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Lessons from F1 racing on how business can adapt to change

Business lessons from the Formula One motor racing industry were shared with dealer group leaders at a recent CDK Global Connect seminar in London.

Former Jordan Grand Prix and Red Bull Racing executive Mark Gallagher of Performance Insights outlined how data analysis and modelling can allow businesses to optimise performance and prepare for changes that otherwise will cause significant pain.

He said F1 has been a very fast-changing environment in the last 15 years, with digital technology, environmental developments, transition from 3.0-litre V10  to 1.6-litre petrol-electric hybrid engines, and regulation removing tobacco advertising being just some examples of its rapid evolution.

He said the reality is that all automotive businesses are going through unending change, but the opportunities are tremendous.

Outwardly the F1 industry today doesn’t look dramatically different, in that it still designs and manufactures racing cars, but beneath the surface it is a data-led business, he said. Digitalisation of the F1 industry began after the deaths of F1 drivers Ayrton Senna and Roland Ratzenberger in the same weekend in 1994. F1 decided it wanted to manage risk. Huge accidents were going to happen, but it desired to engineer out fatalities.

“There’s nothing like having a catastrophe to make you want to have some hard data which will enable you to make better decisions.”

Data and analytics allow businesses to demand “guaranteed outcomes”, he said. Monitor everything, employ data analysts, plot trends, learn and improve. He said in the first 50 years of F1 vehicle reliability was 45%. Today, some of the teams achieve 97% reliability.

Data can show where you need to change a product or process just marginally to get the result you want, he said. And it can drive diversification.

F1 realised that today fewer young people want to watch it. So it has embraced gaming, and three years ago launched an E-sports championship, which engaged 82 million gamers. Every F1 team now has a virtual team too, and gamers can race online against real F1 drivers.

F1’s business model based on sponsorship and advertising model died 15 years ago he said. It now has numerous revenue streams, including e-sports and developing and selling technology to numerous industries, such as energy efficient solutions to supermarkets, simulators to airlines, healthcare devices to hospitals and battery technology to carmakers.

Gallagher said: “When you see your business model break, when the thing that actually drives to the bottom line of your business goes out the window almost overnight, it’s quite a moment to sit in a board meeting discussing ‘what will we all be doing in three years’ time’. Then to see the industry adjust, and recognise that change is not a point in time, it is ever present.”

He added: “Our takeaway is that when you combine great teams of people with great technology solutions you get amazing results.”


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