Episode #244

Maria Franzoni (00:16): Hello and welcome back to The Speaker Show with me your host, Maria Franzoni. Today, we are talking about performance. The Speaker Show is brought to you by Speakers Associates, the global speaker bureau for the world’s most successful organizations, providing keynote speakers for events, conferences, and summits. My guest today has spent his career working in the global sports business of Formula 1 motor racing. This includes 15 years spent on the management boards of two well-known teams, Jordan Grand Prix and Red Bull Racing. And later as managing director of the Cosworth Formula 1 engine company. He now runs his own Formula 1 consulting business – Performance Insights and works with several teams, commercial partners and drivers. His third book – ‘The Business of Winning – Transformation from the Formula 1 track to the Boardroom’ – was published in 2021. Please welcome my guest, Mark Gallagher. Mark thank you so much for joining me you are down under at the moment, aren’t you?

Mark Gallagher (01:15): I am indeed. I’m in sunny, sunny Australia. Well, it’s sunny where I am in South Australia. It’s not so sunny in Sydney, but yeah, I’m enjoying a couple of Northern hemisphere winter month down here in Australia.

Maria Franzoni (01:28): Fantastic, brilliant. So I’m gonna get right to it because anybody listening to this wants to know about Formula 1. This is, you know, it’s exciting. Let’s, it’s exciting and it’s sexy and we love it. And you’ve worked with some of the greatest formula, one world champions. So what defines them? What is their ability to become the best in the world?

Mark Gallagher (01:49): There’s no question that they have to have talent and like anyone in who’s successful in business, you have to have a degree of talent and application, but then they go a big step further. And that big step is the work ethic that they put into really honing those skills and then applying themselves as leaders within a team. And it’s something that you know, I worked very briefly with Eric and center at the beginning of my career. And then I met and worked with Michael Schumacher and more recently with Lewis Hamilton and in these are giants of the industry and they all are superbly talented, but it is really interesting that work ethic comes across. And it’s not something that sports media ever really see because it’s something that’s within the team. And it’s really only people inside the team who get to see the way in which they apply themselves every day of the week, you know, 15, two weeks of the year.

Mark Gallagher (02:49): So a huge work ethic and work, right? Of course each one is slightly different. Michael Schumacher could apply himself almost 24/7 Lewis Hamilton really enjoys getting away from it all periodically and having a complete break from forming the one. And then he comes back fresh and invigorated. So it’s different things for different people, but the thing they all have in common is this formidable work ethic. And then the leadership aspect, it comes down and it’s a, I think I’ve observed it really very much firsthand is when all of these talents come into Formula 1. And perhaps I was even like that. We all think that we are going to be the best we are going to be the greatest we it’s all about. It’s all about ourselves. And then after quite a short time, you see the realization done that to be successful in Formula 1 has to be successful in business.

Mark Gallagher (03:43): It’s about the team of people. It’s about the sum of the parts and the great drivers recognize that sooner than others. And they begin to apply themselves as leaders to the business. I did a, an event with Louis Hamilton just before the pandemic. And he talked about this for about 10 minutes on stage around the fact that he realizes realizes that even his demeanor, when he comes into the office or comes into the factory or turns up at the racetrack, his demeanor has an effect on the team. So he realized at an early stage that he is regarded by the team as a leader. And therefore he has an opportunity to inspire to he has an opportunity to sort of inculcate the, the right approach so that those leadership qualities suddenly start to make themselves felt. And I think that’s again, been one of my big takeaways from working with these so far, these guys who are super successful and Formula 1, it’s them really understanding it’s about teamwork, it’s a people business.

Mark Gallagher (04:51): And the final thing I’ll say is that as individuals, they are just never satisfied with their own performance. They always know there’s a little bit more to come and there’s this relentless enthusiasm for improving performance. And what they do is they apply that to themselves first, but they then export that to the whole team and they, they ask the team to focus on con constantly improving. How can we keep improving performance? So this whole iterative process of continuous improvement is something that they have built into them and they then export it to the wider team. So you add all of those things together, the, the work ethic, the, the, the application of their leadership qualities within the team, the focus on improvement. Ultimately they just reach the top of the, the top of the, the tree in Formula 1. And, and that’s why they become world champions. So very interesting to see that, although they’re different personalities, they’ve got these very similar traits. That’s really

