Management Lessons from Formula 1
I was in Singapore for meetings and GOYA, when my trip coincided with the Formula 1(F1) Grand Prix, watching was obligatory. What did I learn from Performance at the Limit (Business Lessons from F1 Motor Racing); one of the books that best describes the lowdown of F1. Well-known Formula1 commentator Peter Windsor said: “F1 is the only motorsport where each team has to design the technology of their own car.’ You realize that F1 is a very important opportunity for brands as well. Apart from the visibility in the races and the team members’ loyalty, other opportunities are created throughout the year.
If we were to reconcile business life with F1 experience; if we were to ask the company CEOs…
When I asked Mr. Vural “Will the races continue?” His answer was…
Did I drive a Formula car? Do I have a race car?…
Are there any similarities between formula teams and business life, and any principles that can be copied?
Family, hobby, work-life balance…
All in the below article!
Last week, I shared Formula 1(F1) images from my LinkedIn and Instagram accounts.* You probably wondered what was going on. I was in Singapore for meetings and GOYA. As my trip coincided with the F1 Grand Prix, finding a location as convenient as possible to watch the race was imperative. Racing is held in the city in Singapore; it’s an exciting track with lots of bends, especially when it’s wet… By the way, let me explain to some of you who are not interested in auto racing; it’s not just about F1; For those who know closely, F1 includes very valuable management, marketing, and human relations courses. In addition, many private and public institutions benefit from the experiences of companies that own F1 teams and use the technologies they develop to benefit people. For example, the remote sensor and telemetry expertise gained through the F1 experience is used in McLaren Applied Technologies (MAT) while also helping to follow patients’ recovery processes after treatment at Oxford University Hospitals in England.
I learned this from ** Performance at the Limit (Management Lessons from F1 Races); one of the books that best describes the lowdown of F1. Authors are Mark Jenkins of Cranfield School of Management, Management Consultants Ken Pasternak and McLaren, Williams, and Arrows, and Richard West who worked as a senior executive in F1 teams.The book is based on exclusive interviews conducted in the paddock with special permission from F1, Bernie Ecclestone, and has no other precedent.
There are two types of Grand Prix in the world: outer world races that take place in public arena and races within the teams. The authors describe both in this book. The first automobile race, you know, was organized by a Paris-based newspaper in France in 1894. However, the term Grand Prix was not used until 1906, when Renault won the race which was sponsored by the Automobile Club de Paris. The modern history of the current F1 World Championship consisted of only seven races in 1950; it was like a European championship. In 1952, though, only the Ferrari team had crossed the Atlantic to race in Indianapolis.
Well-known F1 commentator Peter Windsor said: “F1 is the only motorsport where each team has to design their own car’s technology.
The host country’s government largely financed fifteen of the nineteen races in the 2015 season. For them, the F1 atmosphere gives their country a prestige that would otherwise be difficult to obtain. During the three-day race week, they gain the important advantage of attracting the attention of hundreds of millions of people who follow the excitement of F1 on social media and in the press to their city, as well as a huge television audience.
Among all these, Singapore joined F1 as part of its policy to increase tourism in the country. The government also organizes various concerts and events during the race week, making a great effort to turn the race into a feast that encompasses the entire city. During the first four years of the Marina Bay Grand Prix, one hundred million people watched the race on television, and two hundred to three hundred thousand ticketed spectators attended each. Tourism revenues in this period contributed 410 million dollars to the city’s general budget.
One can realize that this is a very important opportunity for brands as well. Apart from the visibility in the races and the team supporters’ loyalty, other opportunities are created throughout the year. For example, we tested the cars with Porsche pilots at Porsche’s Leipzig factory in Germany. We had studied the Panamera model’s production and had the opportunity to test the performance of Porsche off-road vehicles on the outdoor track. Moreover, these did not cost the sums that come to your mind, but a price of 600 euros. #makehappybehappy
If we go back to the races, unlike places like Monaco or Singapore, in Belgium the pilots who will race, teams, guests, and support teams will stay in family-run boutique hotels and small residences instead of staying in luxury residences and five-star hotels, which are much more attractive and sparkly. This creates the unique atmosphere of the race setting. Curves on the track push the limits of pilots’ abilities.
The total value of the F1 industry is estimated to be over three billion dollars. With a total television audience of over 425 million, 38 percent of whom are women, F1 races are the most watched sports event among the sports organizations held every year in the world in terms of spectators, after the Olympic Games and the World Cup. However, these two organizations are held every four years. F1 is a highly competitive organization; even a hundredth of a second can affect race results and has the longest history.
