convinced that business and government leaders will be able to take from this book concepts and ideas that will add much to the development of our Country."

Main Ideas of the book "True Power"

  • True power is the union of three aspects: analytical ability, knowledge, and leadership that makes it happen;
  • The best knowledge is acquired through practice: read this summary, but remember to apply what you learn, and always read it again if necessary;
  • Only that which is measured is managed;
  • To get knowledge from information, you must analyze and synthesize;
  • Knowing how to communicate is essential to share knowledge;
  • We all procrastinate. After defining Action Plans, cover their implementation.

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[Book Summary] True Power - Vicente Falconi

Fundamental factors of management

What should be the focus of management?

In his book "True Power", Falconi notes that every management has to have a goal to achieve. The goal of any organization is to "satisfy the needs of human beings", that is, customers, employees (and shareholders), and society.

To achieve these objectives, it is necessary to measure, because, as Falconi says:

"Only what is measured is managed."

And what should we measure? How well we are meeting the needs of human beings, and the financial return achieved by doing so.

And how do we measure it? Through Customer Satisfaction, Employee Satisfaction, Society Satisfaction, and, most importantly, Financial Performance metrics, because they allow us to assimilate the other metrics into a single unit of measurement: financial return.

Among the financial return metrics, the main one is EBITDA (E arnings before interest, taxes, depreciation and amortization), because it "tells the truth about management", succinctly showing whether the company's performance as a whole is good or not.

Now that we understand what the focus of an organization should be, we need to know the means to achieve good results, which the author calls the organization's vital points.

Vital points are those in which your organization must be the best in the world to ensure its survival under any circumstances.

At AmBev, for example, the vital points are low costs and sales — the whole company lives and feels this commitment in its daily routine; nobody becomes, for example, the president of the company without first having passed through the sales sector.

Factors that guarantee results

Falconi points out three factors to achieve good results in any enterprise: leadership, technical knowledge and method. Without the first, the last two are useless, because leadership is what makes it happen.

Weak leadership leads to slow change and, consequently, to the company's failure in the fight for the market.

"Leading is about consistently beating goals, with the team doing it right."

To beat goals you need a good team, so the leader must focus a lot of his time on developing his team. For the team to do well, you need to foster a culture of excellence, where everyone wants to do the best in the world, and be rewarded for it.

Technical knowledge is essential, and must be maintained at world-class standards of excellence if the company wants to remain competitive today.

To achieve this standard, Falconi advises bringing in the best possible technicians as consultants, to work together with the company's employees in solving their problems, and thus share their knowledge.

There is another essential knowledge for companies: method knowledge, which is nothing more than "the sequence of actions required to achieve the desired result."

Since managing is to seek results, every management must have a method, right?

But which one should your company use? Descartes' Cartesian method, proposed around 1600, which, according to Vicente Falconi, consists simply in seeking to understand reality, through information and facts.

Making decisions based on the analysis and synthesis of information is making intelligent decisions. In this sense, all the company's employees must work following this method. Some more, some less, according to the position, but the method must be applied by all.

Method and management system

"Everyone who really wants to improve their company must be full of problems"

It may seem contradictory this quote from the author, but the idea behind it is simple: "problem is an undesirable result", so if you don't have problems in your company, you have all the results you expect to have, and you won't do anything to improve them!

Therefore, as a manager, you have the role to:

  1. Ensure consistency of the processes in your area;
  2. List, prioritize and solve the problems within your sphere of responsibility.

Easy to say, right, but how to do these two things?

Through a management method. And here you will not have to rack your brains to choose a method, because, according to Falconi, it is unique.

Each consultant you meet will give it a beautiful name, but in practice it can be understood as the PDCA method:

  • Plan;
  • Do;
  • Check;
  • Analyse.

We will not go deeper into it here, after all, it is a simple method to understand but complex to apply. Write it down and study about it, because it is the soul of success for companies.

We have already talked about the method, now let's get into another fundamental concept: the system.

"System is a set of interconnected factors with specific functions."

Interconnected factors, remember that. What is a company if not a set of interconnected factors, striving to deliver results? These interconnections are internal — among the areas of the company —, and external — its stakeholders.

This is where many companies fail, from the largest to the smallest. If the company is a system, necessarily the results of each area of the company must be conected, leading to the company's overall result.

How to measure if the results of each area are impacting the overall result of the system? Through the management system.

The sooner you start developing a management system, the better. This is exactly what the Japanese automobile industries did, and they achieved outstanding performance.

This journey of management system development takes years, and it is no use "cutting corners": it takes time for people to learn. One step at a time, companies that have tried to apply management systems beyond their managerial capabilities have failed miserably.

How to improve the performance of an organization?

In the book "True Power", Vicente Falconi notes that, to improve the performance of an organization, one must focus on its biggest problems within three horizons:

  • Strategic, linked to the organization as a whole;
  • Tactical, linked to its processes;
  • Operational, linked to its operations.

The definition of these problems — here understood as the company's goals — is a great challenge, but it is what directs the company's efforts in the right direction.

One of Falconi's tips is that many companies make the mistake of defining their problems as a "lack" of something, such as "the lack of productive capacity. In this case, it would be better to define it as" the inability to meet demand, "as this would allow a much broader analysis of the problem."

