CASE STUDY The Formula 1 constructors Mark Jenkins This case describes four peri

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CASE STUDY

The Formula 1 constructors

Mark Jenkins

This case describes four periods of dominance by particular firms in a highly competitive technological context. Formula 1 (F1) motorsport is the pinnacle of automotive technology. Highly specialised constructors design and build single seat racing cars (and sometimes engines) to compete for annual championships which bring huge financial and reputational rewards. These four eras explore the stories of three contrasting companies each within a different competitive time period in terms of how they both created and lost the basis for sustained competitive advantage.

‘Between two and four on a Sunday afternoon this is a sport.

All the rest of the time it’s commerce.’

Frank Williams, Managing Director, Williams F1

In 1945 the Fédération Internationale de l’Automobile (FIA) established Formula A as the premier level of motorsport. In the years that followed Formula A became referred to as Formula One (F1) and a drivers’ world championship was introduced in 1950. By the mid-1960s F1 had moved from being a basis for car manufacturers to promote and test their products, to a highly specialist business where purpose built cars were developed through leading edge technology.

F1 had become a TV sporting event which enjoyed the third highest audience in the world, surpassed only by the Olympics and World Cup Soccer.

There have been between 10 and 14 race car manufacturers or constructors competing in F1 at any one time. In 2008 the top three teams were Ferrari, McLaren and BMW, all medium sized businesses turning over between $300 million (x220m or £200m) and $400 million (x293m or £268m) per annum. For the first three years of their entry into F1 in 2002 Toyota are estimated to have committed $1 billion on capital and running costs of which only one-fifth will have come from sponsorship. The top teams would typically have their own testing and development equipment, which would include windtunnels and other facilities. The larger teams would employ between 450 and 800 people in their F1 operations, a quarter of whom travel around the world attending Grand Prix every two to three weeks throughout the F1 season

(March to November). Labour costs account for around

Source: Corbis/Michael Kim.

25 per cent of the budget. All the teams would have highly qualified technical staff which would include race engineers (who work with the driver to set up the car), designers, aerodynamicists, composite experts (to work with specialised carbon-composite materials) and systems specialists.

In addition to sponsorship, revenue is provided by prize money generated by winning championship points. The prize money is a way of dividing up the royalties earned from media coverage and other revenues negotiated on behalf of the teams by the Commercial Rights Holder: Bernie Ecclestone’s Formula One Group (FOG). In 2009 around 15 per cent of Ferrari’s budget was estimated to come from prize money.

The Formula 1 Constructors provide a unique context to consider the competitive advantage of different multimillion pound organisations over time. The pace of change and the basis of advantage are constantly changing, shown by the fact that since the start of the world championships, only two constructors have won the championship consecutively more than four times (McLaren 1988–91; Ferrari

This case was prepared by Mark Jenkins, Cranfield School of Management. It is intended as a basis for class discussion and not as an illustration of good or bad practice. © Mark Jenkins 2010. Not to be reproduced or quoted without permission.

