In one of my lectures on strategic change I use a quote from Professor Larry Greiner, formerly of the Harvard Business School, ‘The clues to future success lie in the past’. I use it to explore the notion that every organisation has a unique history and it is only by understanding that history and using it to build future success that organisations can succeed in a way that is impossible for their competitors to copy. Let’s face it, most organisation’s today have very similar strategies, what makes the difference is their ability to deliver the strategy and the uniqueness they bring from their past. When you look at success stories like Apple and Harley Davidson you can see that the key is that they build on their past successes in ways that are relevant to present and future markets.

Never has the principle of remembering your past, but adapting to the future been more readily demonstrated than in Formula 1. Enzo Ferrari was first and foremost a builder of racing cars, he moved into supplying customers with versions of his racing cars to help fund the racing, but he was never a mere automotive manufacturer. Ferrari’s focus on the cars led to suggestions that he disliked drivers becoming too successful and would often manage things to suggest that ultimately it was the car that was the reason for winning, not the driver. A strong focus on the car has permeated many of the F1 teams in the UK, with Lotus, McLaren and Williams all concerned with the racing car as the focus, of course they wanted good drivers, but ultimately it was all about the car. Frank Williams’ famous mantra for anyone wanting him to sign a cheque was always ‘Will it make the car go faster?’.

The story at Red Bull Racing however demonstrates a very different history. Dietrich Mateschitz supported by his driver coach/mentor Dr Helmut Marko was never into cars. His focus has always been unequivocally on the driver. Red Bull entered F1 not as car maker, but as a sponsor with a clear focus on developing driver talent. They bought a stake in the Sauber team in 1995, and in 2001 introduced the Red Bull Junior Team under the guidance of Dr Marko. The purpose of Red Bull Juniors was to develop young talent, and ultimately to move them into F1. This included a young German, Sebastian Vettel, who Red Bull had first supported driving karts in 2000 when he was 12 years old. In 2001 Mateschitz had a disagreement with Peter Sauber; Mateschitz wanted Enrique Bernoldi in the car, whereas Sauber was keen on a young Finn called Kimi Raikkonen. As a consequence Mateschitz withdrew his funding from Sauber and looked to purchase the struggling Arrows team to provide a seat for Bernoldi. This failed to work out, but in 2004 he was looking for a drive for a young Austrian driver, Christian Klein, and in discussions with Jaguar Racing discovered that Ford might be interested in selling the team. He purchased Jaguar Racing with the initial intention of keeping the existing management team, but a disagreement over…wait for it… drivers, meant that they were relieved of their posts and Christian Horner became the new team principal at the start of 2005.

So in the end what we have is a very different history that marks Red Bull Racing ultimately as a team constructed for Red Bull drivers to show their talent, not, like Ferrari, McLaren or Williams for the building of racing cars, and like most aspects of an organisation’s history, it is both a strength and a weakness. So what happened in the 2013 Malaysian Grand Prix is perhaps less surprising than you may think and maybe what arises from Vettel ignoring team orders is more a question for Christian Horner and, particularly, Adrian Newey as to the kind of organisation they want to work for, and the kind of history they want to leave behind, than it is for anything related to drivers or indeed cars.

One of the fascinations of Formula 1, from a business strategy perspective, is how the same organisation suddenly shifts from being nowhere to a championship contender and equally how a championship contender suddenly ends up nowhere.

The obvious explanation for many is that it is simply all about money, the more money you have the better car you produce and the better driver you recruit so inevitably you will win more races. Not so. If it was all about money why didn’t Toyota’s huge investment in an F1 operation allow them to win a single race, even though today some of the top-teams are still making use of their wind tunnel in Cologne? If it was all about money then Renault would not have won their world championships in 2005 and 2006 and the team that was BAR and then Honda would surely have achieved more success on the track before they became Brawn in 2009?

Of course money is a key part of the equation. I remember former Jaguar Racing boss, Tony Purnell, describing Formula 1 as a ‘celebration of unfairness’, you can see his point, the richest teams have the most resource to get sponsors and performance on the track, and when they do well they get even more revenue from the distributed media royalties via Formula One Management, the more you have the more you can get. But that’s what makes it fascinating when the underdog does pull through. When Williams produced their FW07 car back in 1980 they were running on a shoestring and only could afford one week in the wind tunnel at Imperial College to try out Patrick Head’s ground-effect design, and yet they produced a better car than the all-dominant Lotus and went on to become world champions. When Dietrich Mateschitz bought Jaguar Racing for a ‘nominal sum’ (and all the debts as well – so in reality a bit more than £1) most could not see how he would turnaround a team that had showed potential as Stewart Grand Prix, but had become a corporate political football for various groups of Ford’s management to fight over and ultimately destroy, and yet today we all see them as the obvious favourites for the championship.

