When I was growing up Formula one was dominated over a twenty-year period by two teams Williams and McLaren. Williams won the driver’s championship seven times in 1980, 1982, 1987, 1992, 1993 1996 and 1997 while McLaren won the drivers’ championship nine times from 1984 -1986, 1988-1991 and again in 1998, 1999.
However, in the last twenty years these two great companies have been on very different trajectories. Today McLaren is a diversified group not only owning a Formula One team, but also manufactures its own high-end sports cars and through McLaren Applied provides a range of technology services and products. Some of these include the electronic control units used in all Formula 1, Indy and NASCAR race cars, the analysing of large data sets to assist drilling, wind turbine and call centre companies and a joint venture with GlaxoSmithKline which develops drugs, vaccines, and medications. Today the McLaren Group has around 4000 employees and was worth £2 billion at the time of founder Ron Dennis’ exit from the company in 2016.
Williams has been in a slow decline for the last twenty years resulting in Frank Williams and Patrick Head, the founders, having to sell Williams in 2020 to avoid the failure of the team. They received £100 million for the company.
My interest in these very different outcomes was piqued through various interviews held with Ron Dennis, engineers and designers who worked for both teams. Both teams were founded by incredible entrepreneurs who built race cars that were world best. Why then did one prosper and grow and the other ultimately withered away?
The difference comes down to what John Maxwell calls the “Law of the Lid”, where an organisation will only grow commensurate with the ability of the leadership provided in the organisation. There are many brilliant entrepreneurs and management teams that start and build businesses but then their leadership ability puts a ceiling on the business.
So where did Ron Dennis and Frank Williams differ in their approach to business and what can we learn from this?
Ability to build a management team
Ron Dennis was able to build a management team to free himself to focus on other areas of growth. Frank Williams and Patrick Head however remained highly involved in the day-to-day management until their respective retirements from Williams.
Evidence of the difficulty Williams experienced in attracting and retaining management talent was evidenced when they lost their key designer Adrian Newey at the end of 1999 racing season. Frank Williams committed to Newey that he would involve him in key decisions including driver selection but then continued, as many entrepreneurs do, to make decisions without consultation or listening to their management team. This behaviour frustrates managers and either leads to their demotivation or in them leaving. In the case of Adrian Newey, he chose to leave after Frank Williams once again failed to include him in driver decisions.
Newey joined McLaren where he designed the McLaren that ultimately brought Lewis Hamilton his first world championship and then left to design the Red Bull that took Sebastian Vettel to four world championships and Max Verstappen to multiple race victories. Many entrepreneurs battle to make the transition from their business being reliant on their brilliance and decision-making abilities to a business reliant on the brilliance and decision-making abilities of a team. This appears to have been the case at Williams.
What got you here won’t get you there
Patrick Head, Williams lead engineer and co-founder was famous for saying “Drivers are like lightbulbs they are interchangeable”. In contrast this to Ron Dennis describes the business of racing as “a simple business in which you have two customers, the drivers, and you need to build them the best race car”. Wow what a difference in views.
Paddy Louw who worked for both Williams and McLaren, recognised the different outcomes for the two teams when he said, Williams remained focussed on the engineering the best race car, where Ron Dennis recognised success in Formula 1 was more than just having a great race car it was also about building and marketing a brand that attracted the best sponsors, drivers, and employees. Here Ron was a master, building McLaren into a brand known for excellence that attracted partners such as: Marlboro who funded McLaren for many years; Hercules Rocket Manufactures who helped him build the first all carbon fibre race car; Ayrton Senna which allowed him to win the Honda engines from Williams; and his partnership with Mercedes which allowed for the development of the McLaren Automotive Division.
Entrepreneurs often have a myopic view of their business and believe the reason for their initial success, in the case of Williams, which was to build fast race cars, is all that is needed. They fail to recognise that business is more complex than merely having a great product or being exceptional at something. Thus, the importance of other aspects of a business such as team culture, marketing, financial management are often seen as secondary or a nuisance resulting in these areas being underdeveloped with long term consequences to the success of the business.
Marshall Goldsmith’s book “What got you here won’t get you there” is an apt description for the reason why careers and business success stall. What made you successful won’t necessarily be what will continue to make you successful. Many entrepreneurs and businesses believe if they continue to repeat the formula that made them successful this will continue to ensure future success which is not always the case.
Vision
With the success McLaren had in the 1980s and 90s, Ron Dennis recognised McLaren had built a valuable brand and had knowledge and technologies that were world best. Ron looked at strategy and asked: “We are spending all this R&D for two race drivers how can we monetise this?” He then launched the McLaren road car which appealed to rich fans of McLaren. He then started developing products and entering partnerships to use McLaren’s knowledge of composite materials used to build race cars, which led to the formation of, McLaren Applied, the technology arm of the McLaren Group. First McLaren worked in other sports to develop yachts, rowing boats, bobsleighs, and bicycles using composite materials. They then added their data analytic abilities to these sports to analyse the athletes and their equipment to improve performance. They took their knowledge in rapid product development and supply chain management to start a consulting business helping other companies in these areas.
Williams found success and then stopped they never asked the question of where they could go. Many entrepreneurs find initial success but then don’t reset the vision on what can still be achieved. Setting a new vision and developing a strategy to achieve it is key to ongoing business success.
Conclusion
There are a few key take a ways:
- Entrepreneurs need to be able to make a shift from creating and selling a product to building a team to do so.
- What allowed someone or a business to be successful is unlikely to be sufficient to ensure success into the future given the various complexities a business face in an ever-changing operating environment
- Businesses need to be lead with a vision and a strategy to achieve success
The above observations are based on publicly available information and won’t fully explain the different outcomes between McLaren and Williams. It should be noted that Frank Williams become a tetraplegic after a road accident in 1986 and whilst he remained an active CEO of Williams for the next twenty-five years the impact of this accident on him and the trajectory of Williams is not known. Frank Williams passed away on 28th November 2021 as the oldest living tetraplegic in the world, a testimony to his positive mindset and energy that drove the creation of one of Formula One’s most successful teams. For Ron Dennis his focus on building a diversified group brought him into conflict with his shareholders who wanted to focus more on the racing team and ultimately this difference in strategic view resulted in Ron Dennis stepping down as CEO and selling his shareholding in McLaren in 2016.
