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Driving Transformation at Formula One

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Driving Transformation at Formula One Driving Transformation at Formula One Following the 2017 British Grand Prix, Criticaleye talks toMark Gallagher a Formula One team management board member of more than three decades, about the sport’s evolution uring more than three decades at technologies and a lack of succession cutting-edge cars, for which it then sold DFormula One, Mark Gallagher, CEO and leadership development under its corporate advertising and sponsorship. of Performance Insights, has worked on former CEO, Bernie Ecclestone. “The cars were essentially a 200 mile the management board of the highly per hour billboard,” he says. successful Jordan Grand Prix team, run Mark was invited to Criticaleye’s recent the world famous Cosworth engine Member Dinner to discuss the many That model disintegrated in 2005, when business and established the commercial developments at F1, including its sale to the EU banned tobacco sponsorship. arm of Red Bull Racing, which went on to Liberty Media, owner of US TV company With just three years notice to find a become four-times World Champions. Discovery, for $8 billion in January 2017. replacement for 70 per cent of team sponsorship revenue, the organisations During that period Mark’s been witness Rebuilding the Commercial Model involved initially looked for similar to what he describes as Formula One’s sponsors. They had to be established, “existential challenges”. These include When Mark joined Formula One in the profitable and would be enticed by the the collapse of its commercial model, 1980s, its model could not have been glamour of racing. One of which was the development of highly disruptive simpler. It designed and manufactured the banking industry. > www.criticaleye.com Driving Transformation at Formula One 1 “Eighteen months later the financial crisis “We’re imminently reaching a fork in hit and with it a tidal wave of corporate the road due to changes in transport governance that meant sponsoring F1 Maybe in the technology. One path will take us to a was seen as a bad thing in the corridors fully electric, autonomous car that we of power. Our business model had broken future people can use to showcase new systems. The right beneath our feet,” Mark explains. will watch F1 for other option is to look at F1 as we do horse racing, which is still very popular Not only were the sponsoring banks the spectacle of despite horses having become obsolete under the critical gaze of shareholders, seeing humans as a form of transport. media and regulatory bodies, so too was F1’s former CEO, Bernie Ecclestone, who control cars by “Maybe in the future people will watch was still at the helm and fighting bribery F1 for the spectacle of seeing humans allegations in Germany. themselves control cars by themselves. Either way, we need to be relevant and embrace The type of sponsorship that had everything that the automotive industry supported the sport for 40 years was on involved in a dangerous incident. The is about to go through.” > its way out. Fortunately, Bernie Ecclestone turnaround was dramatic, as the next 20 had already considered alternatives by years were without fatality,” says Mark. CAREER HIGHLIGHTS looking to the most profitable sporting entities − the Olympics and World Cup. “The only variable now is whether the 2009 - 2011 He took their business model, under which driver makes a mistake, and we don’t like Head of Cosworth’s F1 business: governments bid to host their tournaments, to employ drivers who do that. Yet it’s an supplying engines & electronics and refined it. Today F1 now has 20 globally issue for our viewers and the media, to teams including Team Lotus, tendered events, many paying a promoter’s who want excitement and the tension HRT, Marussia Racing and the iconic Williams team. fees of over $50 million annually. of an unexpected outcome,” he adds. 2006 - Present Innovating to Obsolescence While Formula One is far safer and more Regular motor racing industry contributor to Sky News, AJ fuel efficient, it is also much harder for Jazeera News, BBC Radio, CNN, Data has allowed Formula One to outperforming underdogs to win, making Channel 4 news. Sports industry address the demands of developing the sport less enticing to viewers. For columnist for isportconnect.com. cars that are not only high performing, example, while football fans have been 2006 - 2009 but also inherently safe. Quality has whipped up by the likes of Leicester City Consultant to Pixar on CARS improved to the point that most cars unexpectedly winning the Premier League, The Movie and CARS II. finish most races, but using a data- this year’s British Grand Prix was taken by driven approach to achieving this five-time winner, Lewis Hamilton. 