Table 7.1 Summary of world champions

Year

Driver

Car/Engine

Constructors’ Cup

1950

Giuseppe Farina

Alfa Romeo

1951

Juan Manuel Fangio

Alfa Romeo

1952

Alberto Ascari

Ferrari

1953

Alberto Ascari

Ferrari

1954

Juan Manuel Fangio

Maserati

1955

Juan Manuel Fangio

Mercedes-Benz

1956

Juan Manuel Fangio

Lancia-Ferrari

1957

Juan Manuel Fangio

Maserati

1958

Mike Hawthorn

Ferrari

Vanwall

1959

Jack Brabham

Cooper/Climax

1960

Jack Brabham

Cooper/Climax

1961

Phil Hill

Ferrari

1962

Graham Hill

BRM

1963

Jim Clark

Lotus/Climax

1964

John Surtees

Ferrari

1965

Jim Clark

Lotus/Climax

1966

Jack Brabham

Brabham/Repco

1967

Denny Hulme

Brabham/Repco

1968

Graham Hill

Lotus/Ford

1969

Jackie Stewart

Matra/Ford

1970

Jochen Rindt

Lotus/Ford

1971

Jackie Stewart

Tyrrell/Ford

1972

Emerson Fittipaldi

Lotus/Ford

1973

Jackie Stewart

Tyrrell/Ford

Lotus/Ford

1974

Emerson Fittipaldi

McLaren/Ford

1975

Niki Lauda

Ferrari

1976

James Hunt

McLaren/Ford

Ferrari

1977

Niki Lauda

Ferrari

1978

Mario Andretti

Lotus/Ford

1979

Jody Scheckter

Ferrari

1980

Alan Jones

Williams/Ford

1981

Nelson Piquet

Brabham/Ford

Williams/Ford

1982

Keke Rosberg

Williams/Ford

Ferrari

1983

Nelson Piquet

Brabham/BMW

Ferrari

1984

Niki Lauda

McLaren/Porsche

1985

Alain Prost

McLaren/Porsche

1986

Alain Prost

McLaren/Porsche

Williams/Honda

1987

Nelson Piquet

Williams/Honda

1988

Ayrton Senna

McLaren/Honda

1989

Alain Prost

McLaren/Honda

1990

Ayrton Senna

McLaren/Honda

1991

Ayrton Senna

McLaren/Honda

1992

Nigel Mansell

Williams/Renault

1993

Alain Prost

Williams/Renault

1994

Michael Schumacher

Benetton/Ford

Williams/Renault

1995

Michael Schumacher

Benetton/Renault

1996

Damon Hill

Williams/Renault

1997

Jacques Villeneuve

Williams/Renault

1998

Mika Hakkinen

McLaren/Mercedes

1999

Mika Hakkinen

McLaren/Mercedes

Ferrari

2000

Michael Schumacher

Ferrari

2001

Michael Schumacher

Ferrari

2002

Michael Schumacher

Ferrari

2003

Michael Schumacher

Ferrari

2004

Michael Schumacher

Ferrari

2005

Fernando Alonso

Renault

2006

Fernando Alonso

Renault

2007

Kimi Raikonen

Ferrari

2008

Lewis Hamilton

McLaren

Ferrari

2009

Jenson Button

Brawn

Note: Constructors’ championship is based on the cumulative points gained by a team during the season. Currently each team is limited to entering two cars and drivers per race.

1999–2004) and only Ferrari (1975–77) and Williams

(1992–94) have also won for three consecutive years (Table 1). The remainder of the case considers each of these periods of competitive dominance in chronological order.

Ferrari and its renaissance in the mid-1970s

The period 1975 –77 saw a renaissance for the Ferrari team. Its previous F1 World Championship had been won in 1964, one of the few reminders of the glorious 1950s and early 1960s when the bright red cars of Ferrari dominated motor racing. Ferrari is the oldest of all the Grand Prix teams still racing. This heritage gives the team a special place in the hearts of all motor racing enthusiasts. Founded by Enzo Ferrari, an ex-driver and manager of the Alfa Romeo racing team, it and other Italian marques such as Maserati and Alfa dominated the sport during the 1950s. Ferraris have taken part in more than 780 grand prix (the next highest is McLaren with 658) and, despite the variable nature of the team’s performance, drivers continue to view a contract with Ferrari as something very special. Perhaps this is why world champions such as Alain Prost, Nigel Mansell and Michael Schumacher have been attracted to the team at times when their cars have been far from the fastest or most reliable.

While the majority of constructors were British specialists who buy in components such as engines and gearboxes, Ferrari has always done everything itself. All the major components are made at its Maranello factory, which enjoys the most up-to-date facilities. While other constructors will paint their cars whatever colour required by their flagship sponsor, Ferraris always have been and, one assumes always will be, bright red, the national colour of Italy, a throwback from the time when F1 cars were colour coded by country of origin. The cars have, until recently, very little evidence of sponsorship; it has always been the Ferrari emblem – a black prancing horse – which has the most prominent position. The Italian public see Ferrari as a national icon, as observed by Niki Lauda:

The Italians love you when you win and hate you when you lose and whatever you do, win, lose or simply break wind everyone in Italy wants to know about it!

The influence of Enzo Ferrari, or Il Commendatore as he was frequently known, was pervasive and the myths and stories surrounding him still permeate the team. It was legendary that Ferrari himself hardly ever attended a race and very rarely left the Maranello factory where his beloved cars were made. He relied on the media and his advisors for information which often created a highly political atmosphere. Ferrari’s first love was motor racing, and this was despite having created a very successful range of road-going cars which he saw primarily as the source of funding for his racing. The merger between Fiat and Ferrari in 1969 provided Ferrari with a huge cash injection. Ferrari had sold 40 per cent of the company to Fiat and allowed Fiat to build the road cars. However, Enzo, who was then 71, would retain control of the racing operation in order to concentrate on his first love, motor racing at the highest level: Formula One.

Ferrari has always built its own engines using a large technical team dedicated to the task of engine design and development. In 1971 the company opened its own test track at Fiorano, literally a few hundred yards from the Maranello factory. At the time it was the most advanced and sophisticated test circuit in the world, enabling the cars to be constantly tested and developed between the track and the factory. This effectively gave Ferrari its own grand prix circuit. All the competitors were obliged to hire a circuit such as Silverstone in the UK and transport their cars and equipment for a two or three day test. Ferrari himself attended most of the tests and would make sure he was kept informed as to exactly what was being tested and why. Enzo himself had always declared his love for the distinctive sound and power of a Ferrari engine as indicated by former Ferrari driver, Nigel Mansell: ‘Enzo Ferrari believed that the engine was the most important part of the race car. Colin [Chapman – head of Lotus] believed it was the chassis.’