In the early days, the purpose of F1 racing was to provide manufacturers in the industry with a racing platform where they could promote their cars and technologies. For this reason, one of the most fundamental elements of F1 is that each manufacturer renews the design of their racing car every year. Some automakers, such as Mercedes and Ferrari, also design their own power units. In the past, the word engine was preferred over power unit. However, in the 2014 season, the word engine became an inadequate definition as the engines of F1 cars turned into highly complex, turbocharged hybrid V6 power units. These power units have systems called Energy Recovery Systems (ERS) today. Whatever I meant…
When you watch an intercontinental Grand Prix on TV, think about everything in the pit area, garages, and the paddock is packaged and delivered through the customs of the countries, to the area where the race will take place, where hundreds of boxes are opened, the equipment is set up, placed, and it is packed again after the race to the teams’ headquarters or where the next race will take placeand all this shipping is done in a limited time frame; then, you can understand how complex and difficult the logistics part of F1 is. The same goes for the television studios and the equipment used in these studios, where F1 management shares warm-ups, qualifying and race footage with the world.
F1 races give us many important clues about the nature of organizational performance. The first of these is undoubtedly the performance itself. But this is actually a relative advantage. Any F1 team can significantly improve its performance by improving its own car, but if this performance increase is below that of other teams it competes with, then it is just an improvement. Conversely, managers often focus on their internal performance measures without considering the apparent relativity of performance. However, you will surpass your opponent, not yourself. Of course, this is the resultant of each team member’s success.
But being a pilot is not easy either; For example, we went to Sweden for an ice rally. This was a permitted activity when the lake was covered with ice thicker than 90 cm. They shovel the snow and immediately turn it into a runway. The most enjoyable part is that you turn 90 degrees at full throttle, and you get most stuck in the surrounding snow. There are no trees around! An experience that makes you sweat when it’s -18 degrees outside and it requires a lot of effort throughout the day, but we were drinking tea in the igloo during rests. It was quite enjoyable.
By the way, I only talked about foreign tracks, but the Istanbul track is also very enjoyable and challenging. I have done 55 laps in one day at the Istanbul track with friends with borrowed cars. I even passed GT3 with the Porsche GT2 with manual transmission on takeoffs. I have a largish go-kart; KTM. It’s a track-only vehicle. In fact, you can think of it as a performance go-kart vehicle, and it doesn’t even have a front visor. I was able to reach 60% of Michael Schumacher’s performance on the Istanbul circuit; what more could I ask for? I felt that I had shrunk one size at the end of the day due to the high effort and stress I mentioned earlier.
In our country, F1 was made seven times between 2005 and 2012, with the cost completely undertaken by the state. When we asked Vural Ak, who is the owner of the track now; As Intercity, we did it twice in a row in 2020 and 21, with F1 racing costs of $13.5m per year and about $6m in racing costs. The 2020 race was held without an audience due to the pandemic. Still, it was selected the best race with great success, and approximately 2 billion people watched it on TV and social media. The race, which was held in 2021 with more than 250,000 spectators in total, was again watched by nearly 2 billion people on TV and social media. It was a great promotion of our Istanbul and Turkey. More than 30,000 foreign tourists attended. 35,000 foreign visitors together with the F1 teams were in Istanbul only during the race week; They spent about 150 million USD in foreign currency. Their contribution to THY, hotels, taxis and rental car services was also outstanding. Not to mention shopping and restaurants/cafes…
In addition, Mr. Vural Ak mentioned that F1 is a very important “Soft Power” as it promotes Istanbul and Turkey and brings foreign exchange directly. It distinguishes itself positively from other sports with its smiling faces and spectators away from fanaticism, he says.
Will the races continue ? when I asked Vural Bey; As a company from the private sector, we carried out the 2020-21 races by assuming all material and moral obligations without burdening the public. But we can’t take on a single race that costs about 40/45 million USD, he said. It does not seem possible to bring F1 again under these conditions, as it is not reasonable and logical because ticket revenues do not reach 10 million USD. However, if our country’s big groups and brands unite and sponsor or advertise F1 races with a long-term strategic approach, it will be possible for F1 races to continue at Istanbul Park.
Vural Ak also said: “Intercity Istanbul Park has been completely renovated and is ready to represent our country in the best possible way. All the pilots and teams are eager to race on our track because we have a very fast and difficult but also a very safe track.
To give an example, after the pandemic, Rolex continues to advertise F1 even though there are no watches in their stores and the prices of second-hand watches are more expensive than new ones.
If we were to reconcile business life with F1 experience; If you ask company CEOs what the return on their investment in information and communication technologies is, their answer will certainly be disappointment and uncertainty. This tense situation is also evident in F1, where many teams with high budgets fail to transform their advanced technological resources to achieve high-performance output. F1 provides us with an ideal environment to discuss this issue.
For example, we know that the ability of the pilots to use the F1 car increases the team’s motivation. However, no F1 driver can be successful without the presence of an organization and technological power behind him. Pilots are part of the team, but to achieve and maintain high success in this competitive environment, all the parts that unite the team must be integrated into the organization efficiently. In order for each member of the team to maximize their contribution to the whole system, their motivation must always be at the top.
We can examine it as follows:
Integration: It is the process of constantly balancing the tension between the many variables in the organization that will be necessary to optimize the performance, bringing together all the different and also related activities in the organizational system which is strongly influenced by leadership and teamwork and providing clarity about purpose and target..
Innovation: It is the process of continuously improving the system and increasing its performance.
