HIGHLIGHTS: Zak Brown - CEO of McLaren Racing

0:00Hi everybody, tune in to this short version of the podcast, which we do every Friday. For the long version, tune in on Wednesdays. Hi everybody and welcome to In Good Company. I'm Nikolaj Tangen, the CEO of the Norwegian Wealth Fund. And today I'm speaking with Zach Brown, the CEO of McLaren Racing, one of the most remarkable turnarounds Formula One has ever seen. Well, I would argue it's one of the most remarkable turnarounds I've ever seen anywhere. Zach has transformed McLaren from a struggling mid-pack team into a champion leader and you are currently dominating the F1 season. Well done. So let's just dive straight in.

0:36Why are you winning everything this year? People, if I had to give, of course, it's not a simple answer, and it's never quite as simple as one thing, but it's our people and specifically our culture. What we've been able to do here, if I take a step back, we're the second most successful Formula One team of all time, second most historic next to Ferrari, which is good company. And we certainly have won a lot of races and world championships over the years, but really started to struggle 10, 15 years ago and lost our way for a variety of reasons. But probably the biggest impact being we lost our way as a team, teamwork and that culture.

1:24And so, of course, we've had great investment. We've got great drivers. We have new wind tunnels, all the things that people are the tools that they need to be able to get back to the front. But the way we've been able to unlock the performance of our people through a great culture of transparency, hard work, incremental improvement, real talks, park your feelings at the doors. All those things have just made everyone rowing the same direction. When you get 1 ,400 people rowing the same direction, it can be pretty powerful. But, I mean, what exactly have you done? If you just take us through some of the steps.

2:05Yeah. So you joined in 16, right? I joined at the very end of 16, December. Following some pretty bad experiences with a Honda. Yeah, we were at a record low in sponsorship, in results on track. Our fans weren't happy. And it was a pretty toxic work environment. And as I say, other than that, everything was great. But what we did have was a great brand in a great sport with great history. And clearly, we had great people because we have people that have been here for 20, 30, 40 years. And you still have a lot of the same people, right? So you haven't really smoked out a lot of people. Yeah. Well, I would say the majority were here during our winning ways.

2:49and also when we were terrible. How important is the car? Very important. Critically important. So you have – I mean it's a stupid question, right? But you said it's about the people. No, it's not a stupid question. It's one I'm asked all the time. And here's how I would say – First of all, you need to have both. But I would say there are six drivers that can win the world championship out of 20. but they have to be in two of the best cars. So two of the 10 cars can win the Drivers World Championship, but only six of the 20. So you got to have one of the best two cars in the business, or it doesn't matter who's driving.

3:37How do you get two of the best cars? How do you make them? What do you do? Good question. I mean, as I tell people in Formula one, the worst team is really good. 2 % separate the best from the worst. If you think about all the industries out there, 2 % is our margin of error, which explains why we work so hard for the smallest incremental gain of milliseconds. It's an aerodynamic game. It's a tire wear game, which also comes from aerodynamics. So it's primarily an aerodynamic game, but that then facilitates your mechanical grip, your tire wear. And then, of course, you have things like strategy.

4:15And you got to have the best of everything. Let's talk about some of the really good sniffing you've done lately. Why are Lando and Oscar so good? First and foremost, they're unbelievably naturally talented, right? You see this in all sports. It's that anticipated rookie coming in who's just had a stellar career through high school, college. They just run faster. They throw better. They read the game better. Whatever it is, Lando and Oscar are two of the six best drivers in the world on a grid of 20. Then you get into the qualities of them as a human being. highly intelligent, which you need to be as a Formula One driver.

5:07This isn't just get in a car. You need to technically understand what's going on. So they're high IQ people. They're great in a team environment. They're honest. They don't have an edge to them. A lot of that, we look at families and upbringings. So they're just a complete package of what you see is what you get. And money and fame and success have not gone to their head whatsoever. It's gone to their car collection. Can you predict that ahead of time, whether success will go to somebody's head? Yes and no. I think it's something that you're looking for when you're bringing someone in of how grounded is this person.

5:48But sometimes you get it right. Sometimes you get it wrong. But it's definitely something that you're looking for in that early day analysis of, do I want this driver in my team? How important is the way they work with fans? I mean, you talk about the importance of your fan base a lot right just tell me about how you look at fans without fans there's no mclaren just simple straightforward we're in the sport and entertainment business you had some people in the sport it was like we shouldn't be in the entertainment business and i was just i don't understand like if you buy a ticket to go sit down and watch a fireworks a movie a football match or a motor race that's entertainment that's do you think you care more about your fans than the other teams?

6:36It'd probably be unfair of me to say that, but I think so. And I only say that because of how much... And as a fan, let's say now I'm like a diehard McLaurin fan. How do I see that you really care? We did a great event in Trafalgar Square, free, open to the fans, 40 ,000 people through two days. We just did a huge fan event. All of this on our dime and our partners' dimes, time and investment in Austin to get us closer to the fans. Only 1 % of our fans will ever go to a race. So the amount of effort we put into bringing Formula One to the 99 % that'll never go to a race. Our drivers, you'll never see them not stop and sign an autograph and take a photo for a fan.

7:35We went back to probably the greatest example, our iconic papaya colors, which you'll kind of see right there. We were a dark team. I described this is Darth Vader, which Darth Vader is cool, but dark gray exclusive. We went to papaya. All our fans, when I started, were going, bring back the papaya. All right, we'll bring back the papaya. And I remember one of the old school teammates around here was like, we're only doing that because that's what the fans want. And I'm like, is that kind of a trick question? So our livery today, our iconic papaya, we brought back to McLaren because we listened to our fans.

8:12That's what our fans wanted. How important has Netflix been to build the value of your brand? They've been fantastic. I don't think any of us saw that coming. It's brought in North. So if you look at what Formula One needed when Liberty acquired it, it needed North America from a geographic standpoint. It needed a more diverse and female fan base and a younger fan base. tick, tick, tick, tick. We went from one race in America to three to a new huge TV deal with Apple. 75 % of our new fans are women and a younger audience, age 18 to 34. So it totally moved the needle in the three areas that when you went and talked to corporate sponsors, yeah, but North America is big for us and Formula One is not big there.

9:07The fan base isn't young enough. It's not diverse enough. Netflix helped us lead the way on ringing the bell on all three of those aspects. And then, of course, we've built on it. You have your Brad Pitt movie. All these things have accelerated our new fan base. Do you personally celebrate enough? Not enough. Not enough. Because you won last night and you look very sharp. We want to win in Brazil. So that's something that I've had to personally work on over the years. I've had comments from my staff, whether it was my old company or here, of like, is he ever happy? He's always kind of busting our chops.

9:47I'm just trying to move forward. Are you ever happy? Yeah. Yeah. Definitely. I'm happy. Just not happy for long periods of time. Doesn't mean I'm unhappy. I just kind of like, I'm happy. That's right. But like, I'm thrilled we won last night. It was amazing. but like we got a job to do with the next race in brazil we got four races to go