How Red Bull Won Part 1 of Formula 1’s 2022 Season Against Ferrari
A company that sells energy drinks has mastered F1’s complex game of trackside strategy
Read the original article on Medium.
Formula 1 is wrapping up for its summer break. In my head, I imagine all of them drinking champagne on a beach in the South of Europe for a month. All of them lined up along the coast.
In reality, it’s probably two days of champagne and three weeks of analyzing and re-analyzing data for most of them. Thinking about how many scenario and regression models will be built is already hurting my brain.
One team — will probably get a few more days off than the rest — Oracle Red Bull Racing, currently leading the championship with a 97 point lead over Ferrari. It’s a team that has been consistently playing their cards right. To admit this hurts my soul, being a die-hard Mercedes fan. But, if you’re new to F1 — all you need to know it’s the kind of rivalry that will be inherited for generations within families — probably even worse than a Gators vs. Bulldogs collegiate football rivalry. It’s a litmus test, for when you meet another fan. It’s not like they haven’t had their share of PR issues, with the team leadership and family members of prominent people on the team frequently drawing attention via discriminatory comments that will not be acceptable publicly in any US-based organization.
However, it is probably pretty hard not to admire them today as an engineer and a management consultant. The racing ecosystem, especially F1, is not a typical sport. You need all the basic sporting skills to run it — host the show in different cities, broadcast it to the audience, and sell ads to make money.
It also requires engineers who have an in-depth understanding of how to build high-speed cars; supply chain experts who can move millions of dollars worth of technical equipment every two weeks or so around the globe, and combine that with in-depth B2B partnership building knowledge.
It is probably the most expensive sport to run worldwide. Liberty Media’s (Formula 1’s parent company) SEC filings show they finally turned a profit in 2021 — maybe even the first time since the media conglomerate took over in 2017. And it is stated as the fifth goal on the 10-k report — “improving….. the long-term financial stability of the participating Teams”. Surprised it’s not the second or third, but for most teams, that comes from a complicated indirect ROI for their commercial car business. Even Gene Haas, the owner of the Haas F1 team, has probably benefited from an increase in sales of CNC equipment for Haas CNC corporation. CNC aka lathe machines are what haunted me in my 2nd-semester engineering lab, and I will not be boring all of you wonderful folks with any additional details.
All of this makes the Red Bull success story an interesting one. It’s not that Red-Bull doesn’t understand sports. They sponsor teams and athletes in almost every sport. But it’s the engineering and analytical strategy that initially stumped me. Automotive engineering houses that succeed in making good cars, for either regular people or a track — usually have decades, if not centuries’ worth of knowledge and heritage. Unfortunately, they typically misfire for decades before they can even start thinking as a well-oiled machine. Mercedes, the incumbent champion until 2021, even got the basic car concept wrong this year and it has taken them the season till now to rectify, given the budget-constrained era of the sport. And it’s just not the car making; it’s being able to think through pretty complex engineering calls and sometimes responding to a tire-change strategy based on an opponent’s action or unprecedented weather in seconds.
Red Bull hasn’t dropped the ball on track since last year, except a few times. Their marketing plan is as solid as ever, and their partnerships game is probably the best in the business; they have somehow also created an unparalleled engineering organization. Employees at Red Bull describe it as a machine that thinks ten steps ahead. They ended the relationship with their engine supplier Honda in 2022, who took them to their championship win in 2021 after seven years. They built a new engine factory in 2021 while signing a deal last week with Porsche as their new engine provider and equal owner. Examples of diversified long-term strategies like this are a hallmark of successful automotive OEMs, which also shows trackside; except for the fact that Red Bull’s key product is an energy drink. Nevertheless, they usually have made the first tire strategy call or known how to respond precisely to their opponent — something that Ferrari, a company synonymous with racing, has been missing, again and again, this year.
The social media opinion machine thinks Ferrari may have forgotten how to compete, having won their last championship 15 years ago. I respect Ferrari’s history like any other fan but can’t help but wonder if it’s true. I remember someone saying last year to me that Ferrari is an analog player in today’s digital world. It does make some sense to me. The company is hugely Italian and, although the region has a heritage of auto pioneering, the latest talent in automotive innovation is concentrated today in Silicon Valley or Germany. Even most of the F1 teams and talent are in the UK. My hypothesis is that the exchange of ideas from other regions doesn’t happen as much anymore.
I still question some of Mercedes’ strategy calls from last year, and my career in the automotive industry made me pretty skeptical for a while about Red Bull. How could an energy drink manufacturer figure out a world class engineering organization better than car manufacturers? But, I have to accept that they’re visionary in many ways. Adrian Newey, Chief Technology Officer has pioneered quite a few concepts in the sport till-date. They invest the most in young drivers and work actively to find them a full time elite racing career. On the marketing side, while they have a varied strategy, it’s interesting how Red Bull recently hired a US-based full-time TikTok and Twitch streamer to connect to the younger fans, while other teams are still figuring out the micro-marketing era.
They think miles ahead of their opponents, and we realize that while functional knowledge can always be learned — the mindset part is harder to hack.
I still love my teams, but it may be time for the F1 grid to take a 50k view this summer break and learn something new from Red Bull.