Maria Franzoni (05:56): Interesting that because that it works so well in business as well. You know, if you’ve got that really strong work ethic, and if you, you know, you become the leader and you appreciate the team is so important and that you are never satisfied with what you’ve achieved. You’ve got that you always become obsessed, don’t you with that continuous improvement. I think that’s, that is fascinating. And as you say, we don’t really see that we see the glamor of the race and you don’t see everything else that goes on behind it. And, and that work ethic thing. That’s really interesting. And the difference that you, you shared there between Schumacher and Lewis Hamilton, and I’m thinking, who am I, am I more Lewis Hamilton? Or am I more Schumacher? I don’t know. I think I’m in bit in between , but but no, it’s brilliant. Although I’m not allowed to drive, like either of them on the road, Mark so you’ve talked about team and team is really, really important. And businesses often like to bring speakers who have a sports background, talk about teams, but what’s the difference when we’re talking about teams with regards to Formula 1, how do they sustain high performance? And what is different about the whole Formula 1 setup?

Mark Gallagher (07:04): Well, Maria, as you say, businesses love drawing upon sport and using the powerful analogies of teamwork and even individual performance in sport. So I understand that very well. I’ve shared many a stage with rugby players and, and football coaches and people from lots of other sports. What makes Formula 1 different? And the business community definitely recognizes this is that our teams are very large up to a thousand full-time members of a team. In fact, one or two teams, even larger than that. And see, we’ve got a great many people, less than 10% of our employees travel to the races. So 90% of our staff are working in a factory where we are essentially a technology business. And I think businesses love the fact that a Formula 1 racing team is first and foremost, a technology business, which is a research and development intensive business.

Mark Gallagher (07:57): We manufacture something, we bring a product to market. It happens to be a Formula 1 car, but I can promise you over the years, talking to companies at all kinds of areas of business, they, the fact that we produce something really resonates for them. So that’s a very powerful story. And I think the, therefore the teamwork for us is not confined to what people see on the television or streaming on a device. It’s not the pit crew in the pit lane, although that’s a very powerful story of teamwork for us. That’s the tip of the iceberg. Actually, the teamwork starts many months and indeed years beforehand, when we conceive the car back at base and we design this incredibly complex piece of technology and bring it to market. So the teamwork is from, you know, top to bottom and left to right of the organization.

Mark Gallagher (08:47): Formula 1 teams are quite big complex businesses to run. So business are really interested in how do we then build a high performance team, not amongst 11 football players or you know, but amongst a thousand people, how do you get that? So it comes down to, of course having great leadership comes down to having a team of people who are fully aligned behind what the organization is trying to achieve. And in working at red bull racing and more recently spending time talking to people like Toto Wolf and James Allison at Mercedes-Benz Formula 1 who up a dominating Formula 1 in recent years, what really comes across is that they create a framework within which a team of people benefit from a high degree of psychological safety. They are able to be open and honest and transparent with one another. There’s no fear factor.

Mark Gallagher (09:41): There’s no blame culture. If there’s a challenge, it’s a challenge with the whole organization sets up at overcoming. And the flip side of this Maria, is that when I then have observed and met and indeed talked to senior executives in uncompetitive formula, one teams, you find the, the opposite is the case. You find that there is a fear factor, maybe the left hand side and the right hand side of the business are not communicating that effectively. This tension in the business is perhaps a little bit of blame culture going on, which is always very destructive. So we know from experience with formula on what works, we also know what doesn’t work and to sustain that high performance, you need a highly engaged group of people who really believe in the leadership and in the ambition that the company has and who share that and bring the very best of themselves to the table.

Mark Gallagher (10:36): And if you can unlock that kind of passion for everyone in the organization to be pulling in the same direction, not against one another, but all trying to beat the competition. That’s a very, very powerful thing. And I’ve mentioned also the competition. And I think this is something which when I talk to businesses that are really fascinated by which is that in Formula 1, we, we want to be the best team we can be because we have these nine competitors who we know are packed full of smart, clever people, all trying to, to create a better product than to be does. So there’s an intense, competitive nature to what we do. And we know that if we don’t have the right values and behaviors in our team, we know we’re giving the opposition the opportunity that to adopt those and to beat us. So it becomes all about focusing the team on how can we go from being a good team to being a great team? How can we unlock the potential that exists in, in all of those great people who work for us? And in the case of Formula 1, there’s no doubt that in the last decade, my former team at red bull racing, and then the Mercedes-Benz team at Lewis Hamilton, those are the teams who’ve gotten the people factor, right. And as a result of getting the teamwork flowing, they have just quite frankly, shown a clean pair of heels or wheels. Should I say to the opposition?

