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 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 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.

Apologies for the gap, but hopefully this is a return to a more regular posting pattern on the blog.

I’ve been watching the machinations around Team Lotus, Group Lotus and Renault with some interest, and although there seems to be some way to go (and presumably a lot of legal fees and a few trips to court) before we know which Lotus will be on the grid, we can be pretty sure that there will be a Lotus Renault of some description in 2011.

It is now clear that Renault’s strategy in F1 is to go in exactly the opposite direction to Mercedes, who have moved from being an engine supplier to a full constructor with the acquisition of Brawn GP at the end of 2009. Renault however are in the process of moving from being a full constructor to an engine supplier, having sold a significant proportion of their F1 team to Genii Capital, also at the end of 2009, it looks like they will continue this exit strategy and focus on purely supplying engines. After all, in partnership with Red Bull, they are the world champion engine supplier this year, their first since 2006. So as Renault withdraw as a constructor who will take their place in the Enstone based operation? Well, one scenario is that Group Lotus – with their new CEO, ex-Ferrari man Dany Bahar, and new ambitions: a full range of product concepts from the new Esprit due in 2013, to the four door, Lotus Eterne which looks to take on competitors such as the Porsche Panamera – will invest in the F1 team and create the new Lotus Renault F1 operation. Of course there is one problem to this scenario and that is the existence of Tony Fernandes’ Team Lotus who were the most successful of the new teams in 2010. Team Lotus is a separate legal entity to Group Lotus and continued to race in F1, following Lotus founder Colin Chapman’s death in 1982, until 1994 when they went into administration and the company, including the name and branding, were purchased by David Hunt, brother of F1 world champion, James Hunt. Hunt having recently sold the company to Fernandes’ F1 operation.

For 2011 Team Lotus have switched engine suppliers from Northampton based Cosworth Racing to the French manufactured Renault Sport power unit which proved so successful in the Red Bull chassis (and was also able to hold off Alonso’s Ferrari at the Abu Dhabi grand prix in the Renault chassis). Interestingly the new arrangement also includes gearbox and hydraulics from Red Bull Technology, so in effect the Team Lotus car of 2011 will be the same powertrain as the Red Bull. So whatever the outcome of the Lotus wars, we should still see a Lotus Renault of some kind on the grid in 2011, whichever one it is, it will be interesting to see how it compares to the Red Bull.

The great thing about Formula 1 is that you can connect together so many different stories into theories, some rather far fetched others a lot less so. Two interesting sagas at the moment (apart from the Japanese Grand Prix qualifying) are the spat between Renault and Kimi Raikkonen, and the continuing development of Team Lotus (assuming they are called so in 2011) who are now going down a Red Bull route with Renault engines and the Red Bull gearbox.

First the Raikkonen story, F1 is always full of stories of possible driver deals, these are a great demonstration of Game Theory and remind me of my sadly, recently departed colleague, Stephen Regan. Steve was a superb teacher of the theory, and I always enjoyed hearing him work through the ‘Prisoner’s Dilemma’ if I got the chance. In the F1 context the two players are normally the driver’s management and the teams. Stories of possible links and negotiations are stimulated by either the driver’s management who are suggesting a rumour about their driver and Team B in order to force the hand of Team A, who they are really focusing on. Similarly they can also be started by Team A who are negotiating the renewal of a contract with Driver C, and leak or announce that they are in talks with Driver D, in order to force Driver C to agree to their terms. Of course the real issue is who is bluffing and who isn’t. One interpretation of the Raikkonen situation is that his management are renegotiating his contract with the Citreon rally team and so suggested that he may be going back to F1 and the Renault team. The other scenario is that Renault are negotiating terms with their Russian driver Vitaly Petrov and so the Raikkonen story is to put pressure on Petrov’s management. Of course there is a further game going on and that is the game between the teams and their sponsors, for a team to be linked with a big name like Raikkonen when they are trying to close a deal with a sponsor is often very helpful. This wasn’t lost on the Times’ Kevin Eason who noted that following the Raikkonen episode, Renault announced a sponsorship deal with Flagman Vodka for the last four races of 2010, Kimi, of course, being well known for the odd tipple of the clear stuff.

The other interesting story is that Team Lotus will now use both Renault engines and a Red Bull gearbox for 2011, effectively creating a second Red Bull drivetrain, in the same way that Force India use the McLaren gearbox/engine package. The gearbox is important, not just for providing the gears, but also as the rearmost major component it has significant impact on the aerodynamics. As Red Bull’s Adrian Newey is regarded as the best aerodynamic brains in F1, you could infer that he has and will continue to design the most aerodynamic gearbox! The departure of Bob Bell from Renault also suggests that he may resurface at Team Lotus with his former colleague Mike Gascoyne. Although Gascoyne is the Technical Director and Tony Fernandes the Team Principal, Fernandes has rather too many other plates spinning to provide the long term focus needed to be Team Principal, so we could see Fernandes moving to Chariman, Mike Gascoyne moving to Team Principal and Bell taking over as Technical Director, let’s see what happens.

Force India could be one of the teams looking for a name change. Photo: Jenkins, Pasternak & West

The commercial rights for Formula 1 are held by Bernie Ecclestone’s Formula One Group which is owned by CVC Capital Partners. I’ve heard on the grapevine that the new Concorde Agreement (the one that all the teams are currently focusing on to carry on from 2013) is likely to stipulate that any team using the terms Formula 1 or F1 in their name will be required to pay a licensing fee to FOG. A quick review of the full names of the teams on the official F1 site shows that this could effect ‘Mercedes GP Petronas F1 Team’, ‘Renault F1 Team’, ‘Force India F1 Team’, ‘BMW (yes it’s still there!) Sauber F1 Team’ and ‘HRT F1 Team’. The implications are that if a team wants to avoid paying significant sums to FOG then they may need to come up with a new name before 2013.

All of this suggests (as previously blogged) a tightening up of FOG’s position on the rights to use and promote the F1 brand and use the paddock area, for example the team’s having to remove their tractor units from the paddock if they had decals of brands which had not paid to be advertised in the paddock. Perhaps I need to look at renaming my blog?

Renault team sold

December 11, 2009

So who is the buyer of Renault F1?

The BBC have announced that Renault F1 has been sold, with Renault continuing to have a 25% stake in the team. The team will race as Renault F1 in 2010. No details on who has bought them as yet. Currently at Williams F1 running a programme on business lessons from F1 with a delegation from Abu Dhabi, it’s very foggy here! Will update over the weekend.