The early 1970s began shakily for Ferrari. The new ownership and influence from Fiat meant increased resources, but also increased pressure for results. At this time F1 was dominated by the Ford DFV engine. Built by Cosworth Engineering near Northampton and funded by the Ford Motor Company, the DFV was F1’s first purpose built engine; it was light, powerful and relatively inexpensive. In 1968 the engines were available for £7500 each and were fully capable of winning a Grand Prix. This enabled the British constructors, who specialised in chassis design, to become increasingly competitive. In 1971 and 1973 every Grand Prix was won by a car using a DFV engine.

In 1971 the Ferraris were very fast, but not reliable. It got worse in 1972 and 1973 with cars only finishing every other race and rarely in the points. Enzo himself had been suffering poor health and the team seemed unable to turn around despite having the huge resources of Fiat at its disposal. However, through 1974 things began to change. Mauro Forghieri had been recalled to Ferrari in 1973 as technical director. He had been responsible for some of the more successful Ferraris of the 1960s, but had fallen from grace and spent the later part of the 1960s working on ‘special projects’.

In addition to the arrival of Forghieri, a new team boss was also appointed. At 25 years old, a qualified lawyer with connections to the Agnelli family which owned Fiat, Luca di Montezemolo was an unlikely right-hand man for Il Commendatore. However, he was given a relatively free hand by Ferrari and brought much needed management discipline to the team. Whilst there had always been a huge supply of talent at Ferrari, particularly in the design and development of engines, it had not always reached its collective potential. Enzo’s autocratic style of ‘divide and rule’ had created much confusion and rivalry within the team. Montezemolo defined strict areas of responsibility in order to reduce the amount of interference and internal politics. This created a situation where the various technical teams (chassis and suspension; engine; gearbox) concentrated on, and were fully accountable for, their own areas. Montezemolo was also instrumental in the recruitment of driver Niki Lauda.

In 1974 Lauda and the design team had embarked upon an exhaustive testing and development programme at the Fiorano test track. The new car, the 312B, was very fast; however, there were still reliability problems and although Lauda was leading the championship at the British Grand Prix, the lead was lost through technical problems. In 1975 the fruits of Forghieri’s creative ideas and the intensive testing at Fiorano were exemplified in the new 312T which featured a wide, low body with a powerful 12-cylinder engine and a revolutionary transverse (sideways mounted) gearbox (‘flat 12’) which improved the balance of the car, making it handle extremely well. Lauda, with the supportof team-mate Regazzoni, was able to easily secure both the drivers’ and constructors’ world championships. The Ferraris dominated the 1975 season. With their elegant handling and the power advantage of the engine, they were in a class of their own. Because the majority of the competition all had the same engine and gearbox combination (Ford DFV and Hewland gearbox), they were unable to respond to a chassis/gearbox/engine combination which was unique to Ferrari.

1976 continued in much the same vein, with Lauda and Regazzoni winning the early races. Montezemolo had been promoted to head up Fiat’s entire motorsport operation and Daniele Audetto was moved from managing the rally team to Sporting Director at Ferrari. However, things were not to go as smoothly as in 1975. At the German Grand Prix, Lauda lost control of the car in the wet conditions and crashed in flames. He was rescued by four other drivers, but not before suffering severe burns and inhaling toxic fumes. His life was in the balance for some weeks while the Grand Prix series continued with James Hunt (McLaren) reducing Lauda’s lead in the championship. Miraculously Lauda recovered from his injuries and although still badly scarred, he returned to race for Ferrari. He and Hunt went into the last Grand Prix of 1976 (Japan) with Lauda leading by three points. There was heavy rain and Lauda pulled out of the race leaving the drivers’ championship to Hunt, although Ferrari still collected the constructors’ championship. On paper it was a good year, but Ferrari should have dominated 1976 as it had 1975. Audetto who, perhaps not surprisingly, had been unable to live up to the role created by Montezemolo and had failed to develop a strong relationship with Lauda, returned to the world of rallying. Ferrari entered 1977 in a state of disarray.

In 1977 Ferrari was still the team to beat, although the testing and development lost through Lauda’s six week convalescence had undermined the crushing dominance which the team had earlier shown. The competition were beginning to find ways of catching up. The Brabham team moved away from the Ford DFV and used an Alfa Romeo ‘flat 12’ similar to the Ferrari engine. Tyrrell launched the revolutionary P34 six wheeled car which seemed to be the only car able to stay with the Ferrari. Ferrari itself was not standing still and launched the 312T2 in 1976 which was a significant development on the original 312T. Ferrari won the 1977 drivers’ and constructors’ championship, but this was the end of the partnership with Niki Lauda; the relationship had never been the same since the Nurburgring accident. Lauda left to join Brabham. Lauda was not perhaps the fastest racer on the track, but he was always able to develop a car and build relationships with the design team which enabled Ferrari to translate the drivers’ senses into reliable technical solutions.

The unprecedented run of Ferrari success continued in 1978 with the 312T3 car. In 1979 South African Jody Scheckter won the drivers’ championship in a Ferrari, with the team also taking the constructors’ championship. Ferrari’s greatest moment was when drivers Scheckter and Villeneuve finished first and second at the Italian Grand Prix at Monza.