Maria Franzoni (12:01): I love that. I love the fact also that, you know, Formula 1 is not just about the sport. It is a tech, you know, it’s a technology company, it’s a, it’s a technology business rather, and it’s also you know, producing products and, and it’s no, it’s fascinating, really fascinating. I know that obviously businesses will be thinking they’ve been through a lot of change and a lot of transformation and Formula 1 as well has been through a lot of change and transformation. Can you gimme some of the examples that you’ve had to face and explain how you’ve managed the lessons and how you’ve then interpreted them and applied them to your business audiences?

Mark Gallagher (12:39): Well, the first thing to say, Maria is that I’ve been speaking about Formula 1 for 20 years. So just standing in front of the mirror, I see change in transformation every day of the week. And we we’ve all changed enormously over the years. And I’m really struck by the way my industry has changed and it is, it’s all changed for good. And I’m, I’m actually more excited about my industry than about Formula 1 today in 2022 than, than I’ve ever been. I mean, it’s, it’s going, it’s, it’s going from strength to strength. We have faced some really existential challenges. And I think everyone in the world at the moment knows what that feels like because the pandemic felt like an existential challenge to so many businesses, but that was only the latest and a series of major challenges for Formula 1. Our business model underwent major changes in the early part of the century.

Mark Gallagher (13:31): If we go back 20 years ago, we moved from a business model entirely reliant on sponsorship to beginning to beginning to change that shift away sponsorship became almost commoditized. And, you know, suddenly we were on the race to the bottom in terms of margins and profitability against thousands of other sports in the world. So we’ve seen some really big changes occur, which means we’ve had to really reinvent ourselves. What, what is it that we’re good at? What is it that our customers want, indeed, who are our customers reevaluating, all of that. So Formula 1 teams have had to really change how they do business, who they do business with and effectively repurpose themselves. You know, where are we actually driving value? Because as you said in your introduction, formula, one is seen from the outside is being in a very sexy, glamorous sport from the inside.

Mark Gallagher (14:24): It’s rather more mundane. You know, we run in a business that’s very expensive to run. It has to make money. We have got to look after the bottom line, we’ve got to be profitable. We’ve got to invest in our future. And as a result, the, the stresses and strains that our business models have been under needed resolution, we needed to find a future. And so that’s really a story that I love sharing and how we did that over the last particularly the last 15. And I mentioned the fact that it’s about playing to your core strengths. What is it that we as a business do that really adds value? Where can we add value to our customers? How can we innovate be creative? And so Formula 1 has really learned how to, to do business in, in, in a lot of quite unique ways.

Mark Gallagher (15:10): In recent years, two examples, my former rivals at McLaren and Williams, they had both set up diversified technology companies working in aerospace, renewable energy, working in defense, working in believe it or not energy efficiency programs. I, myself and I was running the Cosworth formula. One engine business got involved in defense applications for formula. One technology got involved in aerospace applications for our technology. So what we were doing there was really taking a step back and saying, well, our core capability here is, is not motor racing. Our core capability is impressive technology solutions, which we can bring to market in record time and do so at the highest quality possible. And of course, great performance and clients just love that. So we’ve been through a lot of major shifts in our business model over the years. And then of course along came co came COVID and that led to another transformation because the last two years have tested the resilience of, of all businesses and Formula 1, quite frankly, looked like it might be on its knees when the pandemic began how could we travel in the world?

Mark Gallagher (16:24): How could we have something called a world championship? And yet, somehow we managed to do that. And again, we did that by having the agility, to adjust, to play to our strengths, to focus on the things that we can control rather than the things that we had no control over. So yes, Formula 1 became a more predominantly European championship in the last two years with some events in slightly further places, but certainly not the long haul venues that we used to enjoy. I think really interestingly, we pivoted online and, you know, just as we are recording this interview online Formula 1 pivoted online, but how did we do that? Well, we did that by embracing the world of eSports and computer gaming and having virtual world championship events. And in doing that low and behold, we have transformed our business because we’ve engaged with younger audiences who we were struggling to engage with previously.

Mark Gallagher (17:19): And we’ve had an acceleration and growth in all of our global audiences during the pandemic. It’s been an extraordinary example of the fact that sometimes these major challenges that come over the horizon are an extremely useful way of making you innovate and being creative. And it poses the question, why weren’t we doing more of that anyway? So why did it take a pandemic for us to respond in that way? But as a result, Formula 1 in 2022 is a very different beast than it was in 2019. And it’s very exciting. We have new pillars, new, new vertical pillars in terms of profitability and growth of the business. And again, the lesson is, you know, all about adaptability plan, your core strengths, and recognizing that when these major business challenges appear, they appear for everyone it’s not unique to your business. And so if you’re the one who’s prepared to meet that challenge, head on to develop innovative solutions work with that powerful team that I talked about a few moments ago, it’s amazing what can be unlocked. And as a result, you come out the far side, a far better brighter and more resilient business than you were before.

