Business Philosophy according to Enzo Ferrari

By Patrick Henz

“An inspiration for managers, leaders and everybody interested in Enzo Ferrari's life.”

Born 1898 in the Northern-Italian city of Modena, Enzo Ferrari lived his dream and founded the world’s most famous sports car manufacturer. This book analyzes how he achieved his goals by what are considered to be modern concepts. Or were leadership theories, emotional intelligence, business ethics, client orientation and sustainability already guiding principles of business in the beginning of the last century.

In his own words, and drawing several parallels to Italian history, he thought he was living in the wrong time. But taking off Il Commendatore’s sunglasses, this book presents him as a surprisingly modern leader, who, conscious or not, acted conform the latest business and leadership models, confirmed by key decisions of his company, including the racing-team.

The book not only uses racing decisions and car development as examples, including many photos, but sets them in relation to Enzo’s personal business philosophy.

6. edition.

• Language: English
• Publisher: aix books
• Release date: Sep 24, 2017
• ISBN: 9781386016663

Patrick Henz

Patrick Henz holds a master degree in business economics of the University Cologne, with focus on marketing, distribution and business- & social-psychology. After working in marketing and new economy in Germany, he went to Mexico City and started in 2007 his Compliance career, first being responsible for implementation and then as Compliance Officer for Mexico, Central America and the Caribbean. In this time he became co-founder of the Mexican Ethics & Compliance Forum, panelist at The Economist Mexico Summit 2015 and publisher & co-author, of the Mexican Ethics and Compliance Manual.

Book preview

DEDICATION

To my family. My parents Falko und Ursula, who prepared me for the race and my wife Claudia and daughter Valeria, who gave me the time and support to work on this book.

CONTENTS

Foreword, 6. Edition

Even if Enzo Ferrari’s story started much earlier, this year’s 70 th anniversary of the Ferrari corporation is a good reason to take the book and update some of the details. While doing so, it was important for me to include an additional chapter to explain how Enzo’s spirit lives on and got incorporated into the company’s values and Code of Conduct. What employees and other stakeholders can read here, can all be directly linked to

Il Commendatore himself. A precious advantage for the employer, as the values don’t stay abstract, but receive a face and even voice, as still a lot of video material exists.

For the additional photo material and detailed information, my thanks to Alain Bellehumeur (Musée Gilles Villeneuve), Lisa Cecchetto (Ristorante Il Cavallino), Jim Glickenhaus (SCG Cars), Pierpaolo Lazzarini (Lazzarini Desgin), Gene Leeds (SCG Cars), Paolo Martin, Marco Procaccine (MP Cardesign), Tim Smith (Element Public Relations) and Pete Williams (The Decision Playbook).

I hope that you, the reader, enjoy this trip into the past and discover Enzo Ferrari as a modern leader and manager. He was a positive example, but of course not alone. As described in this book, many others crossed his way, entering and leaving his circle of trust. This competitive atmosphere mixed with Latin culture created a combination from which most players benefited, and thanks to Industry 4.0 it is more than ever an inspiration for today’s business.

Patrick Henz, Atlanta 2017

Foreword, 5. Edition

Writing a book is like a travel, you prepare the suitcases, put them into the trunk and start the engine. Nevertheless all the planning, at the end you do not know in detail what you will see and whom you will meet. The same happened to me. Thanks to the earlier edition, I came into contact with new people and travelled to different places. Due to this, a fifth edition became inevitable. My thanks go to (in alphabetical order): Eduardo Aguilar (Electronic Arts), Veronica Bellinazzi (Museo Enzo Ferrari), Richard Hilleman (Amazon Games), Jack Koobs de Hartog (Author and Bizzarrini expert), Joe Leigh (Ferrari World Abu Dabi), Eric Hutchison (Electric GT), Rick Koenig (mPerpeto), Daniele Martin (ATS Automobili Turismo Sport), Gianluca Perdicca (Autodelta Italia), Mathias Pfaffel (Audi Tradition Unternehmsarchiv) and Raffaella Quaquaro (Museo Storico Alfa Romeo).

I hope, even more than before, Business Philosophy according to Enzo Ferrari became a scientific, but also entertaining management book. Maybe you can enjoy it with a good class of Italian white wine. Why from not from San Gimignano, the beautiful medieval town in Tuscany, around 84 kilometers away from Ferrari’s Mugello race track. A must see if you attend today’s revival of the famous open-road race Mille Miglia.

Wherever and whenever you are able to read these lines, you will discover that sustainability and leadership skills are no newly invented models, but similar than today already existed in the last century and further back; Enzo Ferrari and many of his companions are today as relevant and inspiring as they had been in the middle of the 20th century. Even more, thanks to latest technological, as Industry 4.0 and beyond, the craftsman and artistic entrepreneur as Enzo returns and celebrates a Renaissance!