However, 1979 was the last time that Ferrari was to win a drivers’ world championship for 21 years. 1980 was a disaster for Ferrari: the 312T5 car, although a significant development from the 312T4, was outclassed by the competition. New innovations in aerodynamics brought the ‘ground effect’ revolution, pioneered by Lotus and quickly adopted by Williams and Brabham. Here the underside of the car featured two ‘venturi’, or channels, either side of the driver. These were aerodynamically designed to create a low pressure area under the car which sucked the car to the track allowing faster cornering. Sliding strips of material or ‘skirts’ were used to create a seal for the air flowing under the car. Ferrari’s engine was one of the most powerful, but it was a ‘flat 12’ meaning that the cylinders were horizontal to the ground creating a low and wide barrier which gave no opportunity to create the ground effect achieved with the slimmer V8 DFV engines. In 1978 Alfa Romeo had launched a V12 engine to replace its flat 12 for this very reason. No such initiative had been taken at Ferrari which was concentrating on a longer term project to develop a V6 turbocharged engine. The lowest point came in the Canadian Grand Prix when the reigning world champion, Jody Scheckter, failed to qualify his Ferrari for the race, a bit like Italy failing to qualify for the soccer World Cup. Once again the full wrath of the Italian press descended on the team.

McLaren and Honda domination in the late 1980s

The period from 1988 to 1991 was unusual in the hypercompetitive world of F1, where the pace of change is rarely matched in any other competitive environment. This period was notable because of the dominance of one constructor. In one year the McLaren team won 15 of the 16 races. Such dominance had not been seen before and will almost certainly never be seen again.

Founded by New Zealander and F1 driver Bruce McLaren in 1966, the McLaren team had its first victory in the Belgian Grand Prix of 1968. Tragically McLaren himself was killed two years later while testing. Lawyer and family friend Teddy Mayer took over as team principal. The team continued to develop and in 1974 secured a long term sponsorship from Philip Morris to promote the Marlboro brand of cigarettes. This was a partnership that was to last until 1996, probably the most enduring relationship between a constructor and a ‘flagship’ sponsor. In September 1980 Ron Dennis became joint team principal with Mayer, a position which he took over solely in 1982, when Mayer was ‘encouraged’ by Philip Morris to take a less active role in the management of McLaren.

Dennis had been a mechanic for the highly successful Cooper team in 1966, but left to set up his own Formula Two (a smaller, less expensive formula) team in 1971. By the end of the 1970s he had built a reputation for professionalism and immaculate presentation. His Project Four company brought in designer John Barnard who had some radical ideas about using carbon fibre, rather than metal, as the basis for a race car chassis. These ideas were to provide the basis for the MP4 car. Both Dennis and Barnard were perfectionists, with Dennis’ obsession with immaculate presentation and attention to detail complemented by Barnard’s uncompromising quest for technical excellence.

In 1986 John Barnard left to join the struggling Ferrari team. The partnership between Dennis and Barnard had been stormy, but a huge amount had been achieved through the energy of these two individuals: Dennis providing the managerial and commercial acumen and Barnard highly innovative design skills. To replace Barnard, Brabham designer Gordon Murray was brought into the team, perhaps best known for developing the innovative ‘fan car’ for Brabham in 1978. Murray, like Barnard, was at the leading edge of F1 car design.

A further factor in McLaren’s success had been its relationship with engine suppliers. In the mid-1980s turbo charging became the key technology and in 1983 it used a Porsche turbo engine which was funded by the electronics company TAG. However, the emerging force in engine development was Honda which had re-entered F1 in 1983 in partnership with Williams. Importantly the engines were supported by a significant commitment from Honda in both people and resources. Honda used the relationship as an opportunity to develop some of its most talented engineers and to transfer F1 design and development capabilities to its production car programme. In the mid-1980s the Williams/Honda partnership was very successful, but following Frank Williams’ road accident in 1986, Honda began to have doubts about the future of the Williams team and agreed to move to supply both McLaren and Lotus for the 1987 season.

Half way through 1987 McLaren announced that it had recruited two of the top drivers in F1 to their team for the 1988 season: Alain Prost and Ayrton Senna. This was unusual as most teams tended to have a clear hierarchy, with a lead driver being supported by a ‘number two’ who was regarded as either less skilful and/or less experienced than the lead driver. However, McLaren appeared to feel that it would be able to deal with the potential problems that such a structure could cause.

Prost and Senna were real contrasts. Senna was fast, determined and ruthless. Prost was fast too, but a great tactician and adept at team politics, making sure that the whole team was behind him. It was rumoured that a key reason for Honda moving to McLaren was that it now had Alain Prost.

In 1988 the Honda powered MP4 car was without question the fastest and most reliable car on the circuit. This meant that effectively the only real competition for Prost and Senna was each other. This competition between two highly committed and talented drivers resulted in one of the most enduring and bitter feuds the sport has ever known. In 1990 the acrimony with Senna culminated in Prost moving to Ferrari.

