The Business of Auto Racing
A synergistic relationship between the business world and sports has been an ever increasing one with each passing year throughout North America and worldwide. Make no mistake, sports at the highest level is big business and has been for decades and the bar continues to be raised with each passing day.
Intense competitive spirit is largely what drives the unity between sports and business when alliances are initially conceived. The sports athlete or team wants to have the resources necessary to draw out the best, whether it is equipment for an individual athlete or additional sponsorship money where a team is then able to financially justify paying the salary of a top free agent on the market. The Canadian Business Journal takes an inside look at the unique business partnership between an IndyCar Racing Team, namely Chip Ganassi Racing, and NTT Data on the Verizon IndyCar series circuit.
IndyCars are finely tuned pieces of high-tech machinery, each worth the north side of $1 million. Australian IndyCar driver Ryan Briscoe’s No. 8 NTT Data Chip Ganassi Racing car comes equipped with 750HP revving at about 12,000RPM in a V6 2.2L twin turbo direct-injection Chevrolet engine. Designed with a six-speed gearbox and all-wheel carbon brakes, it is capable of reaching speeds upwards of 320km/hr. on long straightaways.
With the Honda Indy Toronto just recently being held on the grounds of Exhibition Place, we decided to take an inside look at the fast-paced world of IndyCar racing, and specifically the burgeoning relationship that has bloomed borne out of the formation of the NTT Data Chip Ganassi Racing team and its driver Ryan Briscoe. It was an opportunity to see first hand how this notable relationship between a sports team and a title sponsor co-exist and serve to benefit one another.
NTT Data is a Japanese company that was formed in 1988 as a spinoff from NTT (Nippon Telegraph and Telephone Corp.) which was founded in 1952. NTT Data ranks as the sixth-largest Internet Technology and IT consulting company in the world with revenues of about $15 billion and more than 75,000 employees in 40 countries worldwide. Already with an incredibly strong market share throughout Japan, a corporate decision was made to expand into other regions of the world and by extension other areas of business.
Jeff Womack, Senior Vice President & Chief Marketing Officer with NTT Data tells us the company expanded its footprint into North America about two years ago through a number of acquisitions done outside of Japan with a very robust initial globalization strategy being put in place about five or six years ago.
“We had enough scale that about two and a half years ago we consolidated all of the business outside of Japan, and North America in particular, and then rebranded all of that business as NTT Data,” Womack says.
“As we launched the brand in North America we were looking for marketing platforms that gave us an opportunity to get into a very crowded space,” Womack continues. “We compete against Accenture, IBM, HP and CSC; these are brands that have been around for decades.”
It didn’t take executives with NTT Data very long to reach the conclusion there are several high-profile opportunities from which to expand their own company’s brand here in North America. The primary focus right off the hop was to penetrate the very lucrative North American market in the most efficient manner possible, which meant seeking out a top-flight entity with which to do business.
“What is unique about the IndyCar platform for us is that our focus is North America and their business is North America,” Womack relates. “We’ll touch down into Latin America once in a while.”
Success in brand awareness marketing always centres on being able to accurately focus right in on a target audience and build customer knowledge and loyalty from there. The way Womack describes the match between his company and the IndyCar circuit makes total sense when you factor in the frequency and rate of return per race.
“I’ll get folks who will say F1 is more popular around the world, and that may be the case, but for us that one race in the U.S. and the one in Canada (Montreal) doesn’t really do it for us for the price,” he rationalizes. “The ability to have an entire season and hit Canada and Texas, California and the east coast, it’s just perfect for us. It allows us to target clients in those markets while getting our employees engaged in those areas, so it just fits really well.”
During our inside look at the world of big business and auto racing, The Canadian Business Journal spent quality time with some of the key executives at NTT Data and the Ganassi Racing team during the Honda Indy Toronto weekend. With Toronto being the hub of Canadian business both nationally and internationally, and it now being one of the largest cities in all of North America, penetrating the established market with its own core business is something NTT Data has strong designs on achieving. Each year the Honda Indy Toronto generates millions of dollars in revenue for the city.
In Toronto, the Chip Ganassi Racing team had six massive trailers set up in the paddock area, which essentially serves as home base for the entire team during race weekend. One of the trailers is emblazoned with NTT Data Chip Ganassi Racing, another Novo Nordisk and the other four are Target Chip Ganassi Racing. The trailers all fit neatly together like a puzzle, creating a gigantic temporary indoor living and working quarters allowing team members to navigate from one end to the other. Inside, these trailers have all the necessary amenities, including separate rooms for meetings and quiet areas where the drivers may want to be alone. These huge transportable home offices on wheels are pulled behind transport trucks from city to city throughout the season. Travelling north of the border is always a special occasion on the calendar.
