Business View Magazine | June 2020

3 BUSINESS VIEW MAGAZINE JUNE 2020 New Study Uses Formula 1 Racing To Show How Business Leaders Pinpoint Problems W hen companies hit a rough patch, managers race to figure out why they’re underperforming. But today’s businesses involve increasingly complex systems with endless moving parts; so how do they pinpoint the weak links? To find out, researchers at the UBC Sauder School of Business and INSEAD turned to one of the most performance-driven businesses on the planet: Formula 1 racing. And what they found is the racing world’s top managers look over the fence to their competitors. Unlike other sports, success or failure in Formula 1 doesn’t only come down to the skill of its drivers; the cars themselves are feats of automotive engineering, and the companies behind those cars, in turn, have to operate like well-oiled machines. As a result, Formula 1 managers are constantly forced to determine whether the suppliers they rely on are speeding up or slowing their success, and whether they should stick with those suppliers or hit the brakes. The problem is, when the components, services and systems are highly specialized, as they are in countless modern businesses, diagnosing exactly what’s causing the slowdown can be tough. “Think of an organization as a really complex piece of machinery, like a computer or a jet engine with thousands of moving parts that are interconnected in different ways,” explains UBC Sauder assistant professor and study coauthor David Clough. “If there’s a problem it can cascade through the business and have consequences in quite distant parts of the organization. So, it’s difficult to get an impression of which component is at fault.” For the new study, titled Tie Dissolution in Market Networks: A Theory of Vicarious Performance Feedback , Clough and his coauthor Henning Piezunka, an assistant professor at INSEAD, UBC SAUDER SCHOOL OF BUSINESS AND INSEAD RACE FOR ANSWERS O p e n i n g L i n e s J U N E 2 0 2 0