Ron Dennis and his professional management style was synonymous with the success of McLaren, indicating that the era of the ‘one man band’ Formula One constructor was past. His record since taking over in 1982 has been impressive. Eddie Jordan, principal of the Jordan team held him in high regard:

He’s won that many Grand Prix, he’s won that many championships, he’s been on pole that many times and he’s got the best drivers. Everyone hates him; but they only hate him because he’s the best.

Dennis’ negotiating and marketing abilities were legendary throughout Formula One. McLaren also created its own marketing consultancy operation where the smaller teams engaged it to find sponsors. In 1991 Management Week had Ron Dennis on the front cover with the question: ‘Is Ron Dennis Britain’s best manager?’ Dennis likens the management of McLaren to that of a game of chess: ‘you’ve got to get all the elements right, the overall package, the budget, the designer, the engine, the drivers, the organisation’. Dennis is renowned for being hypercompetitive and once chastised a driver who was delighted with finishing second with the comment – ‘remember, you’re only the first of the losers’. Dennis’ ambitions went beyond F1 and in 1988 he began a project to build a roadgoing car, the McLaren F1. In many ways this mirrored the development of Ferrari who had made the progression from producing dedicated race cars to also develop roadgoing cars. The McLaren F1 was launched in 1994 and with a price tag of £634,000 and a top speed of 231 mph became the most expensive and fastest road-going car in the world.

The McLaren–Honda combination had dominated F1 from 1988 through to 1991, and it was difficult to see what more could be achieved. In September 1992 Honda confirmed that it was pulling out of F1 racing. It had been hugely successful and achieved all of its objectives; it was now time to stand back from F1 and find some new challenges. Dennis had been told about Honda’s thinking in late 1991, but it appeared that he had not taken it seriously enough and the team had no real engine alternatives. This meant it lost valuable winter development time as it tried to find a new engine supplier. In 1993 the team competed with ‘off the shelf’ Ford engines available to anyone who had the cash to buy them. Senna’s skills still gave McLaren five victories, despite having a less than competitive car. However, at the end of 1993 Senna left the McLaren team to move to Williams, which he saw as having the superior car and engine combination. Former world champion and adviser to Ferrari, Niki Lauda, saw this as the terminal blow: ‘Senna was a leader. He told them exactly what was wrong with the car. Hakkinen [Senna’s replacement] is not in a position to do that, so the reaction time is much longer. Senna motivated the designers.’

The mid-1990s was a particularly difficult period for McLaren. Having tried Peugeot engines in 1994 the company moved to Mercedes in 1995. Mercedes had been considering a major commitment to F1 and in 1995 it concluded a deal which involved taking equity stakes in McLaren (40 per cent) and also in specialist engine builder Ilmor Engineering based near Northampton (which it subsequently purchased) which was to build the Mercedes engines used in F1.

Williams and the technological revolution: the mid-1990s

During the period 1992–94 Williams cars won 27 out of 48 races, they secured the F1 constructors’ title for all three years and the world championship for drivers was won in a Williams in 1992 (Nigel Mansell) and 1993 (Alain Prost).

Like many of the founders of Formula One constructors, Frank Williams began as a driver, perhaps not of the same standing as Bruce McLaren or Jack Brabham, but nonetheless someone who lived and breathed motor racing. His desire to remain in the sport led him to develop a business buying and selling racing cars and spare parts and in 1968 Frank Williams (Racing Cars) Ltd was formed. A series of triumphs, tragedies and near bankruptcies led to the establishment of Williams Grand Prix Engineering in 1977 when Frank Williams teamed up with technical director Patrick Head. Frank Williams’ approach and style owes a lot to the difficult years in the 1970s when he survived on his wits and very little else, including at one time operating from a public telephone box near the workshop when the phones were disconnected as he had not paid the bill. His style could be described as autocratic, entrepreneurial and certainly frugal, despite the multi-million-pound funding he managed to extract from the likes of Canon, R.J. Reynolds and Rothmans. Williams saw his role as providing the resources for the best car to be built. His long-standing relationship with Head was pivotal to the team and brought together a blend of entrepreneurial energy and technical excellence needed to succeed in F1.

The first car from this new alliance was the FW06, designed by Patrick Head and with support from Saudi Airlines. The team enjoyed success in 1980/81 by winning the constructors’ championship both years and with Alan Jones winning the drivers’ title in 1980. Jones was a forthright Australian who knew what he wanted and was not afraid to voice his opinions. His approach to working with the team was very influential and coloured Frank Williams’ view of drivers: ‘I took a very masculine attitude towards drivers and assumed that they should behave – or should be treated – like Alan.’

