August 8, 2016
There seem to be a range of articles around at the moment analysing the current problems at Ferrari. There are suggestions that Ross Brawn is returning, that Eric Boullier should be recruited, or that Ferrari should relocate to the UK, as they once did in the 1980s.
To add my own pennyworth into the discussion, I see the problem as one which impacts on many organisations around the globe. The problem is the nature of the relationship between a specialist business unit and the corporate centre. Corporate centres, and the senior managers within them, like to feel they are the ones in control, they are the ones that call the shots, and, generally, because they own the overall business, they are correct. However the managers in the business unit are the ones who really understand the industry, the market and how to get things done in this particular situation. So there is inevitably a tension between these two worlds. The term often used to describe the relationship between the business unit and the corporate centre is corporate parenting.
There are many different approaches to corporate parenting. At two extremes we have the laissez faire approach where – to extend the parent/child analogy – we don’t care what our children do, as long as they are getting the right results. We don’t tell them when to work on their homework, or what to write in their reports, we give them a set of boundaries and we let them get on with it, we judge them by their results rather than their activities. In a corporate sense this could be like the relationship between Tata and Jaguar Land Rover. Tata don’t tell JLR what cars to build or where to sell them, they set some overall targets and tell them to get on with it. At the other parental extreme we micro-manage and attempt to control everything our children do. We tell them when to do their homework, we continually check their work (whether they ask or not) and suggest how they could improve things in a great deal of detail, and perhaps we even end up doing it for them. This is over-protective parenting, where we focus on control and micro-managing activities in the assumption that this will produce the best results. This is analogous to the relationship between JLR and their previous owners the Ford Motor Company. In this relationship they were told what models to lauch in what markets, how to price, market them etc. In other words the managers in the business unit were being micro-managed by the centre, unable to do the things that they felt would work best in their specific markets.
Ferrari are the most successful team in F1. Ever. Their most successful period owes much to the driving skills of Michael Schumacher, the technical orchestration of Ross Brawn, the design brilliance of Rory Byrne and engine director Paolo Martinelli. But it owes equally as much, if not more, to the management style of Jean Todt. Todt protected the F1 Team from the parent Fiat. This also would not have been possible without the support from, then President, Luca di Montezemolo. Montezemolo had been responsible for appointing Todt. It was always tempting for Fiat/Ferrari to meddle with the F1 team, particularly in the mid-nineties when the results were not yet there, but this would ultimately have destroyed their ability to compete and dominate F1. Just look at what happened when the Ford Motor Company took over Stewart Grand Prix and turned it into a corporate political football called Jaguar Racing. The team lost its direction and leadership and ultimately failed. When they then became Red Bull Racing the story was somewhat different.
Parents who micro-manage their children may be well-intentioned, but ultimately misguided. If we want our children to become capable, well-developed individuals, we have to give them space to grow, make mistakes, learn and build their own capabilities. Organisations are no different. The main problem I see at Ferrari is the managerial style and approach of Sergio Marchionne. As Chief Executive of Fiat Chrysler he has ended up micro-managing the F1 team – Scuderia Ferrari. He has made their success in F1 a very personal crusade and he has also been quick to get rid of those that he saw as not supporting his approach. Hiring and firing can be very important to build a great team, but, if done badly and for the wrong reasons, it can destroy a great team and create a culture of blame and fear from which success will never grow.
Great leaders are great enablers. Their secret is that they allow others to flourish and develop and bring their abilities to the organisation. Just look at how Mateschitz built up Red Bull Racing. He doesn’t micro-manage. He has good people in place, they know about racing, and he lets them get on with the job. Marchionne should take a step back and give Scuderia Ferrari and its leaders the space they need to build future success.
September 14, 2014
The departure of Luca di Montezemolo from the role of chairman of Ferrari is undoubtedly the end of an era. For many this was perhaps necessary to get new thinking into the Scuderia, currently experiencing a period of underperformance similar to that of the early 90s prior to the ‘Schumacher era’. The irony is that the person who was responsible for turning things around back then, protecting Ferrari from Fiat’s corporate culture, and appointing Jean Todt to help build what became the most successful F1 team of all time, was Luca di Montezemolo.
With Fiat CEO Sergio Marchionne now taking over as chairman and with the Scuderia being led by the former head of Ferrari’s US road car operation, Marco Mattiacci, it looks like history may be repeating itself. Back in 1988 when Enzo passed away Fiat’s stake in Ferrari shifted from 40 to 90% and resulted in one of the least successful periods in the proud history of the Scuderia. A long line of Fiat managers were parachuted in with disastrous results. You only have to look at the contrast between Jaguar Racing and Red Bull to see what a dysfunctional effect corporate management can have on entrepreneurial, fast moving F1 teams, you need racers like Christian Horner, not corporate managers to win in F1. Let’s hope Ferrari aren’t going through corporate paralysis once again – it took ten years to recover from the last time. If I was Fernando Alonso, I’d be seriously considering my options.
April 12, 2014
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.
On 29 July 2013, the day after the Hungarian Grand Prix, an interesting piece appeared on the Ferrari website entitled ‘A turning point to tackle with a knife between the teeth’. It related the comments of Ferrari President Luca de Montezemolo, who was apparently less than happy about the team’s performance, and also the behaviour of its lead driver, Fernando Alonso. The piece stated baldly that Montezemolo had ‘tweaked his (Alonso’s) ear’ reminding him that “all the great champions who have driven for Ferrari have always been asked to put the interests of the team above their own. This is the moment to stay calm, avoid polemics and show humility and determination in making one’s own contribution, standing alongside the team and its people both at the track and outside it.” Nobody seems entirely sure why Alonso was on the receiving end of Montezemolo’s ire, but one theory is that it was his reply when asked what he would like for his (forthcoming) birthday, his response was ‘a new car’.
The public castigation of Ferrari’s most expensive employee by the President gave me a real sense of déjà vu. Last night I was re-reading one of Niki Lauda’s memoirs ‘For the Record’ written in the late seventies and focusing on his experiences during the season of 1976 when he almost lost his life and did lose (by a very small margin) the World Championship to James Hunt. I had got to the part where he was being criticised in the media by Enzo Ferrari saying that he made a mistake by coming back too early for the Grand Prix at Monza. Enzo Ferrari was renowned for communicating his pleasure or otherwise with the race team, Gestione Sportiva, via the media and it seems that Ferrari’s current President is following a similar line. However, interestingly, Montezemolo started off by saying that “The Ferrari I saw in yesterday’s race doesn’t sit well with me.” If he is following Enzo’s tradition of criticising his drivers through the media, he is not following his other tradition of never criticising his cars, but then I guess they don’t have his name on them.
February 21, 2013
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.
March 20, 2012
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.
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.