Every problem must be strategic, that is, related to the company's long-term survival, according to its guidelines. This prevents some managers from defining goals related only to their areas, which do not generate results for the company.

"Goals exist to narrow the gap between the real and the ideal." Katsuya Hosotani.

Right, but how to set goals?

There are some managerial practices that facilitate this process:

  1. Determination of the company's gaps, that is, the difference between the current value of an indicator and its ideal value.
  2. Prioritization of problems. The problems to be prioritized are almost always the financial ones, and when they are not, they will be those that are a priority for the company. For Amazon, for example, a priority problem is to make fast deliveries.

The management method

Systems analysis (or business analysis)

"The objective of analysis and synthesis is to reduce uncertainties in decision making."

It is a fact that nowadays there is a lot of data and information available. The companies that are able to use this to analyze, that is, to know the truth of the facts, make the best decisions and stay in the market.

But after all, how to do this much-talked-about analysis?

One way is through simplified representations of reality, known as models.

In the same way that we model phenomena in nature to understand them, we should model business systems too, to be able to solve their problems.

Every model must have its "target" defined, or rather, the system that will be modeled. This target should be broad, at first, and then converge to something more specific, as the system becomes known. Good models are those that we understand just by looking at them.

Now that we have our goals, and we have the system modeled, we can move on to the Planning phase (action plans) to beat these goals.

Planning is basically evaluating what changes can be made to a system to improve its results. Plans are never perfect, and can be improved as we get to know the "target" better.

TIP: models are created to understand complex situations, and thus to solve problems. If the company already understands the situation, without a model, great!

How to conduct the analysis?

We usually think that we have to have an answer on the tip of our tongue to solve any kind of problem that is raised. Not so. There are problems that need to be analyzed first.

In his book "True Power", the author points out some methods to do this analysis, following three steps that go from top management to the shop floor:

  • Functional Analysis: analyzes the functions of the system where the problem lies;
  • Problem Analysis: it is done to break a big problem into smaller ones, allowing to stratify them for each level of the organization, and to prioritize them.
  • Process Analysis: is a technical procedure, which seeks to solve each smaller problem unfolded by the previous phase.

As experience is gained in analysis, the faster and more effectively the company's problems are solved, using resources, models and statistics. Toyota is the biggest example of this, taking an average of 15 days to solve their problems.

This was not for free, they have an army of analysts with Ph. D. 's in statistics, and a complete and structured historical database to analyze any problem. Falconi makes it clear to managers and directors: "follow Toyota's example."

How to drive improvement in the organization?

We change for the better through goals, methods, and good Daily Work Routine Management. The goals direct us where to change, the method directs how to change, and Daily Work Routine Management ensures a stable, homogeneous, and standardized operation.

An effective way to change is to adopt what Falconi calls Best Practices: this basically consists of replicating good practices from within the organization, or from outside, in other departments. Sounds pretty simple, doesn't it? But remember, copying also requires competence.

For the changes to actually occur, it is finally necessary to execute the actions, which will be guaranteed through the PDCA "Check", or rather, the checking and charging of the execution of the Action Plans by those responsible.

How to operate with stable results?

Managers end up worrying too much about delivering results and forget about routine, but the author makes it clear that without a stable operation there are no excellent results.

It works like our habits, little by little, every day, we go much further than with great random and momentary efforts, isn't it?

So remember: a good leader is not the one who solves the most problems, but the one who ensures that his followers operate in a stable way, avoiding the problems.

Finally, to cultivate knowledge, the most important thing in any organization, you need a good management, which:

  1. Propose goals that challenge employees to seek new knowledge;
  2. Change their positions according to their skills, so that they develop new competencies.

What do other authors say about it?

In the book "The Effective Manager", Peter Drucker, author who inspired the management of modern organizations, alerts to the fact that some executives end up diving too much into the data generated by the organization itself, without paying attention to the fact that it is a system interconnected with other systems.

In "Passion for Winning", Jack Welch points to frankness as the greatest secret of success in a business, since it enriches discussions, increases the speed of decision making, and reduces costs. Basically, it allows one to treat the facts as they are, as in an analysis process proposed by Falconi.

Finally, Pedro Mandelli in "Muito Além da Hierarquia" (Far Beyond Hierarchy) explains how to conduct self-management, becoming a Manager Beyond Hierarchy (GAH). These managers form people for the company, and not for their area, define clear goals and make all their knowledge available to the team, so that they become self-managed.

Okat, but how can I apply this in my life?

There are so many learnings in the book that it would not be possible to list them all, but here are the most important ones:

  • Acquire knowledge through analysis and synthesis of information;
  • Constantly redesign the three levels of the business system: organization, processes, and operations, according to the knowledge acquired;
  • Use models as a way to do the analysis;
  • Practice good communication, because it is essential to transmit knowledge;
  • Replicate good practices from one area of the organization to the entire company, it is the most practical way to disseminate knowledge.

Did you like this summary of the book "True Power"?

According to Falconi

"There is and always will be a vast advancement field for companies."

If you want to follow along on this journey, be sure to check out the full book, it offers everything you need to know to have a systemic view of the organization. Then just click on the image below to buy it!

Book 'True Power'