Maria Franzoni (18:33): I can hear the passion. I really can. Mark. I’ve known you for a long time. I’ve known you for the 20 years. I, I mean, I remember you talking about the sponsorship cause we I’ve known you 25 years, I think now and I can hear the passion it’s really ignited in you. It’s wonderful. And these you know, I never, would’ve considered the idea of bringing Formula 1 to, you know, online. Wow. I mean, fantastic, amazing, amazing things. And I also like what you said earlier on about change for good. And I think all of the change that Formula 1 has made in the last 20 years, 25 years that I’ve known you has definitely been for good. It’s been incredible. You touched on digital transformation. What does that look like? Is, is there more digital transformation going on that we are not seeing in Formula 1? Or, or what, what does it look like at the moment?

Mark Gallagher (19:24): So a driver such as Lewis, Hamilton, or world champion max staff can realistically expect to go into a Formula 1 season and not suffer a single reliability problem. So we are designing high end technology. That’s robust and reliable. So quality of outcomes has really been revolutionized by this digital transformation. We then have a third outcome, which is to do with energy efficiency. And it’s, it’s a story that Formula 1 has not perhaps done that good a job at selling, but it’s something that I enjoy talking to my audiences about, which is that we are in a world now where re resources are scarce. We’ve got to make the most of what we have available. Indeed. We’ve got to move away from finite resources. So energy efficiency has become keyword in Formula 1. And we currently have the most energy efficient engines in the world.

Mark Gallagher (20:18): And indeed we are only four years away from abandoning using fossil fuels all together. So again, our digital technologies have enabled us to do a lot more with a lot less. So energy efficiency has become, again, a, a really interesting outcome and we are seeing technologies and Formula 1 today that quite frankly, Maria, no one would’ve thought possible just 10 years ago, artificial intelligence playing a key role in helping us to develop solutions that we previously really would’ve struggled with. And then the final thing, and perhaps the most obvious is the fact that today in formula, one of our cars are the highest performing formula, one cars we’ve ever seen. So we’ve got great performance. We’ve got energy efficiency, we’ve got robust, reliable solutions, and we’ve got a very safe sport. And the digital technologies have all played a key role in helping us to achieve those outcomes. So it’s a very, for me, a very powerful story of transformation of really changing the FA face of our business and making us move into a very different place and a much better place today than at any point in the sports 72 year history.

Maria Franzoni (21:28): You know what? I wish that everybody had those kinds of high standards, especially technical reliability people won’t know, but during art, this podcast, we’ve had two major technical challenges and it’s like, you know, seriously, we’ve been, we’ve been virtual now for two years, let’s have the technology be reliable. So thank goodness we weren’t driving the Formula 1 car Mark, but we nobody noticed we’re so professional. So I’d, I’d like to finish talk about your third. You’ve written your third book, which is amazing. And your third book focuses on how important diversity and inclusion in Formula 1 is which I never really put the two together, but I’m glad to say that it has become an important topic. Talk to me about that. Tell me about how you’ve handled that topic and how Formula 1 is dealing with D D and I DEI that’s the DEI.

Mark Gallagher (22:22): Well, we are recording this podcast on international women’s day and, you know, hashtag break the bias. And in Formula 1, I would love to tell you that we’ll walk up one morning about 20 years ago and decided we needed to simply go out and employ more women. It was slightly more complicated than that because the first thing that really began to change was a recognition that we were short of engineers. And when we started looking at engineering as a discipline, we were finding very few school, children were coming into engineering. Universities were struggling, and actually it was only boys who were predominantly. I’m slightly exaggerating, but it was mainly guys who were coming into engineering. And it was certainly only guys who were applying for engineering jobs and Formula 1s. So purely from a business perspective, we realized half the population wasn’t even considering a career in a technology business like Formula 1.

Mark Gallagher (23:14): So going back 20 years ago, we started initiatives such as Formula 1 in schools, which targets seven to 17 year old school boys and school girls, and introduces them to the stem subjects and shows them that engineering is not boring. It can be incredibly exciting. And of course, in the case of Formula 1, we want to generate young engineers who come and work for us rather than work for British Aerospace or Rolls-Royce or Jaguar Land Rover or other areas of industry. So it all really started with the, to get men and women, boys, and girls interested in engineering and coming to work in Formula 1. And then we began to move into a number of other areas. First of all, there was a growing recognition that to be a successful team in Formula 1, you needed a group of people who were extremely creative innovative looking for competitive advantage over the competition.