Further success occurred in 1986/87 with Nelson Piquet winning the drivers’ title in 1987 and Williams the constructors’ title in both years. This was despite the road accident in 1986 which left Frank Williams tetraplegic and confined to a wheelchair. However, 1988 was Williams’ worst season; with Honda having switched to supplying McLaren the company was forced to suddenly switch to uncompetitive Judd V10 engines. Williams did not win a single race, McLaren won 15 out of the 16 Grand Prix of 1988 and a disillusioned Nigel Mansell left and went to Ferrari. Frank Williams had to search frantically for a new engine deal, which he found in 1990 with Renault. This relationship became a far-reaching and durable one, with Renault putting human and financial resources into the project with Williams. The company also sought to develop the relationship further and extended its activities with Renault by running its team of saloon cars for the British Touring Car Championship, and also provided engineering input and the Williams name for a special edition of the Renault Clio.

In 1990 a lack of driver talent meant that the team was only able to win two races. In 1991 Nigel Mansell was persuaded to return from retirement by Frank Williams and narrowly missed taking the 1991 title, but in 1992 the team dominated the circuits, effectively winning the championship by the middle of the season. Nigel Mansell went into the record books by winning the first five consecutive races of the season. However, deterioration in the relationship between Williams and Mansell led to the driver’s retirement from F1 at the end of the year.

In a sport where personnel change teams frequently, the stable relationship between Williams and Head provided enviable continuity compared with the rest of the field. Head’s designs had often been functional rather than innovative, but he had always been able to take a good idea and develop it further. These have included ground effect (originally developed by Lotus), carbon-composite monocoque (McLaren), semi-automatic gearbox (Ferrari), and active suspension (Lotus). The car development process was always a top priority at Williams and Head was supported by many junior designers who then went on to be highly influential in Formula One, such as Neil Oatley (McLaren), Adrian Newey (McLaren and Red Bull), Frank Dernie (Ligier, Lotus and Arrows) and Ross Brawn (Benetton, Ferrari and Brawn).

This focus on developing the car and engine combination sometimes meant that the driver took second place in the Williams philosophy, despite the fact that a good test driver, who could help the technicians define and solve problems, was essential to the development process. There had been a number of high profile disputes with drivers which had, in part, been attributable to Frank Williams’ ‘masculine’ approach to dealing with drivers. In 1992 Nigel Mansell left when he felt his ‘number one’ driver position was threatened by the recruitment of Alain Prost for 1993 (although Prost himself left the following year for the same reason regarding the hiring of Ayrton Senna). A similar situation arose when the 1996 world champion, Damon Hill, was not retained for the 1997 season and was replaced with Heinz-Harald Frentzen. In an interview with the Sunday Times Patrick Head set out the reasons for the decision not to hold on to Hill:

We are an engineering company and that is what we focus on. Ferrari are probably the only team where you can say the driver is of paramount importance and that is because [Michael] Schumacher is three-quarters of a second a lap quicker than anyone else.

This emphasis on the driver being only part of the equation was not lost on Paul Stewart, who was concentrating on developing the Stewart Grand Prix entry to F1 in 1996:

If you look at the Williams team, they rely on a solid framework, their organisation, their engine, their car design is all amalgamated into something that gives a platform for everyone to work on. They don’t believe putting millions into a driver is going to make all the difference.

Williams’ emphatic dominance in the 1992 season was due to a number of factors: the development of the powerful and reliable Renault engine was perfectly complemented by the FW15 chassis which incorporated Patrick Head’s development of some of the innovations of the early 1990s, namely semi-automatic gearboxes, drive-by-wire technology and Williams’ own active suspension system. As summarised by a senior manager at Williams F1:

I think we actually were better able to exploit the technology that was available and led that technology revolution. We were better able to exploit it to the full, before the others caught up . . . it wasn’t just one thing but a combination of ten things, each one giving you another 200/300th of a second, if you add them up you a get a couple of seconds of advantage.

However, in 1993 the Benetton team made a great deal of progress, with both the gearbox and suspension innovations largely attributed to the development skills of their new driver, Michael Schumacher. Williams’ technical lead coupled with the tactical race skills of Alain Prost, supported by promoted test driver Damon Hill (due to Mansell’s sudden exit), secured the 1993 world championship and constructors’ championship for Williams F1.

1994 was a disastrous year, but not for reasons of performance as Williams won the constructors’ championship for the third successive year (this was always the declared primary objective, with the drivers’ championship very much a secondary aim). Frank Williams had, for some time, regarded Brazilian Ayrton Senna as the best driver around and, now with the obvious performance advantage of the FW15 chassis and the Renault V10 engine, Senna was keen to move to Williams, which he did, partnered by Damon Hill for the 1994 season. Tragically at the San Marino Grand Prix at Imola on 1 May 1994 Senna was killed in an accident, an event which devastated not only the Williams team but the sport as a whole.

In 1995 the Benetton team had eclipsed the Williams domination. Benetton had developed a car using many of the technological innovations used by Williams (with the help of ex-Williams designer, Ross Brawn). In addition Renault’s ambitions to match Honda’s previous domination of the sport as an engine supplier from 1986 to 1991 led the company to supply Benetton with Renault engines as well as Williams. 1995 was the year of Benetton and Michael Schumacher, breaking the three year domination of the Williams team. However, in 1996 Schumacher moved to the then uncompetitive Ferrari team for £27 million, putting him in third place in the Forbes chart of sports top earners. This left the way clear for Williams to dominate the season, with Benetton failing to fill the gap left by Schumacher.