“Canada is a big focus for us,” Womack reveals. “We have about 1,000 employees in Canada and I think we are the largest employer in Nova Scotia and have a big presence in Halifax. We have a big delivery centre there that supports Canadian and U.S. business but as far as Canadian clients, it’s still an emerging market for us. We are really increasing the level of focus for the Canadian business.”
Womack and his team have a suite at the Honda Indy where they act as host to more than 50 clients over the course of the two days of racing. Those clients range from high-level retail to financial services and most any other sector where Internet technology services and data management are involved. The fact NTT Data clients are treated to spend a great weekend watching auto racing makes it that much more special. It’s much the same at the other stops on the IndyCar circuit, be it San Francisco or a Florida race; there is an ability to directly engage clients; they don’t have to get on a plane. They can drive in because it’s local for them.
The NTT Data and Chip Ganassi Racing relationship first got off starting line in 2013.
“We began with an Indianapolis 500-only effort last year and we were probably talking for several months before putting that together,” remarks Steve Lauletta, President of Chip Ganassi Racing Teams. “That led us to building off the success that we had there.”
As the team’s driver, the partnership between NTT Data and Ganassi Racing is something veteran racer Ryan Briscoe is ecstatic about.
“It’s awesome,” he beams. “They are just such a great company with great people. It’s not just a sponsorship, it’s a real partnership. The work they do for the team is incredible. They’ve redesigned my website and the team’s website as well. They didn’t have to; they just love being involved. Everyone from CEO John McCain and Jeff Womack – they are just so into it. They’re always sending me text messages. The whole thing is just huge. It’s global support.”
Regardless of whether you are a kid go-karting – as Briscoe did in his younger days – or a seasoned professional auto racer who is recognized as a major star around the world, it’s integral that a partnership be based on positive ideals and a shared confidence in on another’s abilities.
“Every weekend, whether you’ve had a good day or a bad day you know they’re right behind us and that really means a lot,” Briscoe offers.
Another key difference for the Ganassi Racing team vs. many of their competitors is that they are not only involved in IndyCar but also NASCAR and IMSA, which is an area Lauletta says could provide additional synergies for NTT Data in expanding an already strong partnership.
“They were part of our IMSA team at Indianapolis and part of our NASCAR team in Texas, which is their home market,” Lauletta notes. “That led us to open more conversations about what a full season effort like we’re doing now would be for us and for them both on the marketing side but also on how we could take their expertise to get better both on and off the track and I think that’s the exciting part for us.”
A successful sports business partnership involves far more than simply slapping a brand logo on a race car. It’s about leaning on one another and maximizing each other’s strengths to enhance the well being of both sides – give and take. With respect to NTT Data teaming up with Ganassi Racing it’s been a very compatible relationship over the past couple of years.
“They are very partner-centric and we didn’t want it to be about handing over sponsorship money to have our logo on the car to get some visibility,” Womack remarks. “We really wanted to have a true partnership where they were providing a winning platform obviously; we were able to have a platform for brand awareness because we were a new brand and also what we do best – IT services.”
The two companies have already begun work on a few other projects together where NTT Data will be able to enhance IT services to the team in an effort to make it more competitive. That in turn invigorates employees who become that much more motivated to succeed.
“When you look at who our typical client base would be, it would be like a Fortune 1,000 – Fortune 2,000, so Ganassi Racing wouldn’t necessarily be considered a Fortune 2,000 with 300 employees even though it’s one of the bigger racing teams – so there is some scalability there, but yet the same issues they face on a day to day basis,” Womack says.
Immense amounts of data is constantly being produced and not having somewhere to store it, secure it, analyze it – those are the same issues that a large bank or financial institution faces; dealing with the opportunity of the cloud vs. not going to the cloud and so on.
Securing tier one sponsors takes a thorough, concerted effort and is crucial for IndyCar teams in order to remain competitive where thousands of a second can be the difference between landing pole position and perhaps starting on Row 4.
“Corporate sponsorship is the lifeblood of our teams across the board,” Lauletta admits. “The more we can deliver value to a partner like NTT where we can help open doors for them to our other partners the better it will be. Once a year we bring all of our partners together and talk about their businesses collectively so we can see if there are any fits. There might be an opportunity with one of our other partners for NTT to help them with their IT services and vice versa.”