Mark Gallagher (24:08): And you tend not to get that when you employ a very like-minded group of people. So basically in Formula 1, we were having a, a bunch of predominantly white European guys, all working together and Formula 1 teams and surprise, surprise, repeat often repeating the same mistakes and and really indulging in group think. And as we have diversified our teams, more men and women, people from different cultures coming to work in Formula 1, we began to see the strengths of that. Now, whenever we had our conversation a few months ago about how digital transformation had helped us to transform safety and Formula 1, another thing that has helped to transform safety and Formula 1 is getting rid of those quite frankly old, tired male teams with a lot of the negative behaviors that comes from a purely male environment. Bringing more women into the workplace has really changed the dynamic in the teams that’s made for a much more creative, innovative, caring environment where people actually want to help each other.

Mark Gallagher (25:09): So the dynamic within teams has really changed as we have embarked upon this diversification strategy over the last 20 years. And then if you move to the last five years since Formula 1 was taken over by Liberty media the American company, there’s been a, there’s been an overt determination to make Formula 1 a much more diverse and inclusive industry. In fact, after we record this podcast, I’m speaking to a multinational company about the diversification strategies, which Formula 1 is currently employing, and every team in Formula 1 has bought into that because all of the leaders recognize the power of having a team that actually reflects the society that you work in. And, and indeed the customer base that you serve, it’s actually completely nonsensical for a team of people not to reflect the society that they operate in. So there are a lot of initiatives at the moment and we will add inclusion to that because as many observers will know only too well in Formula 1, we have this formidable talent called Lewis Hamilton, who has won seven world championship titles and is the first black Formula 1 driver and has challenged our industry to be much more inclusive and is now leading and indeed pioneering some wonderful programs with his team at Mercedes-Benz to bring people of color and people from black communities and people from communities who perhaps wouldn’t normally get the opportunity to even consider working in Formula 1, actually to have that chance to have scholarships and apprenticeships and programs to work in the sport.

Mark Gallagher (26:52): And this is having of course, an enormously beneficial effect on our businesses because not only is it good for our teams to be diverse and inclusive, creative, and innovative, it’s actually good for our business to be seen by society to be contributing in a positive way, towards reaching out to groups of people who very often are being passed by and overlooked. And I’ve spent some time mentoring school children as part of these programs. And I can tell you, Maria, it is so motivational and so inspiring to have a group of 11 or 12 year old stand up in front of you and give you a presentation about why they want to become engineers, boys, and girls seeking to come and work in Formula 1. It’s for me, that’s, as I read, you know, move towards the end of my career, a really powerful takeaway from the change in transformation that’s occurred within the industry.

Mark Gallagher (27:46): One final thing I’ll say to you is that under FAQs in presentations that I give, I would say probably once a month for the last 25 years, someone has asked me, when are we going to see a woman Formula 1 driver? So when I talk about diversity and inclusion, you can imagine this naturally becomes the next question. And the good news is that we now have a number of initiatives to bring women into, to motor racing as professional drivers. My associate David Coulthard former Formula 1 driver he’s chairman of the all women w series championship. And that is now a major support series to Formula 1. And there’s so much momentum behind that. That I’m quite confident that before I hang my, my hat up in Formula 1, I, we will see a full-time female formula, one driver within the next three to five years. And that’s going to be a very powerful message to women and to girls all over the world. Because the one thing that we do know from our experience in Formula 1 is that when people have a role model, it really helps them and inspires them to, to mimic that and to, to achieve those self saying kind of targets and ambitions. So we are on a very good trajectory at the moment, still some way to go, but Formula 1s determined that the teams will reflect society that we serve.

Maria Franzoni (29:14): If only I were a lot younger and I could do that. Oh my goodness. How wonderful. Anyway, Mark, thank you so much for your resilience in this episode. Thank you for the incredible content and value brought us. I hope it hasn’t been too painful.

Mark Gallagher (29:29): Thank you so much, Maria. A pleasure to talk with you.

Maria Franzoni (29:31): Wonderful and thank you everybody for listening to The Speaker Show. If you enjoyed this episode, please leave a rating on apple podcasts and you can keep up with future episodes on the Speakers Associates website, which is speakersassociates.com or your favorite podcast app. Go and grab a copy of The Business of Winning: Insights in Transformation from F1 to the Boardroom by Mark Gallagher. And if you would like to invite Mark to speak at your next conference or event, please get in touch with Speakers Associates in good time to book him. So you won’t be disappointed cuz he might be somewhere else in the world and you need him with you take care and I will see you all next week. Thank you.