Ferrari: the return to glory: 1999–2004

Ferrari was struggling in the mid-1980s. A key problem was that new developments in aerodynamics and the use of composite materials had emerged from the UK’s motorsport valley.[1] Ferrari had traditionally focused on the engine as its competitive advantage, which made perfect sense given that, unlike most of the competition which outsourced their engines from suppliers such as Cosworth, Ferrari designed and manufactured its own engines. However, it appeared that these new technologies were effectively substituting superior engine power with enhanced grip due to aerodynamic downforce and improved chassis rigidity.

In 1986 British designer John Barnard was recruited to the top technical role, but was not prepared to move to Italy. Surprisingly Enzo Ferrari allowed him to establish a design and development facility near Guildford in Surrey that became known as the Ferrari ‘GTO’ or Guildford Technical Office. It seemed that rather than being a unique and distinctively Italian F1 team, Ferrari was now prepared to imitate the British constructors whom Enzo had once, rather contemptuously, referred to as the ‘Garagistes’. The concept of the GTO was that it would concentrate on the design of the following year’s car, whereas in Maranello they would focus on building and racing the current car. However, the fact that Barnard was defining the technical direction of Ferrari meant that he became increasingly involved in activities at both sites.

Enzo Ferrari’s death in 1988 created a vacuum which was filled by executives from the Fiat organisation. It was written into the contract that on Enzo’s death Fiat’s original stake would be increased to 90 per cent. This greater investment led to attempts to run Ferrari as a formal subsidiary of the Fiat group. Barnard became frustrated with the interference and politics of the situation and left to join Benetton in 1989. In 1992 Fiat appointed Luca di Montezemolo as CEO with a mandate to take Ferrari back to the top. Montezemolo, who had been team manager for Ferrari during the mid-1970s, had subsequently taken on a range of high profile management roles including running Italy’s hosting of the Soccer World Cup in 1990. One of his first actions was to re-appoint John Barnard as technical director and re-establish GTO. He was quoted in The Times as follows: ‘In Italy we are cut away from the Silicon Valley of Formula One that has sprung up in England.’ With an Englishman heading up design, he followed this up with the appointment of a Frenchman, Jean Todt, to handle the overall management of the team. Both appointments were clear signals to all involved in Ferrari that things were going to change. Todt had no experience in F1 but had been in motorsport management for many years and had led a successful rally and sportscar programme at Peugeot.

The physical separation between design and development in Guildford and the racing operation in Maranello led to problems and Barnard and Ferrari parted company in 1996, this time for good. At the end of 1996 Ferrari recruited double world champion Michael Schumacher from the Benetton team and followed this by recruiting two further individuals from Benetton: Rory Byrne, who had overall responsibility for designing the car, and Ross Brawn, who managed the entire technical operation. With Barnard and his UK operation gone, Byrne and Brawn faced the task of building up a new design department in Maranello of around 50 people. One of the most important tasks for the new team was to take advantage of the fact that Ferrari made its own engines, by integrating the design of the engine, chassis and aerodynamics as early in the process as possible. Ferrari’s historic emphasis on the engine was replaced by a focus on integration, summarised by Ross Brawn: ‘it’s not an engine, it’s not an aero-package, it’s not a chassis. It’s a Ferrari’.

At this time Ferrari also entered into a long term partnership with Shell to provide both financial and technical support to the team, a departure for Ferrari which had previously always worked with Italian petroleum giant Agip. In these kinds of arrangements Ferrari led a trend away from selling space on cars to long term commercial and technological arrangements, with coordinated marketing strategies for commercial partners to maximise the benefits of their investments.

This rejuvenated team provided the basis for Michael Schumacher’s dominance of F1. In 1999 Ferrari won its first constructors’ championship for 12 years. In 2000 Ferrari secured both championships and it was at this point that the team felt it had truly returned to the glory of the mid-1970s, it having been 21 years since its last drivers’ world championship. In 2002 Schumacher and Ferrari were so dominant that a series of regulation changes were introduced to try and make the racing more competitive.

Schumacher’s talent as a driver and a motivator of the team (he learnt Japanese to converse with an engine technician recruited from Honda) was critical, but another key aspect in Ferrari’s advantage for 2002 had been its relationship with Bridgestone tyres where it designed and developed its compounds specifically for Michael Schumacher and Ferrari. Despite stronger competition from Williams, McLaren and Renault in 2003, Ferrari won both drivers’ and constructors’ titles and repeated the feat again in 2004, giving it a record-breaking sixth consecutive constructors’ title and Michael Schumacher a seventh world championship, breaking Juan Fangio’s record which had stood since 1957.