Patrick Henz, Atlanta 2016

Foreword

Born back in 1898, Enzo Ferrari’s life stays relevant, as his philosophy based on integrity, respect and humbleness did not lost anything of its importance. Just the opposite, such values are the pillars for sustainable success and a protection against fraud and corruption. Many of his decisions let to tangible results and can be related directly to championships and the development of unique automobiles.

It was a pleasure to discover Enzo Ferrari’s world, also as it was not only a journey into the past, but explains a business culture, which is still present today. For this on a second level, this book is more than a biography, but is also based on my 10 years of business experience in Mexico, and Latin America in general.  It presents the Latin countries not as risk factors, but as a business culture, which can inspire us. Doing so, Enzo’s ideas are similar to Steve Jobs, Bill Gates or Richard Branson. Interesting here is that these people not only live and lived nearly half a century later than him, but furthermore have and had been active in complete different cultural regions and types of business.

Thanks to his emotional intelligence and self-education, Enzo Ferrari was able to handle difficult situations and different kind of characters, comparable to today’s Millennials. We have modern theories and vocabulary, but if you analyze the person, Enzo’s skills and methods still would make him today a modern and successful leader.

Integrity based leadership is not just comfortable for the employees, but it is an important success-factor for the company. Due to the brand evaluation consultancy Brand Finance, Ferrari is the world’s most powerful brand today. With an overall ranking of AAA+, it received top scores in the categories desirability, loyalty and consumer sentiment to visual identify, online presence and employee satisfaction; just as Enzo described it as elite works. Being leader in these categories allows the company to sell their cars with attractive margins and use the prancing horse further for other merchandising as clothes, watches and even strollers. The Ferrari Corporation is not the exception, but the rule that integrity leads to profitable and sustainable business.

Taking one of his quotes I should like to put something new into my cars every morning, I also detected myself to continuously change and add parts to book. This is why the fourth edition includes many differences to the first one.

Patrick Henz, Atlanta 2016

1 MAN & MYTH

1.1)  Il Commendatore

1.2)  Il Cavallino Rampante

1.3)  Creating a Myth

1.4)  I want to build a car that’s faster than all of them.

1.5)  I am an agitator of men.

1.6)  Divide et Impera

1.7)  I am a cop, not a racing driver

1.1 Il Commendatore

Enzo Ferrari was born on August 18, 1898. Even if he did not had a strong formal school education, me made his way up to the top of the world’s most famous sports car company; self-founded and named. As second son of a rural metal worker[1], he got used to wake up with the hammering noise from the foundry. Typical for a family company, his father not just worked many hours inside the garage, but also was the manager, designer, salesman and filled any other needed position. An early experience what should characterize Enzo for his whole life, as he always underlined the need of hard work to reach high goals.

Destiny hit his family in 1916, as his father and older brother died because of a widespread flu outbreak. Two years later also Enzo should suffer of the illness, but survived it and as result got discharged from the Italian military, where he served in World War I. As the family business went into bankruptcy due to loss of the family members and the negative effects of the war, Enzo went to Milan and got his first job in a small company, who refurbished trucks and create smaller passenger cars out of them.

Even if his formal education finished with high school, he received the opportunity to join the Alfa Romeo racing team in the 1920s to become one of their drivers in local events.[2] Due to his early success doing so, he competed later in more prestigious races.

In 1929 he founded the Scuderia Ferrari. Originally the racing team was born out of financial needs. Due to the legend, the idea came up November, the 19th in 1932, where Enzo met with the potential financial investors Augusto and Alfredo Caniato plus the wealthy gentleman-driver  Mario Tadini. As they accepted, the idea became reality. The team started with several Alfa Romeo 8C cars.

1932 BECAME A TURNING point, as in that year the team used for a first time the famous prancing horse logo at the 24 Hours of Spa, Belgium, and furthermore Enzo retired as active racing driver to  concentrate on his role as team manager. This because of the birth of his son Alfredo (Dino) and his wife, who pressured him to give up his driving passion, so that the son would not lose his father in one of the numerous accidents at that time. Further the Scuderia went growing to more than 50 drivers, which needed Enzo’s full attention.[3] this the Scuderia Ferrari became the racing department with the most numerous drivers ever. This could be reached as Enzo organized them similar to sales executives, meaning they not gained a fixed salary, but got paid according their success. This showed already in beginning of his managing career his practical and non-romantic approach.

