With the Covid-19 pandemic having dramatic effects across the world of business, many business leaders and entrepreneurs are having to face up to the reality that things are not going to go back to normal any time soon. The challenges posed by the coronavirus are unprecedented, partly because of the nature of the virus, but also because the world has never had such a large population, and one that is used to high levels of mobility and inter-connectivity.
As many readers will be aware, Formula 1 teams responded to the combination of the Covid-19 crisis and a halt being placed on international sports events by pivoting their businesses – almost overnight – and repurposing their facilities towards the design, development and manufacture of components for ventilators and breathing aids. Seven of the UK based teams combined to work under Project Pitlane as part of the UK Government’s Ventilator Challenge initiative, while in Italy Ferrari contributed funding and equipment to support their domestic health service. We have seen McLaren produce trolleys for use in hospitals, and the Mercedes Benz High Performance Powertrain’s division produced Continuous Positive Airways Pressure (CPCP) breathing aids as the result of a dynamic partnership with University College London.
The sport has also accelerated its existing on-line presence with virtual Grands Prix enabling some of Formula 1’s top drivers to compete on-line against professional racers and gamers, illustrating how eSports represents are growing opportunity for the sport both now and in the future. Many hundreds of thousands of fans have been able to enjoy observing and participating in the sport in ways that older fans could never have imagined.
So how have F1 teams been able to pivot their businesses so quickly during the Covid-19 crisis? The answer comes from their experiences gained during previous crises, some of which have posed an existential threat to the teams and caused them to complete rethink their business models – from the customers they serve to the product and service offerings they make.
Around 2000 we saw how the effects of the dot-com bubble affected Formula 1 with major technology companies withdrawing their commercial partnerships, while in 2005 the European Union’s ban on tobacco advertising and sponsorship brought to an end the single largest source of sponsorship revenue on which the industry had come to rely.
The 2008 financial crisis caused the withdrawal from Formula 1 of Honda, Toyota and BMW, together with a great many of the remaining commercial sponsors, while changes in consumer behaviours means that terrestrial television is no longer the primary means for people to watch the sport, moving to pay per view, digital and streaming platforms.
Further challenges have included the push toward environmental sustainability, so that sport which was seen as ‘gas guzzling’ had to address both the optics and the reality of how it uses the planet’s finite resources.
In one of my most popular presentations I explain how, thanks to these challenges, the Formula One Group and individual Formula 1 teams developed new business models and revenue streams in the face of business challenges over which they had little control.
Today teams are selling technology products and services into industries as diverse as automotive, aerospace, healthcare and pharmaceuticals, transport and energy. It transpires that the very disruption created by past crises forced new ways of thinking, unlocking value and innovating, such that long term opportunities emerged which ultimately made businesses more sustainable.
Four steps proved to be critical in pivoting Formula 1’s businesses;
When I ask audiences to tell me how Formula 1 teams make money, 99% of delegates will say ‘selling sponsorship.’ The reality is very different, and the ability of a sport to pivot in times of crisis, to unlock new opportunities and drive value to new customers in new ways, is a lesson which other businesses can learn from.
In conclusion, Covid-19 is the latest and most serious in a long line of significant challenges to hit the business of Formula 1, but if past experience teaches us anything it that businesses will forge new, longer term value in the fires of such crises.