However, for 2005 and 2006 the competition became much stronger and despite being competitive Ferrari lost the drivers’ and constructors’ titles to Renault F1 team (formerly Benetton). Renault benefited from the rising talent of Fernando Alonso, who proved himself a match for Schumacher in both driving and team motivation. In 2005 changes in the regulations meant that tyres were required to last for the whole race, which often benefited the Michelin technology used by Renault and left Ferrari struggling towards the end of the race on its Bridgestone tyres. In 2006 a more drastic change to the regulations meant that the constructors had to shift from 3.5 litre V10 engines to smaller V8s, with engine design to be frozen for three years from 2007. In many ways an engine change should have benefited Ferrari, but the team struggled to get the performance in the early part of the season. Towards the end of the 2006 season Michael Schumacher announced his intention to retire at the end of the year, Jean Todt was promoted to CEO, highly experienced engine director Paolo Martinelli moved to a job with Fiat and Ross Brawn announced he was taking a sabbatical in 2007.

The changing face of Formula One

New regulation changes in 2009 introduced Kinetic Energy Recovery systems (KERs) to Formula One. These systems made the F1 cars hybrids, with energy generated during braking being stored and then used to provide a power boost, controlled by the driver, for overtaking. Most of the teams regarded this as an unnecessary expense and many decided not to use the system. However, towards the end of 2009 both Ferrari and McLaren were demonstrating the advantage of KERS and other teams re-introduced the systems, which in most cases used advanced battery technology.

It was expected that the new regulations introduced for 2009 would increase the spread of performance between the teams, but in fact the opposite occurred, with the gap between the first five cars reducing to 0.33 seconds at the Australian Grand Prix. As F1 had now moved to a single tyre supplier (Bridgestone) there was no competitive advantage in the tyres; however, it became clear that cars and drivers who were kinder to their tyres would be able to generate faster times than those who tended to be more aggressive and thereby increase the wear rate and reduce the performance of the tyres.

Regulations were also introduced to try to find ways of reducing costs through a ban on testing, wind tunnel usage and temporary shut-down of factories. In finalising a new agreement from 2009 to 2012 the teams have agreed to reduce costs to the level of early 1990s. In 1992 Frank Williams’ team employed 190 people (it also won the world championship that year), whereas in 2008 it employed 540, so as a rough proxy Williams is looking at a 65 per cent reduction in infrastructure from 2008 levels. All of this suggests that the F1 teams need to find new and more cost effective ways of creating competitive advantage. They will have to generate greater performance with fewer resources. One of the biggest costs in the development of an F1 car involves the use of wind tunnels, specialist facilities designed to simulate the aerodynamic characteristics of the car on the track. Many of the teams are investing heavily in Computation Fluid Dynamics (CFD) technology which allows the aerodynamic properties of a design to be simulated by computer, potentially removing the need for these expensive and energy-consuming facilities.

For 2010, at the instigation of the FIA, a number of new entrants will appear: Virgin Racing, Hispania Racing Team and Lotus Racing are not directly affiliated to car manufacturers. They will be set up on the basis of the new low-cost operations which the current teams are attempting to move towards. They will use Cosworth engines and will be attempting to build cars which are as competitive as the leading teams but on a fraction of the budget.

Looking at the Formula One constructors raises some important questions around the challenge of sustaining successful performance in a highly competitive context. How are these teams able to sustain success after they have dominated the championships? What are the different ways in which this can be achieved in different organisations? And how does the basis for success shift over time? These four cases illustrate some of the challenges which organisations face in attempting to both create and sustain competitive advantage.

[1] A region in Warwickshire, England, which is home to a cluster of leading F1 and Motorsport Companies.

CASE STUDY Please read this session's case study from the core text and post your thoughts on the questions raised in the forum below before proceeding.

Exploring Strategy: 9th edition, 2010: Johnson, Scholes and Whittington: Prentice Hall Publishing
The Formula 1 Constructors – pages 586 – 594

Discussion Questions

To complete this task please answer the questions below:

1. What do you need in order to succeed in Formula One?
2. Why do you think the team was successful during this period?
3. Why were they unable to sustain this success?
4. What could they have done to sustain their success further?

Explanation / Answer

In order to succeed in formula one what is needed is the best car, the best driver and the best supporting team.al this comes from funds from sponsors. thus it is the ability to attract and retain sponsors which is also important Ferrari was successful due to the mutual contribution of everybody mainly the driver, designer and the team manager. They built their own engines and gearboxes which made it very difficult to imitate for competitors due to their unique technology. McLaren used everything with their best foot forward. It had access to high funds from sponsor Philip Morris. William used innovation to develop a fast and reliable car They were unable to sustain their success because Ferrari could not respond properly to new innovations due to its unique approach. McLaren’s failed when Honda pulled out formula one thus breaking the circle that attracted best drivers.williams failed when their junior designers moved to other teams thus losing the knowhow. recruitment of superior drivers eroded the car advantage of William McLaren chief Ron Dennis should have considered the possibility of a Honda withdrawal more seriously. an organization that does all its activity in house cannot keep pace with combined efforts of suppliers used by other teams

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CASE STUDY The Formula 1 constructors Mark Jenkins This case describes four peri

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