He was a pure racer, but well aware that he needed to sell cars to finance and justify his racing department. This included that the racing team had to produce success to create selling arguments for the street cars and had to be as effective as possible organized. His employer Alfa Romeo, as also other car manufactures, appreciated the idea that companies, which are active in motor sports seek a tangible output as sales numbers. For example Alfa Romeo announced in the 1950’s its 1900 as the family car that wins races. This was not just a marketing slogan, but the car proved it in the famous Targa Florio.

In 1937 Enzo’s position got reduced to sports director, with less authority for decision making. As autonomy was one of his key motivators, he decided to leave the company in ‘39.

Of course, it was not only this one reason, but a combination of different factors. Alfa Romeo was in financial difficulties, and besides, lost its luck in motorsports. The ’36 12C and the ’38 Tipo 308 are both very elegant cars, but on the track not competitive. Based on the missing positive results, Enzo’s friend Vittorio Jano had to leave the company at the end of 1937. Enzo himself blamed the Spanish engineer Wilfredo Picart and that his creation, the racing car, was outdated, good only for scrap or a museum. Wilfredo had an opposite biography than Enzo, he had first his own company, where he already developed two prototypes, and then joined Alfa Romeo in 1936. Due to his background, he wasn’t shy and both characters collided.[4] Later after World War II, Wilfredo left Alfa in ’45 (earlier he designed in ’40 the Alfa Romeo 512. A monoposto racer, which at the end never raced due to the war) and founded in 1951 Pegaso. Its focus was on trucks, but nevertheless the company produced with the Z-102 also a sports car. Thanks to its V8 engine, the car reached a maximum speed of nearly 250km/h. On the other hand, its handling was very difficult and it had not any relevant success in motorsports. For Wilfredo no problem, as the Z-102 was nevertheless a success for Pegaso’s reputation. As for Enzo the manufacturing of race and sports cars was a precious craftsmanship, he could not respect the combination of trucks with such exclusive vehicles. A fact what became relevant again later for his relation with Ferruccio Lamborghini.

Already one year after Enzo left Alfa, he manufactured two race cars for the famous open-road endurance race Mille Miglia, still under the brand Auto Avio Construzioni, as due to a release clause, he was not allowed to work under his own name for 4 years. Then after the end of the Second World War, he could finally establish Ferrari S.p.A.

This book wants to go back in time with you and to figure out what an old-school entrepreneur, sportsman and business leader said to the topic business philosophy. Still something to learn and understand or are ethics and leadership really complete new issues? Therefor the book is not a direct biography, but will present and interpret some of Enzo’s famous quotes and business decisions. Luckily he was a man of open words, so we have a real treasure, even if we have to see and understand that he lived before the time of political correctness. Meaning, if we read some of the quotes now, honestly in today’s times it would be not possible anymore to say it that way; even if you analyze it, he was not on a wrong way.

People often referred to him as Il Commendatore, what is the Italian name of Knight Commander, a high medal of honor, which Enzo received in 1927. The name came half for the medal, but also half due to his success and direct leadership style.

Enzo’s career was enrooted in Italy and the local region, as he nearly never left the country and the Italian Grand Prix of Monza were the only Formula 1 races he attended personally. Even more, he never took holidays, The best holiday for me is spent in my workshops when nearly everybody else is on vacation. For this, let’s take a short look on the country.

Italy’s development after World War II was somehow similar to Germany. The country was included in the Marshall Plan, what gave it the opportunity to build up its major cities, including Turin, Milan and Rome. For this the period from 1950-63 should be remembered later as il miracolo economico. Source of the economic miracle had been the high demand after the war, the money from the Marshall Plan and relatively cheap human labor. As the country developed unevenly, many immigrants came from the poorer agricultural structured south to the industrial north of the country, especially to the economic triangle, the area between Turin, Milan and Genoa. In this period Italy as country could reach economic growth rates of over 6% and the triangle should become one of Europe’s most important industry regions.

Even if Modena was not based inside the triangle, the city was still near enough to profit from its economic structures, as in general  all parts of the Italian society benefited from the strong economic growth. The legendary Fiat 500 mobilized the masses and based on its concept and design, the company decided to develop more than 50 years later a 500 for the next millennium. This new car hit the markets in 2007 and became a huge success, regarding sales, but also critics, as the car was even exhibited in the Museum of Modern Art in New York. For Ferraristi, Fiat presented 2011 the Abarth 695 Tributo Ferrari.

