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.

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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.

Leadership Styles and the FIA

February 22, 2011

It was interesting to see the very negative way in which the FIA’s approach to the Bahrain decision was viewed by a number of UK journalists who have been tweeting on the subject. There can be no doubt that had Max Mosley been President of the FIA the style would have been very different with pronouncements and impromptu press conferences on the developing situation. Jean Todt has a very different style and one which recognises that the FIA had effectively outsourced such decisions back in 2001 when it leased the commercial rights to FOM for ninety nine years, in response to an EU investigation into competition which required them to separate the governance and commercial aspects of the sport. In this sense the decision whether or not to hold a particular race is down to CVC Partners’ Formula One Management run by Bernie Ecclestone, and not the FIA (unless it is done on safety grounds). It is for this reason that the FIA has taken very much a backseat, although there has probably been a lot of background diplomacy involved. In essence this is far more about leadership style than substance, Max leading from the front, although not always being followed by everyone, and Jean Todt working behind the scenes and standing back from the spotlight. Both can be effective, but get results in very different ways.

Are we on the verge of another FIA, FOG, FOTA war?

There is no doubt that the 2010 Formula 1 season has been one of the best in the history of the sport. Five drivers and three teams all vying for the world championship, fantastic races (with the exception of Bahrain), the results very hard to predict and a paucity of the kind of off-track politics and scandal that dogged 2008 & 2009. However, I am sorry to say that I doubt that 2011 will be to the same standard, and I’m not referring to the racing here, but things are beginning to simmer gently between FOTA, FIA and FOG and are likely to start boiling over in 2011. The history of F1 can be described as brief periods of calm punctuated by major disputes and upheaval and such periods of upheaval are normally characterised by power struggles and it looks like we might be entering another one in the run up to the 2013 Concorde Agreement.

We essentially have three protagonists involved, FOTA, led by Martin Whitmarsh who represent all twelve teams (and the number seems unlikely to exceed twelve in the build up to 2013), FIA led by Jean Todt who represents the regulatory body and who ultimately control the sport of Formula 1 and FOG led by Bernie Ecclestone who are the commercial rights holders for F1, on behalf of FIA. A sudden peace broke out between the parties in 2009 when the threat of a breakaway FOTA series was averted by all three reaching agreement to move forward together on the basis of a variety of conditions, one of which was that Max Mosley, then President of FIA, would step down and not seek re-election. But that was last year and now attention is focused on the commercial and technical arrangements that need to be agreed from 2013 onwards. Given that it would be better for all  involved to get agreement in place sooner rather than later, that doesn’t leave a lot of time, and it is likely that 2011 will be the year that most things get agreed, if they get agreed.

Martin Whitmarsh has made an interesting statement to autosport.com in which he says:

“I think to now rewrite [The Concorde Agreement] is possible and, if you cannot get agreement, you have to look at all your options. Arguably the teams do not need the FIA, and the FIA does not need the teams. Arguably the teams do not need the current commercial rights holder, and the commercial rights holder does not need the current teams. We can all go our own ways. The FIA can have its FIA championship; there can be a GP1 with CVC, and F1 can go off and do Grand Prix racing; and the teams are big enough and ugly enough to do that as well. But to do all that would be counter productive – we should try and find a way of working together.”

So the message is pretty clear (he’s probably had coaching from Rob Smedley on giving coded messages), if we don’t like your terms FIA and FOG, we can go off an do ‘Grand Prix’ racing, and we’re big enough to do it if we want to. Let battle commence (or rather continue).