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.

The Future of FOTA

December 7, 2011

The news that both Ferrari and Red Bull Racing are planning to withdraw from FOTA has led many to suggest that this is the end of the team’s association. Clearly it is better for the teams to act as one if they wish to get a bigger share of the FOM revenues, but as seems to always happen, self interest is the decider at the end of the day. They are all agreed that they want to reduce costs – doesn’t any organisation? The important question is therefore how do you do it? When you’ve got your own bespoke test track then a ban on testing means you can’t use one of your key assets to improve your performance, so you can see why Ferrari would feel that being in FOTA isn’t in their best interests, RBR are in a different situation where their business model is a very different one to the other teams, so, again it may make better sense for them to go their own way. Of course we also have HRT who were the first to leave FOTA back in January 2011. The other reason rumoured for the departure of Ferrari and Red Bull Racing is the issue of third (or fourth) cars where constructors are allowed to sell/loan their cars to other teams, a practice well used in the 1950 and 60s. Stirling Moss’s legendary victory for Lotus at Monaco in 1960 was not achieved for Lotus Racing, but for Rob Walker’s private team using a Lotus 18. This is an issue which FOTA has been divided on and it could be argued that building more cars would effectively reduce the costs of certain teams such as Ferrari and also for RBR, whose original concept was to provide cars for Scuderia Toro Rosso. It’s just a very different way of achieving the same objective.

However regardless of the reasons for Ferrari and RBR to leave the team’s association, does this spell the end of FOTA? As history has a habit of repeating itself, it is interesting to note that in the controversies around previous Concorde Agreements, there were three teams who were united in refusing to sign up to the fourth agreement which was due to run from 1997 to 2002. They were McLaren, Williams and Tyrrell. In many ways it was this stand that led to the financial demise of the Tyrrell organisation, a team who had dominated F1 in the late sixties/ early seventies. Eventually a revised, fifth, agreement was drawn up which included the three teams and was to run from 1998 to 2007. The current (sixth) agreement is to run until the end of 2012, and this is where the negotiations are focused. The point of history is that the three teams who resisted the fourth Concorde Agreement are very much at the heart of FOTA today, McLaren providing the chairman, Williams a committed participant and the team that was originally Tyrrell Racing has now morphed into Mercedes GP (sorry Mercedes AMG GP!), via spells as British American Racing and Honda, with senior management team Nick Fry and Ross Brawn very much committed to FOTA. So even if FOTA doesn’t represent all the F1 teams, it may represent a significantly powerful voice that can influence the terms of the seventh Concorde Agreement, if it holds together.

There is no question that Sebastian Vettel is a worthy driver’s champion for 2011. He had the best car, but he rarely put a wheel wrong, and so his title is undoubtedly well deserved. I do feel that Sebastian, like Lewis before him, is very much a champion who, although a worthy champion, is still highly dependent on the support of the team for the title, this I would contrast to other champions who really lead their teams to victory. It is the difference between someone who is dependent on the team for their success and someone the team is dependent upon, someone who brings the team up with them.

I guess the contrast I would draw would be the difference between Michael Schumacher at Benetton where supported by Flavio Briatore, Ross Brawn and others he achieved two world championships, here he was a champion, but not a leader. In contrast, during Michael’s time at Ferrari he played a very key role in turning round the whole organisation , becoming the catalyst for change and winning the greatest number of championships that have ever been won, Michael grew from being a champion to being a leader. Similarly, I would also put Fernando Alonso in the leader category, he played a key role in the success of Renault in the 2005/6 seasons and has gone on, with a brief blip at McLaren, to do the same at Ferrari. If we look back into previous champions individuals like Ayrton Senna, Alain Prost, Niki Lauda and Jackie Stewart all fit with the leadership role. The interesting question for me is where Jenson Button is on this, in many ways he seems to be stepping up to the leadership role this season, not only through his performance on the track but his demeanour, his confidence, his approach are all suggesting something stronger than a driver who just gets in the car and performs on the track.

So the obvious thing for Sebastian to do now, or certainly in a year or two, is to move to a new team that needs a leader and see if he can shift up a gear from being world champion, not easy, but some have done it. Who knows, like Michael at Ferrari, he may even persuade Adrian Newey to come with him.

Monaco is always a great spectacle, it is also a bit of an anachronism in terms of F1 tracks, but then that’s what makes it so special. This year’s race also underlined the dangers that are always present when racing takes place, the accident which befell the talented Sergio Perez (who looked like he was going to go well in the race) was very reminiscent of the accident that ended Karl Wendlinger’s F1 career back in 1994, only weeks after the deaths of Ayrton Senna and Roland Ratzenberger. When you see a driver remain still in the car after an accident that is always a very worrying scenario, but the most distressing part was watching Perez’s father clearly beside himself staring at the TV screen in the pit garage and wondering what had happened to his son. Fortunately it looks like Perez and Petrov will be OK, so we got away with it again, the quest for safety is one that should never stop.

Winners

Vettel: It cannot be denied that Sebastian had luck on his side at this race, the big question was how long he had with his tyres, McLaren estimated that they would ‘go over the cliff’ in a few laps, when the red flag allowed him to restart with fresh tyres, I wonder if luck will continue to smile on Seb through the rest of the year, or has he now had his quota?

Racing: Yet again we had an exciting race, and overtaking at Monaco! Some great moves, particular those involving Schumacher and Hamilton (Michael overtaking Lewis at the hairpin, and being overtaken by him at St Devote). Michael, unlike his earlier races, showed how to both overtake and be overtaken while keeping on the road!