Besides a better life for all citizens, the 50s should boost the Italian economy, likewise it produced a new generation of business men and company founders, with fresh ideas and determined to reach their goals, one of them Enzo Ferrari. As the financial situation of most of its citizens became better, also the cultural life should develop new quality standards. Italy became famous for its movies, created by the movie city in the outskirts of Rome, Cinecittà. One of its most famous ones, 1957’s La Dolce Vita (The sweet life) analyzed the new Italian upper class, which tended to life in decadence, similar to the Old Romans, who lived over thousand years ago. Even if Ferrari cars fitted perfectly to the new super rich, Enzo Ferrari with his nearly ascetic lifestyle was the complete opposite. This led to the situation that we was not always happy about the client groups, which could afford his cars, as they bought them as status symbols, but in fact were not really appreciating the quality and racing quality of the sports cars. The real Gran Turismo Ferrari is an offshoot of my racing cars. defined his original business idea to sell street cars, which could be used also for a racing weekend. Nevertheless he understood the business opportunity and the 50s saw now also luxury sports cars, which still could offer an extreme driving experience, but also had been capable to be used as a luxury vehicle. As before, Ferrari offered handcrafted automobiles. Originally this had its focus on driving specifications, but now included also luxury features and went up to individual designs.

Apart from Federico Fellini and Aldo Fabrizi, Roberto Rossellini was one of Italy’s most famous and critical acclaimed directors. On the screen he preferred the neorealism and showing also the less glamour’s sights of life, in private he enjoyed his success and became a loyal client of the still young Ferrari company. As he had once a front-end accident with his 375 MM, he went in ‘54 to coachbuilder Sergio Scaglietti to include some visual changes to his car. The result was presented one year later and was an impressive unique creation with an aluminum body.[5]

Roberto Rossellini not just treated himself with individual luxury, but the same year he commissioned Pininfarina to create a special version of the 375 MM to have a gift for his wife Ingrid Bergman. Unique was not only the design of the car, also the grey color was at that time not available for other Ferrari clients. Because of its timeless elegance and its famous owner, the car became famous, so that Ferrari started offering the color as Grigio Ingrid, which stayed until today in the company’s catalogue.

Italy as country has the image of being a highly corrupt place. To analyze, if this had an influence on Enzo’s business, we review two anti-corruption indices, published by the non-governmental organization Transparency International:

Corruption Perception Index: The CPI ranks countries and territories based on how corrupt their public sector is perceived to be. In 2016 Italy can be found on position 60 (with a score of 40) in a total of 176 countries. This due to the relative high perception of corruption in this country, at least in relation to other European countries.[6] 2001 Italy ranked on position 29 in a total of 91 positions. The score was 5.5, what would be today 55. Keeping in mind a given statistic uncertainty; it is not sure to say that the situation in 2016 became worse than in 2001, but Italy is a country with a medium to higher perceived corruption level.

Bribe Payers Index: The BPI ranks 28 of the world’s largest economies according to the perceived likelihood of companies from these countries to pay bribes abroad.[7] The BPI is less known than Transparency International’s other index, the CPI; nevertheless it is very interesting, as beside its primer results, to show how likely it is for a company to bribe outside its home-country, you can assume that companies normally start growing inside a country, before they expand into other ones. So if they use bribes outside their home territory, likely they have learnt this strategy as a successful business behavior before inside of it. The 2011 results present Italy on position 15 of a total of 28 countries, quite in the middle of the list.

Even if Italy has the image of corruption, on a global view, the country is on a good midfield position, what means that there is a higher risk that sometime in your business life you may face such requests and temptations, but on the other hand this can be clearly no excuses that clean business would not be possible. Ferrari cars played a role as bribery objects, but Enzo Ferrari and his company never had been involved in a corruption case.

STARTING AFTER THE Second World War counting to 2014, the country had 64 governments. This makes it quite understandable that Italians have not the highest opinion of politicians. Even though governments changed often between conservatives and left parties, the country politics had been stable over the time. On the other hand the citizens have a positive attitude regarding the police as they see them as reliable and the least corrupt public institution.[8] As consequence, corruption is not perceived has a problematic factor for doing business in Italy, in opposite to the high tax rate, access to financing, inefficient government bureaucracy, restrictive labor and tax regulations.[9]

With this background (including the two World Wars) it is not surprisingly that Enzo Ferrari not turned out being a political person. Starting as a child, his passion became car racing: Racing is a great mania to which one must sacrifice everything, without reticence, without hesitation. As team manager, he had been forced to become a business man, as he had to finance the racing team. The demands of mass production are contrary to my temperament. In this role he took pragmatic decisions, including to integrate the Ferrari company into the global Fiat company: In Maranello, I created a factory that made cars known all over the world. Fiat turned it into a real industrial concern.