A Partnership Ecosystem
A fundamental challenge in setting up a successful sports business partnership is the ability for both sides to truly understand the wants and requirements of the other party so that each can achieve their goals with maximum efficiency and output.
“One of the things that was appealing to us was their philosophy around partners and it wasn’t even just NTT Data and Ganassi but it’s this kind of partner ecosystem,” Womack adds. “It was appealing for us to see how they were leveraging Target, for example, when they were looking for new real estate in Charlotte they were able leverage Target’s real estate and retail expertise. It’s a great ecosystem of partners that centres on the team and its performance.”
NTT Data always has some form of employee representation at each of the IndyCar races throughout the year but being a diehard supporter, Womack gets out to as many as he can. It’s easy to see he’s a big sports fan and truly enjoys being part of it all. That type of genuine enthusiasm goes a long way in building a solid relationship.
“Usually there is a mix,” Womack says regarding who typically represents NTT Data at the races. “My boss (John McCain) is our CEO and just happens to be a pretty big IndyCar fan so he tends to be there. I’ll go and some of our sales executives will be there – heavy on hosting our clients – and then we always have a mix of local employees as well.”
In total, NTT Data has about 20,000 employees that support the North American business; with about 10,000 are located in North America and the other 10,000 in India. There are about 35,000 employees are in Japan, so it’s not a surprise to learn there are lots of Ryan Briscoe fans in Japan and India who may not have been paying attention to IndyCar before. It’s expanded engagement across an even more diversified cross section and it’s a method that is working beautifully.
North America is definitely the crown jewel that IndyCar and its sponsors want to maximize but there are other lucrative international markets to keep an eye on down the road. What will be the strategy for Ganassi Racing over the near term, of say the next five years?
“The series sets the schedule so we go where they want us to go,” Lauletta responds. “Up until this year the last several years we did go to Brazil and took a year off. I think they’re trying to go back there next year. I think the series feels there’s an opportunity two or three times a year to go outside of North America and bring our cars and our stars and partners to the rest of the world. When IndyCar releases the schedule we’ll show up and try to win every race we can.”
What about the evolution of sports as a big business?
“I’ve been around it for 20-plus years in sports marketing and I think it’s still one of the most powerful marketing platforms that a brand can use,” Lauletta replies. “It’s live theatre and all about the passion of sports whether it is auto racing or any other kind of sports most people follow a sport of some sort and so the challenge again is how do you cut through that and use it to your benefit to grow your brand instead of just being there, and that’s always evolving.”
Womack echoes much of Lauletta’s sentiments.
“For us it’s a matter of finding what works best for you, tied to your go-to-market strategy and your personality of the company.”
Interestingly, during the same weekend that the IndyCars were in Toronto, the British Open Golf Championship was simultaneously being contested at Royal Liverpool on the west coast of England where NTT Data is also one of the major premier sponsors.
“We don’t do a lot of sports marketing and sports sponsorships and IndyCar and the British Open are our two premier ones and that’s big activation for us,” Womack confirms. “What’s interesting is if you go there what you’d see a lot in our hospitality tent are about 85 Japanese executives because golf is huge in Japan and so a lot of the justification for the British Open came out of our corporate office in Japan.”
Womack says NTT Data does not send many representatives from North America, but as a company it fits well with the corporate profile and what you’ll see in some of the messaging and advertisements that they’ve done around that is very data centric and quite similar to what they ultimately look at from the standpoint of IndyCar – the notion of producing a lot of data and having the correct analytics. If you can collect and analyze better than your competitors, it gives you an edge.
The high growth market for NTT Data, outside of Japan, is undoubtedly North America. It’s where the most opportunity can be realized.
“From Chip on down, we all work on one simple thing – and that’s winning,” Lauletta says. “Winning is both on and off the track. Delivering value to our partners is off the track and winning races and championships on the track. It all happens together; you can’t do one without the other. It’s always a balance of doing both that we focus on. It has paid off in the form of a four-car team that’s doing pretty well.”
Teams and Individuals
Four Ganassi Racing teammates, who on the one hand have developed friendships and want to share thoughts and ideas, but on the other hand each is an individual driver who wants to go out and earn that checkered flag. It creates an interesting dynamic of the broader team and the individual driver looking for personal success. As professionals everyone knows what is acceptable and what goes beyond the boundaries.