Transformation: The process by which an organization constantly reshapes itself to adapt to changing conditions, cope with the pressure of the competitive environment, create new resources, and improve performance.
Another important aspect of the organization is the core processes. Additional processes consist of processes such as constantly correcting and developing, establishing relations with stakeholders to provide support. Another important component of the organization is organizational culture.
The leadership role is essentially related to integration issue, acting as the “glue” between key parts of the operation and relieving tension. Leaders create visions that teams want to achieve. Leaders determine the values that feed the behaviors that make up the team’s culture. Leaders set goals and manage expectations. They determine the competitive capacity of the team and establish competency criteria for the employees.
Researchers summarize the effective leadership traits we see in F1 team leaders under seven main points:
Setting reasonable expectations with a clear purpose
Ability to integrate different functional units of the business
Focus on results
Being a role model by inspiring others with their determination and style
Ability to make quick and clear decisions
To protect their own workforce from external threats
To be able to understand that leadership is a behavior that should be exhibited not only among senior managers but also in all layers of the organization.
Jean Todt offered an interesting perspective while he was Ferrari’s team president:
“After winning a race, we would hold an hour-and-a-half meeting or chat about what we didn’t quite do well. At one point, this sounds pretty negative. Why do this to yourself when you’ve just won the Grand Prix?”
Moreover, Ferrari won all the races when Todt gave us this information. But in the world of F1, pointing out and evaluating potential problems is not seen as a negative thing but rather as one of the things you should do if you want to have a chance to win the next race. Evaluating through discussion meetings is just as natural and normal as going out to race.
What are the pressures and requirements that can affect innovation on the basis of F1? Two factors stand out in our research: the pace of marketing and the factors that make innovation difficult in organizations that are growing daily.
As a type of organization, we think that flexible and problem-solving F1 teams can cope with incremental change better than their peers in other industries. On the other hand, when they have to take radical steps that will cause fundamental changes in the mentality for performance improvement, they may experience great difficulties compared to the continuous improvement they maintain by taking small steps within the framework of the existing organization.
The features that distinguish F1 Teams from teams in other companies in coping with change are highlighted in the book as follows:
• Passion and drive
• Focus and competition
• Entrepreneurial mindset
• Paying attention to details
Success in F1 depends on the culture of winning. The team will succeed if the managers can create and maintain a winning culture. Four key elements are required for this type of culture in the F1 world. These are 1) Continuous communication, 2) A “No culprit” philosophy, 3) One team mentality, and 4) A Long-term perspective.
Throughout the book, the authors draw 12 lessons from F1 management. I’m listing them here for you.
Lesson One: Focus, Focus, Focus
Lesson Two: One Team – Provide alignment among individuals, teams, and partners
Lesson Three: Build the organization on informal processes, connections, and relationships
Lesson Four: The leader must be present at all levels of the organization
Lesson Five: Make quick decisions and learn from the consequences
Lesson Six: Real gains are made at the limits
Lesson Seven: Measure everything
Lesson Eight: Be close to go out of your mind, but never do
Lesson Nine: Maintain clear and ongoing communication
Lesson Ten: Isolate the problem, not the person: the “no culprit” philosophy
Lesson Eleven: Be realistic about what you can achieve
Lesson Twelve: Don’t be blind. Never believe that you will always keep winning.
For me, cars and speed are not just an adrenaline rush. Racing and speeding are test areas, a hobby that requires serious concentration and requires you to always be at it. Otherwise, you will experience failure very quickly… My advice to you is to have at least one hobby. This hobby of mine started on the streets like every teenager. But I headed to the tracks when I felt the responsibility and had the opportunity. We are lucky in Istanbul. Intercity Vurak Ak organizes many public events. When I first got into the pilot’s seat of F2 type vehicle, I immediately said, ” Get me out of here,” but after 5 minutes, I got back on my own will and never got out. There is no speed limit on the Autobahn in Germany. I did a maximum speed of 315km/h and couldn’t look at the indicator myself. The person next to me looked at it. Five things determine your speed limit: 1-your vehicle, 2-road condition, 3-other drivers, 4-your own situation, and of course 5-laws.
In short, it is very important to have hobbies and combine them with friendship and work as much as possible. Twenty-four hours is only satisfying in a life where your family, work and hobbies are together. Thus you can keep your excitement in life, your job can be something you really like. If you have friends and family who understand your hobbies and can be associated with them, you will enjoy what you do more. Remember, happiness only increases when shared. #makehappybehappy.
*Links to my Singapore posts:
Long video: https://www.linkedin.com/posts/mulker_team-formula1-passion-activity-6982384412965388288-xjDf
Short video: https://www.linkedin.com/posts/mulker_team-formula1-passion-activity-6982662089555259393-WZJn
** At the Limits of Performance https://www.amazon.com.tr/Performans%C4%B1n-S%C4%B1n%C4%B1rlar%C4%B1nda-Yar%C4%B1%C5%9F%C3%A7% C4%B1lar%C4%B1dan-Y%C3%B6leadership-Lessons/dp/6056859789
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