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.

Professor Derek Pugh, now Emeritus at the Open University, a member of the team who conducted the ‘Aston Studies’ of the 1960s, once said that every organisation has the strength of its weaknesses and the weakness of its strengths. What (I think) he meant was that strengths can become the source of a downfall, and weaknesses may provide the basis for new opportunities. .

This logic can also be applied to individuals, and in many ways you could portray this as a real sign of greatness: someone who is able to grasp the opportunity to turn a weakness into a strength. As a fan of music, and particularly the guitar, I am reminded of Django Reinhardt the great jazz guitarist who was badly injured in a fire at eighteen years old. Reinhardt re-taught himself to play the guitar and developed a unique style, only using his index and middle finger on his left hand when playing solos, as his other fingers had been paralysed as a consequence of the blaze. His distinctive style was sometimes referred to as ‘hot’ jazz, and for many he remains one of the greatest guitarists of all time.

A recent tweet from Richard Williams, concerning Ayrton Senna and his performance at the European Grand Prix at Donington in 1993, got me thinking about this question as it relates to Senna and his legacy. A few years ago I was chatting to someone at Cosworth about this amazing drive, and particularly the first lap when Senna moved from fourth, back to fifth, and then to lead the race by the end of the first lap. It is no secret that, at that time, the Cosworth in Senna’s McLaren was significantly underpowered, particularly when compared to the Renault engine in the Williams’ of Alain Prost and Damon Hill. However my friend regarded this as a potential advantage in the wet conditions, when it would be difficult, if not impossible, to use the power advantage of the Renault due to the low grip on the wet track. But he remarked that the Cosworth also had a smoother, flatter power curve which meant that it was easier to control than the more aggressive power curve of the Renault in low grip conditions, exactly like those at Donington in 1993.

One interpretation of this information is that perhaps Senna’s drive was not that exceptional because he had an engine advantage for the damp conditions that existed at the time. I prefer to look at it another way; he recognised the limitations of the Cosworth power unit during the 1993 season – which was why he moved to the Renault powered Williams for 1994 -  and he therefore made sure that, given the wet track at Donington, he would exploit this opportunity to its very maximum. That day he drove in a way that showed a confidence and commitment that none could match on the first lap. Recognising the opportunity in a weakness is what greatness is all about.

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.

The Three Futures of #F1

December 1, 2011

With the 2011 season now at an end the teams are working even harder on their 2012 cars. We are also getting more clarity on driver line-ups, with F1 very much in tune with work practices in general - extending the retirement age with Kimi Raikkonen now returning to F1, this time with Lotus Renault, not sure if he’s having to make bigger pension contributions.

But while much of the media attention focuses on 2012, the movers and shakers: the Team Principals and FOTA, the FIA, Formula One Management and CVC are all focused on 2013. This is when a new Concorde Agreement should come into effect. Recently in the FT, Leisure Industries Correspondent, Roger Blitz aligned the politics of F1 to those of the Eurozone, with an intense battle emerging between the haves (Bernie and CVC) and have-nots (FOTA and FIA) – my definition not Roger’s. The complex web that is the governance of F1 is yet again going to be stretched and rewoven, and currently, no-one is quite sure how this will all end up. Certainly we will see Bernie at his best – he always enjoys a good fight – and will undoubtedly be focusing on divide and rule with the teams, not a new strategy, but always an effective one, but who knows perhaps Martin Whitmarsh and his peers will be able to keep FOTA united and carve out a good result? The key is going to be where the FIA end up. In the past they have traditionally aligned against the teams, but perhaps this time we will see a new permutation? Expect plenty of off-track fireworks during 2012.

However there are those in F1 for whom 2012 and 2013 matters not a jot: for the technical strategists in the teams work is well underway for the 2014 regulations which will require the cars to have 1.6 litre V6 power units and substantial Energy Recovery Systems (ERS) to harvest and reuse the energy to improve performance. The engine manufacturers are well underway with a variety of permutations and concepts and the teams will be keen to see how they can build the optimum package from this new powertrain.

