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Driving Transformation at

Following the 2017 , 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, . “The cars were essentially a 200 mile the management board of the highly per hour billboard,” he says. successful team, run Mark was invited to Criticaleye’s recent the world famous 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 Racing, which went on to , 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 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 . themselves control cars by themselves. Either way, we need to be relevant and embrace The type of sponsorship that had everything that the 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 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 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 , 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 , 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 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, . 2004 - 2005 Head of sponsorship for Jaguar level of certainty has created another 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. “ 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 and Canon. you to analyse in detail all the factors drive, for example,” Mark explains.

www.criticaleye.com Driving Transformation at Formula One 2 isthat you canbuy your kidafootball and accessible to its audience. “The difference Another issue is that it’s become far less outcome ispredictable,” Mark explains. two hours of sport,especially if the generation who aren’t prepared to watch have to repackage our global sport for a In thismobile world we are going to “Young peoplearen’t watching TV. astheBritishsuch Grand Prix. race, rising to 12 million for a big event people tune in to watch a Formula One 1990s saw anaverage of five million Channel 4.In comparison, theearly 2.5 millionfor theraces itshows on Sky’s pay-per-view service andabout average audience of 500,000through Formula One currently receives an today – andtomorrow − want to watch. acknowledge what theaudience of must The new owners, Liberty Media, www.criticaleye.com nor cantheir implications. innovation cannot beignored, teaches usthat technology and of adominant leader. It also stretches beyond theego term, far-reaching vision that requirement for along- Mark’s story illustrates the both context and acatalyst. the Formula One story candeliver a fan or even acuriousbystander, give ameaningfulperspective. As parallels canbeinspiringand is adaunting task. Looking at making sense of it and its implications transformation, yet asaleader Every businessisundergoing CRITICALEYE COMMENT Criticaleye Managing Director Charlie Wagstaff

Email centric andcommitted to developing business mustbeinnovative, customer- To address allof thesechanges, the including gaming and e-Sports.” to create compelling online content, Formula One’s data-rich environment For younger audiences, we need to use you don’t have global streaming access. even if you pay for premium content, you are in the world. As it stands today, ability to access paid content wherever “One of the profound changes will be the across from 2022. owns the rights to show the Olympics satellite company, Discovery, which the skillsat itssubsidiary UScableand mobile age,” he says. It plans to leverage predictable and to repackage it for the of F1, making it more accessible, less “Liberty want to democratise the viewing holiday in Spain. for thefamily isequivalent to aweek’s to aspirational. A Grand Stand ticket mistake of becoming elitist as opposed nowadays. F1 made the very hard to imagine yourself driving a experience it in your back garden, yet it’s made wasto not bow not out Share that Bernie Ecclestone The biggest The sooner mistake Tweet

Driving Transformation at Formula One the floodgates to open.” and the sport is full of people waiting for The business has stagnated for a decade “A lot of the talent in F1 has been latent. people around him,” says the baton and he just didn’t empower get to a point where it’s time to pass owners delivered far more value. You legacy willbethat thesubsequent It’s a pity because unfortunately his have a clear succession strategy in place. was innot bowingsooner out or having “The biggest mistake that Bernie made and succession. of ignoringleadership development and success, yet thistapered asaresult many years hedrove profits, innovation and multi-billiondollar revenues. For that took thesportto globalprestige Ecclestone, created abusinessmodel internal skills.Former CEO, Bernie www.criticaleye.com Contact Mark through: F1 regulations introduced in2014. new hybrid petrol-electric engine Grand Prix andhelpeddevelop the Along the way hefounded Status and SkyESPN Sports F1. broadcasters including theBBC, and Formula One analyst for Insights, heisalsoco-commentator Founder andCEO of over thelast30 years. roles Formulawithin One motor Mark hasheldsenior management Formula One Analyst CEO, Performance Insights Mark Gallagher  Mark.

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