Alonso: Another stellar performance from the man who (using Denis Jenkinson’s terminology) is ‘a racing driver ahead of his car’. Alonso could well have won the race if Vettel’s tyres had gone off. Ferrari have done the right thing in signing him up till 2016.

Pastor Maldonado & Williams: OK, Pastor was actually taken out just before the end, while in 5th Place, but this was the second time he had made it into Q3 and had driven a great race. But Rubens did at least get them some points, if only two of them. Keep it up team Willy, we want to see you back where you belong!

DC’s commentary: I have been rather negative on DC as a commentator, and felt that he was very much being propped up by the very experienced Martin Brundle, however in Monaco their roles seemed to have reversed with DC being a lot more authoritative and insightful than his former manager. Sometimes it’s a pleasure to admit you were wrong.

Losers

Regulations: The prospect of Vettel, Alonso and Button battling out in the final laps with different levels of tyre degradation was an amazing prospect, but sadly one that was denied us by the regulations. Perhaps next time they red flag a race they should be prevented from changing tyres?

McLaren: They showed so much potential before the race, and Jenson had been very well positioned to make a bid for the lead, should Vettel and Alonso’s tyres fall away, but it wasn’t to be. I’m sure they’ll be even more determined in Canada to reign in Red Bull.

Hamilton: Lewis can always be expected to provide drama at a Grand Prix. I love the way, like Alonso, he nevers stops racing, no matter where he is in the field. However this time his frustrations seemed to really get the better of him. Ron Dennis once said ‘show me a good loser and I’ll show you a loser’. Well Lewis is not a loser, but perhaps he needs to give some thought to being a bit more gracious on those occasions when he is, but then if he did he wouldn’t be Lewis would he?

The Turkish Grand Prix reaffirmed Sebastian Vettel and Red Bull’s dominance of the season so far, it was an exciting race, but there seems to be some developing unease about the impact of the Drag Reduction System or DRS and the effect it is having on overtaking. The Guardian’s Richard Williams seemed to capture this perfectly with the following tweet: Another hectic GP. But does your heart sing to hear (for example) that Alonso has used his wing flap to pass Rosberg? Mine doesn’t”. Part of the problem is that the DRS provides a differential advantage to one car over another, which means the overtake often looks (as was the case in Turkey) more like someone passing a back-marker than a fight for a place in the race, we certainly did get a lot of overtaking, but perhaps not enough racing.

The other main area of speculation related to Michael Schumacher, who seems to be still struggling to assert himself both as the lead driver in Mercedes and as a serious contender with the current crop of drivers. I was recently going through some old tapes of interviews with some of the senior technical people in F1, and came across one from one of Ferrari’s former technical chiefs, he made some interesting comments on Schumacher: “From a Ferrari point of view I don’t believe Schumacher is so good as a test driver. He is good at setting up the car for himself, but I tell you he is not so good as a test driver because in three years with Benetton the car was not one of the best chassis.” The suggestion being that Michael is great when you develop a good chassis for him to work with and get his own set-up, but if you want to develop the car that is a different story, however given the general absence of testing today perhaps this is a non-issue.

The news that the popular Sam Michael is leaving Williams at the end of the year, along with aerodynamicist Jon Tomlinson, has also had quite a bit of coverage. If you look at Williams’ performance, it really drops off from 2005 after Sam Michael took over as Technical Director, but these things are never as straightforward as that. They also, of course, lost the manufacturer support of BMW in 2005. However, given the focus on aerodynamics I also wonder how much is due to them never having really got to grips with their 60% wind tunnel which came on stream during 2004, they say it’s all about aerodynamics and perhaps Williams have struggled to get their new facility to work as well as some of the other teams. It’s interesting to note that Mike Coughlan, their new chief engineer, is not an aerodynamicist.

Away from the track we have the possibility of a bidder for the commercial rights business of F1 from News Corp. and the Agnelli family’ Exor SpA. This appears to have produced some interesting reactions from Bernie Ecclestone (standard response – it’s not for sale, unless they make a really silly offer) and Max Mosley (News Corp. would not be the right buyer for F1 – something to do with them owning the News of the World). The other interesting issue is the view of the FIA and more particularly Jean Todt (who some believe is supportive), and also the teams – what is their take on a Ferrari connection to F1 ownership (perhaps it just makes their implicit influence more explicit!), and is there a place for the teams as part of the consortia? – historically they have always avoided such commitments. Either way it looks like this has a way to go before it plays out, and throws another interesting variable into the Concorde Agreement discussions.

So with things now underway for the 2011 season do we now have a clear picture has to how the season will pan out? If we take the lessons from Bahrain in 2010 then the answer has to be no. As you may recall the Bahrain 2010 race was pretty boring and suggested that all the changes for that year hadn’t really worked, but what we ended up with was one of the most exciting F1 seasons ever. So Australia was not the most exciting race, a number of teams (RBR and McLaren) appeared to be continuing their 2010 form, a number of teams seemed to have fallen back (Mercedes and Williams), whereas some had moved forwards (Renault aka Lotus Genii), the Pirelli tyres seemed to be a lot more durable than anyone had anticipated, Sergio Perez looks like being the new find of the year and Martin Brundle got things off to a good start in his role as BBC ubercommentator.

The key lesson from Bahrain 2010 seemed to be that one race is never sufficient to pick up on trends through the season. Back in 2009 everyone was writing off KERS (particularly strong advocates BMW discarded their system), but Ferrari and McLaren got theirs to really deliver as the season developed, so there’s no reason to believe that this won’t be the case in 2011. The thing that the teams need is feedback to understand what is working and what isn’t and they will now be absorbing all the lessons from the first Grand Prix of the year to put into the second, and the third.. and so on.

So the main lesson is let’s give it a few more races before we jump to any conclusions.

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