2004 - 2005 Head of sponsorship for Jaguar level of certainty has created another Racing / Red Bull Racing. existential issue, that of predictability. It’s not just the exponential rise of data that’s disrupting the essence of Formula 1991 & 1995 - 2004 Jordan F1 team; head of marketing, “In 1994, we decided to put risk One as we know it, but the development of member of the management board. management at the centre of everything technology too. “I often ask myself where we did, including how we designed F1 will be in 20 years. Internal combustion 1983 - 1991 cars and tracks from the perspective of engines will be old hat. Autonomous Freelance journalist and broadcaster in Formula One including for safety. The tool that enabled us to do vehicles will prove to the world – and Sunday Express, BBC Radio, that, was data – in particular the aviation particularly governments – that they are Independent Radio news. Media industry’s black box, which allows the safest option. They won’t drink and consultant to Marlboro and Canon. you to analyse in detail all the factors drive, for example,” Mark explains. www.criticaleye.com Driving Transformation at Formula One 2 The new owners, Liberty Media, internal skills. Former CEO, Bernie must acknowledge what the audience of Ecclestone, created a business model today – and tomorrow − want to watch. The biggest that took the sport to global prestige Formula One currently receives an and multi-billion dollar revenues. For average audience of 500,000 through mistake many years he drove profits, innovation Sky’s pay-per-view service and about and success, yet this tapered as a result 2.5 million for the races it shows on that Bernie of ignoring leadership development Channel 4. In comparison, the early Ecclestone and succession. 1990s saw an average of five million people tune in to watch a Formula One made was to “The biggest mistake that Bernie made race, rising to 12 million for a big event was in not bowing out sooner or having such as the British Grand Prix. not bow out have a clear succession strategy in place. sooner It’s a pity because unfortunately his “Young people aren’t watching TV. legacy will be that the subsequent In this mobile world we are going to owners delivered far more value. You have to repackage our global sport for a get to a point where it’s time to pass generation who aren’t prepared to watch experience it in your back garden, yet it’s the baton and he just didn’t empower two hours of sport, especially if the very hard to imagine yourself driving a people around him,” says Mark. outcome is predictable,” Mark explains. Formula One car nowadays. F1 made the mistake of becoming elitist as opposed “A lot of the talent in F1 has been latent. Another issue is that it’s become far less to aspirational. A Grand Stand ticket The business has stagnated for a decade accessible to its audience. “The difference for the family is equivalent to a week’s and the sport is full of people waiting for is that you can buy your kid a football and holiday in Spain. the floodgates to open.” “Liberty want to democratise the viewing CRITICALEYE COMMENT of F1, making it more accessible, less predictable and to repackage it for the Charlie Wagstaff Managing Director mobile age,” he says. It plans to leverage Criticaleye the skills at its subsidiary US cable and Mark Gallagher satellite company, Discovery, which CEO, Performance Insights Every business is undergoing owns the rights to show the Olympics Formula One Analyst transformation, yet as a leader across Europe from 2022. making sense of it and its implications Mark has held senior management is a daunting task. Looking at roles within Formula One motor parallels can be inspiring and can “One of the profound changes will be the racing over the last 30 years. give a meaningful perspective. As ability to access paid content wherever Founder and CEO of Performance a fan or even a curious bystander, you are in the world. As it stands today, Insights, he is also co-commentator the Formula One story can deliver even if you pay for premium content, and Formula One analyst for both context and a catalyst. you don’t have global streaming access. broadcasters including the BBC, Mark’s story illustrates the For younger audiences, we need to use ESPN and Sky Sports F1. requirement for a long- Formula One’s data-rich environment Along the way he founded Status term, far-reaching vision that to create compelling online content, Grand Prix and helped develop the stretches beyond the ego including gaming and e-Sports.” new hybrid petrol-electric engine of a dominant leader. It also F1 regulations introduced in 2014. teaches us that technology and To address all of these changes, the innovation cannot be ignored, Contact Mark through: nor can their implications.
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