Today many argue that the technology is so tightly regulated and the focus so much on continuous improvement, rather than innovation, that we will not see the kind of turnarounds that we have seen in the past. I’m more optimistic, there is a huge wealth of engineering talent in F1 and it is not just about the superstars drawing the seven figure salaries, there’s a lot of creativity out there and maybe this year we could get a few surprises that show that at the end of the day performance in F1 isn’t just about money.

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.

So after a great start to the 2012 season the F1 teams have left Melbourne and are on their way to (or have already arrived in) Malaysia. Aside from the racing, which is sometimes more interesting than the politics of F1, is a recent piece on the Autosport website by two well connected F1 journos: Jonathan Noble and Dieter Rencken. The piece is significant as it suggests the underlying reason as to why both Ferrari and Red Bull Racing left the team’s association: FOTA.

One of the perpetual tensions between Bernie Ecclestone’s Formula One Management (FOM) and the F1 teams, is that the teams feel that they are not receiving their rightful proportion of the media/ circuit revenues – as they are a key part of the show – and Mr E points out that they are taking none of the risk in running races and securing media deals and therefore do not deserve a more significant share of the benefits. The indications from the Autosport piece is that this could be the start of a process where some of the teams actually end up taking a stake in the commercial side of F1. They speculate that Ferrari shares could be transferred to provide them with a stake in the sport – you may have seen that the Lehman Brothers $1.5billion stake in F1 is up for sale, so ‘go figure’ as our American cousins like to say.

While the Autosport piece makes no direct reference to Red Bull Racing, or their owner Dietrich Mateschitz, acquiring a stake, they do mention RBR in the same piece with a quote from Christian Horner, so there is a certain amount of implication by association going on. An investment by Red Bull would make a lot of sense as Mateschitz currently owns two teams (RBR and Toro Rosso) and so, you could argue, is more exposed than individual teams and could therefore, like Ferrari, see the sense in acquiring equity in FOM. This provides a rather persuasive explanation for why they left FOTA, as presumably this placed some restriction on their flexibility in dealing with FOM, which could involve a range of issues, including share swops or buying shares for cash. Of course all of this is pure speculation at present, but I suspect the story will unfold simultaneously with the negotiations for the Concorde Agreement. I hope that the politics etc. don’t become more interesting than the racing, because I hope the racing will be fantastic this year, but I suspect that we will have a fascinating sideshow evolving that will certainly bring about some different arrangements than we have seen in the past. Don’t expect more of the same.

The Future of Red Bull Racing

February 17, 2012

Last night, at the Roundhouse in London, Adrian Newey was inducted into the Motorsport hall of fame. Another acknowledgement, along with an OBE in the New Year’s honours list, that Mr Newey is a major force in the evolving technology of motorsport and specifically Formula 1.

I remember once talking to Patrick Head, back in 2000, about the role of Adrian Newey in the development of championship winning cars, Newey was then at McLaren, having left Williams during 1996. Patrick in his usual forthright way didn’t believe that Adrian was the common factor in the success of Williams in the mid-nineties, followed by McLaren in 1998, ‘he’s very  good at moving at the right time’ I remember him commenting, but I suspect asked that question again today  he might have a different view. One of the reasons cited for Adrian’s departure from Williams was that Frank and Patrick were unwilling to give him an equity stake in the company, suggesting that Adrian perhaps had bigger ambitions than just being a technical director.

I reflected on this when hearing of the various rumours that Ferrari were now after Adrian Newey in a bid to restore some technological dominance of the sort they enjoyed from 1999 through to 2004. At the recent launch of the Red Bull RB8 Adrian was asked about this and responded as follows: “I can’t see myself going anywhere else. I’ve been involved in the team from very early on, I feel very centrally involved in it and proud we’ve managed to get from the ashes of Jaguar to where we are today. That in itself brings a huge amount of satisfaction and the slightly paternal feeling of wanting that to carry on. To now leave for another team would kind of feel a little like walking out on your children in a way.”. Of course a few of those with memories back to 2001 remember him ‘leaving’ McLaren to go to Bobby Rahal’s Jaguar Team, but then subsequently changing his mind and staying with McLaren, Rahal then going back to the USA and handing over to another Team Principal in the merry-go-round that was then Jaguar Racing. So perhaps things are different this time? It also made me wonder as to whether he still harboured ambitions to be a bit more than just an employee of an F1 team, and certainly if you were to keep someone as talented as this, this could be one of the options to explore. There will come a time when Dietrich Mateschitz decides that he will do something else with the millions of dollars he makes from energy drinks, or perhaps if they win their third successive championship in 2012, he may decide that he no longer needs to own the team. This could perhaps be an interesting opportunity for Adrian Newey and perhaps Christian Horner to be more than just employees and run their own F1 team. Who knows? Stranger things have happened in the world of Formula 1.

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