“Chip has one rule – don’t take your teammate out,” Briscoe laughs, all the while making it clear that the rule is in fact one to be strictly adhered to. “We’re all at a stage where we can race each other hard but maintain that level of respect of being teammates. We work together really well during practice sessions, qualifying sessions; really just trying to push the whole team onward and upward.”
The fact the main principles involved at NTT Data are themselves big auto racing fans, makes the partnership that much more enjoyable for Briscoe and his team, which includes an 11-person pit crew.
“They come on the grid and take pictures and are very enthusiastic,” Briscoe says of the NTT Data personnel. “They come in and want to make sure the car looks great and are very involved with delivery. We had a really intense stretch through the middle of the season where the cars get beat up a bit and they were like ‘come on we need some new paint on this, we need the car looking good’. We just love that enthusiasm but when it comes to the engineering they stay out of it. They become fans and are 100% supportive of what we do.”
In his assessment of the Honda Indy Toronto, Briscoe seems to hold a similar opinion as many of the other IndyCar drivers both past and present in rating the overall experience.
“I love the city but the track is tough,” he bluntly states. “It’s a very bumpy, old surface and generally promotes some accidents. As a driver you have to view it as a potential opportunity to get ahead of guys.”
“I love coming to Toronto where there are passionate fans,” Briscoe smiles. “Whether it’s been (Paul) Tracy in the past, (Alex) Tagliani or (James) Hinchcliffe now, there’s always huge support for their Canadian drivers, which is awesome, and it really fills the grandstands. And nowadays they are very vocal on social media, which is good because it gets people involved and talking about the sport.
A return to Australia where there was once a famous race at Surfer’s Paradise is something the native from Down Under would love, but doesn’t see it in the cards anytime soon.
“It kind of sucks that we don’t race down there,” Briscoe laments. “It’s unfortunate because if you ask the drivers on the grid what track they’d like to go to that isn’t on the calendar, most would say Surfer’s Paradise. The first ever IndyCar race I saw was at the Gold Coast and it was quite special for me to win the last ever one that we held there.”
But Briscoe is realistic in knowing that heading back to Oz likely wouldn’t carry enough economic value in order to haul the IndyCars to other side of the world for just a single race. Nonetheless, the series as a whole has never been in better shape both on and off the track here in North America.
“We’re breaking track records just about everywhere we go,” Briscoe says. “Since 2012 when this car came on the scene and Chevrolet came on board with these V6 engines, horsepower has been going up continually between Honda and Chevrolet so every month really we’re getting more power. I think the more horsepower we have the better.”
Safety is No. 1
The primary objective for the team and its sponsors is always safety. It is clearly the No. 1 priority moving forward with these race cars. Outright performance is irrelevant nowadays because speed has to be limited for safety reasons. That is a main reason why F1 goes to a skinny rear wing because technology is way ahead of what drivers can take for speed and accidents.
“It’s why we limit the horsepower on ovals so that the cars don’t go as fast as they potentially could,” Briscoe replies. “As long as it’s safe, more horsepower would be better for the sport.”
A Unified Series
The IndyCar series attracts a strong contingent of foreign-born drivers and the schedule includes more road or street races than ovals. The series runs a total of 18 races in 2014 in 15 different cities with two races held during one weekend in Toronto, Houston and Detroit.
Encouraging for IndyCar is that attendance figures have been strong everywhere races have been held. The series is once again flourishing after the reunification of the Champ Car series and IndyCar, which had split back in the mid 1990s over a disagreement about preferred race courses, namely ovals vs. road courses. That split caused a great deal of damage to both entities for a number of years.
During the first few seasons of the IRL circuit, which raced exclusively on ovals, there were sparse schedules and mostly unknown drivers, and inexperienced teams, even in the prestigious Indianapolis 500. The split also damaged the overall sponsorship of U.S. open-wheel racing with both sides claiming they were the premier circuit, leaving a number of tier-one sponsors opting to just drop out altogether. With both sides dug in deep, in 2006 and 2007, several top CART and IRL drivers bolted for the more lucrative NASCAR, including the likes of Dario Franchitti, A.J. Allmendinger, Sam Hornish, Jr., and Danica Patrick.
Business smarts eventually took over and cooler heads finally prevailed, and perhaps it was out of sheer necessity to save open-wheel auto racing in North America that reunification took place in 2008. From that point the series has continued to gain in popularity with each passing season and is once again viewed as a top-level, tier-one sport in North America.