Performance at the Limit: Business Lessons from Formula 1® Motor Racing

driver_flippedFinding ways to create and sustain exceptional levels of performance is a challenge that business leaders face in every organization in all markets. One way this can be addressed is by learning from other industries, in particular ones which distill the essence of how to surpass the competition through consistent, outstanding performance.

The size of the global Formula 1 industry is estimated at $3 billion. Ten 2-car teams, each with budgets ranging from $150 million to more than $400 million take part in 19 races in 19 countries across 5 continents between March and November. With worldwide television viewers close to half a billion, Formula 1 is the most watched annual sports series in the world.

Formula 1 races have taken place in the USA for over 60 years, but after a short absence were revitalized in 2012 with the US Grand Prix at a purpose-built race circuit in Austin, Texas. NBC is covering all 19 races live and the US television audience has grown steadily during the past four years reaching around 40 million viewers. In 2016 the North Carolina-based HaasF1 Team, will make its debut becoming the first American-led F1 team since 1986. Plus Californian Alexander Rossi is in the cockpit during five of the last seven races for the Manor F1 team this year, the first American Formula 1 driver since 2007.

Formula 1 racing is a hyper-competitive industry at the pinnacle of motor sport in terms of technology and innovation. This is displayed by F1 teams at each race during the championship season. However, it is the organization and people behind it who design, develop, and perform each and every day that make the difference between a podium finish and being at the back of the racing grid.

In Formula 1 there is constant imperative for change. The environment in which any business develops and implements its strategy is never static. Forces that impact the market emanate from political developments (competition for new spots on the starting grid), the economic situation (the German Grand Prix has been cancelled this year), regulation (governing rules have changed often much to dismay of teams and fans), technology (it goes without saying in this sport which has the most advanced technology in all of motor racing), and of course competition (the slowest competitor being only 5% below the speed of the fastest among the cars on the track). If a business does not continually change and adapt it is doomed to fall behind.

In order to bring a winning product to market, companies must work cross-functionally. Research and development, product design, marketing and sales, finance, distribution, etc. must all work together in order to provide customers with a product that meets their needs and expectations. In Formula 1 it is not only about the engine, the chassis, the tires, or the driver. Rather, success comes from having all these units within the team working together to create and sustain peak performance when and where it matters most.

More and more companies must engage with external partners who are not their employees, but whose contributions and input are critical to meeting objectives. Formula 1 teams work collaboratively with and depend on external partners – IT and telecommunications providers, components manufacturers, fuels and lubricants companies, advertising and public relations firms, etc. in order to bring the whole package to success – a place on the podium.

Formula 1 relies on the continual sharing of knowledge to ensure competitive excellence. High performance on the track requires that the package i.e. inter-relatedness of engine design (power and reliability) to aerodynamics (chassis design and materials used) to set-up (final configuration of components) to tires (correct choice for the circuit and the weather conditions) – be optimized. This cannot happen unless there is a clear goal for the entire organization and open sharing of information between the various ‘corporate’ functions.

Formula 1 teams demonstrate a passion and commitment to innovation. Simply put, if you do not continually innovate in a fast moving market, you are going backwards. Furthermore, innovations that do not represent a sustainable competitive advantage are copied very quickly, so the process of innovation i.e. the design and development process can be far more critical than the innovations themselves.

In Formula 1 teams we have seen the importance of making quick decisions and learning from the results. All organizations need to demonstrate a bias for action. If one waits too long to enact change or innovate, the competition will get there first. Creating a culture of innovation requires that a company be prepared to fail from time to time. The key element here however, is what the business learns from such failures and how it incorporates such “learnings” into its actions going forward.

Communication is an extremely important element of success, but it is one of those behaviors that is easier to talk about than do. We found that successful Formula 1 teams place a high value on the importance of communication, both internally and externally as a means for people to fulfill their job requirements and meet customer/partner expectations. Moreover, open and effective communication must be practiced from the top down, bottom up and sideways by the organization’s leaders, setting an example for everyone else.

Parallels between activities of sports teams to businesses can be edifying and useful. We have found that there is much to learn by examining how Formula 1 teams combine many complicated elements in order to achieve Performance at the Limit.