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.

The Prof: Making a difference

September 24, 2012

Apologies for the lapse in posts over the last few months, the publish or perish world of Universities rather got the better of me, I had to attend to some academic pieces which take around three years to finally get accepted and another year or so before they are published, hardly contemporaneous, but that’s the world of academic journals, don’t think we’ll ever see a peer reviewed journal on F1. Anyway thanks for your forbearance and particularly those who enquired as to when they would see some activity on the blog, it was good to know some of you are out there.

The passing of the great (and I do not use the word lightly) Professor Sid Watkins caused me some reflection, which seemed to be an appropriate way to re-launch my musings on F1. Much has already been said about Sid – his deep knowledge and expertise in the world of neurosurgery, his kindness, his sense of humour, his commitment to safety and his role as family doctor to all those within the F1 circus as they moved from continent to continent. But as I look back over his time in F1 it is clear that he drove the most incredible paradigm shift in a global sport that went beyond Formula 1. Peter Hamlyn, his colleague at UCL, who described him as a cross between the mischievous Mr Toad, Winston Churchill, Henry V, Romeo and an encyclopedia, noted that..’when the IOC came to inspect our London 2012 Olympic bid they asked us if “the medical facilities would reach Formula One standards”.’ To imagine such a question in the 1960s or 1970s was pretty much impossible, and it is a testament to Sid that F1 is now the benchmark for safety technology. Of course, like other leaders who create seismic levels of change he did not do it alone. The pioneering work of Sir Jackie Stewart, the total support of Bernie Ecclestone and Max Mosley, the commitment of volunteer medical staff across the world, the expertise in FIA institute, were all part of the story, but Sid became the talisman of all that was new about safety in Formula 1. It was his clear focus on creating a different way of thinking about safety and the medical infrastructure to deliver it that was so impressive. The whole notion of the medical car and the two air ambulances required at every F1 race were about ensuring that should an incident occur the very best care was available almost immediately, it was in these critical minutes that most could be done to save lives, and there’s no question that he saved many.

An impressive character on every level, Sid also produced, in my view, one of the best books ever on Formula 1. Ritualistic driver autobiographies are generally a rather lack luster collection aimed at fully exploiting fame before it fades away (although Niki Lauda’s are the exception). Sid’s book is a combination of many things, funny, moving, insightful, full of rich (in both meanings) characters it also gives a detailed account of how to change the paradigm of a global sport – essential reading, I would have thought, for anyone interested in really making a difference.

 

Peter Hamlyn’s piece in the Telegraph:

http://www.telegraph.co.uk/sport/motorsport/formulaone/9541394/Sid-Watkins-tamed-Formula-One-and-was-as-famous-for-his-neurosurgery-as-Christian-Barnard-was-for-the-heart.html

Sid Watkins’ biography:

Watkins, S. (1997). Life at the Limit: Triumph and Tragedy in Formula 1. Pan Books.

 The debate over the 2012 Bahrain GP seems to have split many in the F1 fraternity between ‘yes it was the right decision’ – led, unsurprisingly, by those who were party to the decision e.g. Jean Todt and Bernie Ecclestone and supported by other commentators such as Jackie Stewart and Martin Brundle. On the other side were those who leaned towards ‘no it was the wrong decision’ – largely led by the UK press e.g. Richard Williams (Guardian), Byron Young (Mirror) and Tom Cary (Telegraph), and then there were those who were rather stuck in the middle and undecided – e.g. Damon Hill and, I have to admit, myself. One thing does seem certain, that F1 is a bit of an irrelevance in a country which is trying to deal with such deep seated problems, never have discussions on the details of DRS technology seemed so trivial and out of place.

There are two questions which seem to be hanging in the air. First as to whether it is right to place the teams and all those working in F1 into such a potentially volatile situation, and of course there are different views as to how much danger they were really in, the Force India incident was undoubtedly traumatic for those involved, and everyone was glad that F1 personnel were largely unaffected by the troubles in Bahrain. The second question seems to have been whether or not F1 can help or hinder in such a situation. It certainly seems that the unimpeded access which the F1 journalists appeared to enjoy allowed the opposition access to publicity which had previously been denied to them. The fact that, just as the F1 teams were leaving Bahrain, a Channel 4 News Crew was detained by the authorities suggests that the door may have been opened a chink for F1, but it is now being closed up again. However there will be a continued debate about whether or not there should be a Bahrain GP in 2013 (which has probably already started), and from that point of view further scrutiny will be brought to bear on the situation and the progress of the opposition in obtaining reforms. Time will tell. But one thing is clear, anyone who thinks a global sport, such as F1, is in some kind of vacuum and can ignore the political context in which it operates, is well and truly out of touch with reality.

