Following on from my last post on the relationship between innovation and regulation the nice people at Virgin asked me to do a guest piece for the Virgin Disruptor’s website, you can see it here: http://www.virgin.com/disruptors/do-regulations-place-innovation-in-a-straitjacket-or-give-it-wings

I used the example of how Colin Chapman created a huge opportunity for Lotus and, as it turned out, the British motorsport industry when he had to adapt to the change in engine regulations back in 1966. My point was that you can see regulatory change as a threat or an opportunity, and it is those that focus on the opportunity who will ultimately succeed. Just look at Mercedes in F1 at present. It would be wrong to think that the reason for Mercedes’ current dominance was that they are just lucky enough to have a good power unit – the decisions that brought about their current success were taken some time ago, choices made to focus on car and power unit for 2014 were taken back in 2012 and are now bringing the success they hoped for. Of course many of these choices were made by Ross Brawn who is not the one enjoying the current accolades, but presumably enjoying a spot of quiet fishing somewhere. I’m sure that this hasn’t gone unnoticed and I’m sure that, should he wish to, there are one or two openings for him to do the same again elsewhere.

Innovation vs Regulation

April 12, 2014

Lotus 49 & Ford Cosworth DFV

Lotus 49 & Ford Cosworth DFV

I just came across an interesting blog piece on the Virgin Disruptors Website regarding innovation vs regulation: http://www.virgin.com/disruptors/regulation-v-innovation-five-key-battlegrounds

It outlines a series of cases where regulation, often stimulated by lobbying from the incumbents, attempts to stifle some of the creativity of innovators. Undoubtedly this is sometimes the case, but a question which has interested me has been whether regulation can also stimulate innovation and create game changing opportunities rather than just protecting the profits of some rather comfortable firms who have grown lazy from success and want to avoid new competitors at all costs.
Last year I put in a research bid for some funding from the Leverhulme Foundation which aims to provide two or three years funding for academics who would like to spend some time on researching something they are really passionate about, but due to admin and teaching responsibilities haven’t had the time to do it. I felt I was a good case (but they obviously didn’t as I didn’t get the grant!) and of course my passion was to look more deeply into the world of Formula 1 and in particular the relationship between innovation and regulation. The situation today is a case-in-point, for 2014 we have totally new propulsion system, with V6 turbo-charged 1.6 litre engines combined with sophisticated energy recovery systems which create a further 160kw from mechanical and heat energy recovery. These systems are innovative, but it’s been quite interesting how some of the well-established teams and movers and shakers are unhappy about the changes and the way it has shifted the balance of competitive performance between the teams.

A major regulation change is of course both a threat and an opportunity. Back in 1966 the FIA decided to change the engine regulations and move from a 1.5 litre engine to a 3.0 litre (interesting that we have now gone in the opposite direction). For the British teams such as Cooper and Lotus this was a major threat as their engine supplier – Coventry Climax decided that they could not afford the costs of designing a new, bigger engine and so it looked like well-funded teams with the engine technology, such as Ferrari, would dominate. Colin Chapman at Lotus had a different plan. He sought to persuade Ford to fund the development of a new 3.0 litre F1 engine which would be a technological revolution. The Ford Cosworth DFV was designed as a stressed component of the car which meant that the engine could be simply bolted onto the rear of the chassis with the rear suspension and gearbox fitted onto the rear of the engine. It was powerful, light and cheap (in 1968 an F1 team could buy the engine for £7500, so Ken Tyrrell told me!), it created the many F1 constructors based in ‘Motorsport Valley’ that still remain today with eight out of the eleven F1 teams all based within a fifty mile radius of Oxford. So occasionally regulation does stimulate innovation, and with some pretty spectacular consequences.

Luca Marmorini, Ferrari’s Head of Engines, has been quoted in Autosport.com as saying that it is important that Ferrari have a second (ie in addition to Sauber) customer for their 2014 power unit – note the term ‘power unit’ as effectively these are engine + energy recovery systems, so the simple term ‘engine’ no longer seems to do it justice.

The reason for this concern is that their current second customer Toro Rosso have recently announced that they will be shifting to a Renault power unit in 2014, which makes sense organizationally as they are co-owned by Dietrich Mateschitz of Red Bull with Red Bull Racing, so presumably they can share more data during development and racing and therefore improve the performance of both teams. However Toro Rosso’s location in Faenza makes Maranello the ideal partner from a logistical point of view as they are literally a few kilometres down the road. Location matters in F1, otherwise we wouldn’t have Motorsport Valley in the UK, and so the proximity between the power unit supplier and customer cannot be ignored. For this reason, Marmorini hopes that all is not lost with Toro Rosso and that they may review their decision to go to Renault, as he says on the Autosport site:  “I don’t know if Toro Rosso will be with us next year. We are still working very well with them now. They’re an important contribution to Ferrari engine development, but I also think we are giving them a competitive engine.”

A key factor in this is data. Derek Gardner, the now sadly departed designer of the six wheel Tyrrell, told me that a key problem that they had with the six wheeler was the speed of development of the front tyres, which were far smaller than the standard F1 front tyre that Goodyear supplied to all the other teams. As a consequence they were getting far less data on the performance of the tyre – as it was only fitted to two cars and so were unable to develop it as fast as the other which had feedback from twenty four cars (there were 13 teams racing back in 1976). Data therefore is everything if you want to improve performance.

So currently it seems (and things could still move around a fair bit) that if Toro Rosso move to Renault then Renault will be the leading supplier with power units in five teams: Red Bull Racing; Toro Rosso; Lotus; Williams and Caterham. Mercedes will be supplying power units to three teams: their works team plus McLaren and Force India. Ferrari will be supplying two teams – themselves and Sauber. It seems very unlikely that Cosworth, who currently supply Marussia, will be in the frame for 2014 (but never say never) and so who knows, we may see Ferrari supplying the power unit for Marussia, which will make an interesting dynamic in their race with Caterham to tenth place.

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