All in all the next few years are going to be a busy time for anyone involved in F1, regardless of whether or not the Eurozone holds together.

The World Motorsport Council meeting of last week will be best remembered for its ‘unanimous’ decision to reinstate the Bahrain Grand Prix in 2011, although it appears that any changes to the calendar require the agreement of the teams themselves, and so there are still quite a few twists and turns to go on this story yet.

But the other interesting piece from the meeting was the announcement that the engine regulations for 2013 were approved and that these will be four cylinder 1.6 litre units with ‘extensive energy management and energy recover systems (now known as ERS)’ this effectively ratifies the decision made in December 2010. However, the interesting bit of the statement is as follows: ‘In consultation with the main stakeholders, and following the outcome of this consultation, a fax vote by the WMSC could be considered by 30 June latest to redefine [my underlining] the implementation date of these technical regulations.’ In other words the regulations are agreed, but when they actually come into force is not, the implementation date may be put back, presumably this could depend on the timing and costs of developing the new engines. I wonder what the implications may be for the cash flow projections of Craig Pollocks new venture – PURE? So let’s see if anything happens by 30 June, latest.

There have been some rumblings around the new engine regulations which are to be established for F1 from 2013 onwards. The proposal appears to be that a small (1.6 litre) four cylinder hybrid (ie with a KERS type system) replaces the current 2.4litre V8, this has provoked negative responses from a number of F1 luminaries, not least Mr E himself, who has claimed that the development costs will repel engine manufacturers from F1 and will also reduce the attractiveness of F1 as a TV spectacle and so TV companies will also pull out. The first part of his argument is based on sound logic, I remember Bernard Ferguson, the former Cosworth Commercial Director, saying to me that the biggest cost in F1 was obsolescence and so, as far as engine manufacturers were concerned, the fewer and less radical the rule changes the better. In an era where F1 is battling to reduce its cost base surely continuity of engine supply is one area where costs could be contained by sticking with the current format for a further five years, or for however long the next Concorde Agreement is going to be in force? The second part of Bernie’s argument is also persuasive, there is nothing quite like the sound of an F1 car, and if you put 22 of them together at the start of a race it is an incredible sensation akin to putting your head in the speaker of a PA stack at a Ramones concert (which a friend of mine did try for ninety seconds  – the typical length of a Ramones composition). The sound is amazing, although I have to say that my most enduring memory of F1 is going to Silverstone in the late seventies and hearing the flat 12 Ferrari before it became obsolete – that high-pitched scream sounded totally different to the Cosworth powered competition, today the cars sound incredible, but they all (to my untrained ear) sound pretty much the same. However for me the sound is very much part of the spectator experience (try being in a garage when they start an engine up and you forgot to put in your ear-plugs – not recommended), which is not something that has been at the heart of the F1 business model, in fact, apart from the corporate market, spectators haven’t really been anywhere in the F1 business model. So I’m not sure that the TV viewing experience would be that much poorer for different sounding engines.

But the real clincher for me was when I recently gave an F1 talk in Geneva and someone had said to me that his fourteen year old son was mad on cars and so he’d taken him to the Geneva Motor Show a couple of weeks before. I asked, what kind of cars is he interested in, Ferrari? Porsche? No, came the reply, he’s really into electric cars and doesn’t care about the make. The big danger is that current F1 merges seamlessly into historic F1 without us noticing. The internal combustion engine is on the way out and it doesn’t matter who you talk to in the automotive industry they all agree, we are moving into an area where the hybrid will transition us into electric cars and other low emission solutions. The iceberg waiting for the F1 Titanic is that it suddenly becomes very outdated and totally out of step with the new generation of fans that it needs to attract to remain viable, and of course without the fans you don’t have the TV and without TV you don’t have the sponsors. So my vote is for change, it will cost more in the short term, but it will cost far more in the medium/long term if we don’t do it.

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