Until a few years ago when referring to Lotus and Formula 1 things were pretty straightforward. In my view, with the exception of Ferrari, Team Lotus were the greatest team ever to race in Formula 1. Perhaps from the statistics and race performances they were not so great, but their contribution went far beyond mere statistics. If you look at today’s F1 car: many of the key features can be attributed to innovations pioneered by Lotus: monocoque chassis, the engine being a structural part of the chassis, rear mounted radiators and the use of underbody aerodynamics are some of the list. Lotus were a great team (note the underlining) and like Ferrari deserve to be remembered as playing a major role in the history of F1.

Sadly of late the name of Lotus is no longer associated with such greatness but with petty legal arguments and as a name which is for sale to the highest bidder. This is a sad state of affairs and appears to have got even more confused with the sale of Group Lotus’s owner Proton, the Malaysian car manufacturer, to another Malaysian automotive operation: DRB-Hicom. This has led to the end of ‘Lotus’ sponsorship for the former Renault team (and before that Toleman and Benetton) who are now called Lotus F1. So perhaps this means the Lotus name will finally be allowed to bow out of this sad attempt to resuscitate the Chapman legend? It seems not, owner of Lotus F1, Genii Capital’s Gerard Lopez is recently quoted “We are happy to carry the Lotus name as we believe it is a good name for F1″. Actually I think the opposite, please treat the name and legacy with some respect and let it be, we’ve seen how great automotive brands can be destroyed by those who are simply trying to make a fast buck. If someone is going to regenerate the Lotus name we need someone like Ferrari’s Luca di Montezemolo, someone who understands the care and attention needed to make an established brand live on, not those who seek to make a quick return from its sale and exploitation. It’s time for everyone to move on and leave the Lotus F1 legacy in peace.

One of my most enjoyable Christmas presents this year came from my mother-in-law. It was the biography of Steve Jobs by ex CNN CEO Walter Isaacson, it was an impressive read, not just in terms of Jobs himself, but also in terms of the way Isaacson managed to combine the social, emotional, technical and business dimensions to build a deep and insightful portrait of the man. When my latest edition of Harvard Business Review arrived it contained ‘The Real Leadership Lessons of Steve Jobs’ by Walter Isaacson, there has been a lot of poor quality writing about Steve Jobs, particularly in terms of the ‘leadership lessons’ variety, but this was one article I was going to read at all costs, and so last night I did.

It confirmed many of the insights I got from reading the book and which I have used in my strategy sessions with our MBA students, Steve Jobs is very much an inspirational figure, as much for his dark side as the light. As I was going through the HBR piece it suddenly struck me that many of his qualities and quirks I had come across before in an individual who has been as innovative and revolutionary in his spheres of work as Jobs had in his, Colin Chapman.

If I look across Isaacson’s lessons many (but not all) relate very strongly to my picture of Colin Chapman. The importance of focus, the ability to cut through a complex technical issue to the core – think of Chapman’s ideas for fuel sacks rather than tanks which came out of them trying to thread the tanks through a complex spaceframe, the search for elegance and simplicity – Jobs hatred of using screws in his products, Chapman’s concept of the monocoque chassis in the Lotus 25 and the engine becoming part of the structure of the car in the Lotus 49, the lack of tolerance for any who were not ‘A’ team players, it can be said that neither Jobs or Chapman were model managers particularly on the people skills front and yet both had the cream of the crop wanting to work with them, why? Perhaps because they were the best, or perhaps because people saw the interpersonal deficiencies as symptomatic of someone in an hurry, someone who was going to get things done, make things happen and this was a ride they were not going to miss. There was also Jobs’ famous Reality Distortion Field where the impossible became possible, this was very much reminiscent of Chapman where the car could be redesigned and rebuilt just before the race, to incorporate a new innovation thought up by Chapman that day! And perhaps the best of all: ‘When behind Leapfrog’ – anyone remember the Lotus 78? In the mid seventies Lotus had fallen behind and so Chapman got Tony Rudd, Peter Wright and other brilliant technical minds to go back to basics and redefine the grand prix car, no copying competitors, just developing the best solution, in this case ground-effect aerodynamics.

Of course there were also differences. As far as I’m aware Chapman was not a fan of Zen Buddhism, Chapman was also an adept collaborator and, unlike Enzo Ferrari, did not feel the need to build his own engines, Jobs, in contrast, wanted to control the whole thing from end to end, he would have instinctively gone down the Ferrari route. So there were differences, but on balance the similarities win out, for me the most poignant are that both started their businesses in their garages from nothing (although in Chapman’s case this was a stable behind his dad’s pub), and sadly both left us well before their time.

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.

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