1.2 Il Cavallino rampante

The prancing horse became 1932 the famous logo of the Ferrari racing-team. The symbol was originally on the plane of the Italian World War I hero Count Francesco Baracca, who used it as a tribute to his former cavalry regiment.[10] Five years after his death, his mother met Enzo Ferrari at a race week-end and offered him the symbol as a talisman. Enzo accepted it proudly, just changing the original white background to yellow, as respect to his birthplace Modena.

This instinctual behavior had a strong psychological effect, as Carl Jung investigated in his earlier Theory of Symbols that symbols are the key to understand the human nature.[11] So what can tell us the prancing horse about Enzo as person?

In sports and transportation the car is the successor of the horse. Not only regarding getting from point A to B. I enjoy feeling the car's reactions, becoming part of it. Especially a car as a Ferrari is not a simple machine, but personalized; a character implicated. This similar to a stallion, the car has to tamed by an experienced driver. The prancing position represents the start of a car race, where the drivers keep up the engine speed, to have enough horse powers available to accelerate as fast as possible. Besides this, an expensive horse can be compared to an exclusive car, as not just the inner values are counting, but also the esthetics. My cars must be beautiful.

The Ferrari logo includes two hints of Enzo’s home, the thin Italian flag and the yellow background. Even if Enzo was Italian, he was more strongly related to his home region Modena and seldom left to other areas or even outside the country.

The logo was not only important as a talisman, it communicated Enzo’s philosophy and dream to potential fans and customers, but also to drivers and other employees. As group members require something that everyone can approve, a positive and emotional loaded symbol as a prancing horse is ideal to unify employees from mechanics up to the drivers. For this the logo became an important part of his leadership tools, as all employees could identify with horse and company. Enzo created in-group-effects and reached to create a homogenous employee group, which had been highly motivated to give their best for the company and its idea. It also made them different to other companies. As the out-group[12] concept predicts, Ferrari employees had a highly competitive thinking and wanted to beat the competitor on the track, just as it was Enzo’ philosophy.

Further using a strong logo corresponded to Enzo’s introversive character, as his ideas, values and vision got symbolized by the picture of the horse. This way the public’s attention went to logo, he as person had been known, but was not in the center of the daily news. On the other hand this did not stop him to symbolize his idols as unreachable heroes. It is recorded that he mentioned to all young and talented drivers that they remind him a little bit to the legendary Tazio Nuvolari. For example to Gilles Villeneuve, who later also should become such a hero. Not only for the Scuderia, but Formula One in general. Montreal’s Formula One track received the name Circuit Villeneuve and especially Ferrari’s later driver Jean Alesi took the iconic 27, Villeneuve’s preferred number, to honor his idol. Also as his driving style had been similar to him. Today the Gilles Villeneuve Museum in Berthierville, around one hour driving from Montreal, honors Canada’s most famous Formula One driver.

After his tragically race accident, there should had been always a photo of him in Enzo’s office. This special relation was not only based on Gilles’ talent and spectacular driving style, but also his team oriented behavior in the 1979 Formula 1 season. Thanks to this, it was possible for the Scuderia’s number one driver Jody Scheckter to win with just 3 Grand Prix victories the annual championship and for Ferrari the Constructor’s Championship. Gilles believed in the importance of the team and hoped to get the next year the number one status with the team’s unrestricted support. With this, for a race driver untypical, attitude he gained Enzo Ferrari’s full respect and recognition.[13]

As logos and symbols are emotionally loaded, they get larger than life. When they are properly installed, they are strong and have a higher protection against negative news and allegations. A circumstances which the company helped to overstay without problem the tragic accident at the ’57 Mille Miglia, where one tire of Alfonso de Portago’s Ferrari 335 S exploded and as consequence not only the driver died, but also the co-pilot and 9 spectators, including 5 children died. After this event, there had been legal allegations against the person Enzo Ferrari, including negative statements from the Catholic Church. Even if he had been liberated from these allegations, this experience should shape Enzo for the rest of his life. But also in that time the critics had been against the person, the Cavallino Rampante stayed shining. Also the 335 S continued its career and won later the same year the Venezuelan Grand Prix.

1.3 CREATING A MYTH

Even if the pure facts of the Ferrari story, starting from Enzo’s first steps as a driver until becoming the world’s most famous sports car manufacturer, could had been enough to create a myth, Enzo actively promoted this development. He had a propensity for epic histories. This already started in younger years, where he amplified his narrations, so that sometimes the borders between fact and fiction blurred. With this, he was part of a long tradition. Already in the Roman Empire the official communication channels exaggerated with the descriptions of their enemies. This had the effect that the population got distracted from internal topics and later the Emperor could sell his victories more glorious, if the enemies had been illustrated as huge and strong barbarians. Kings and nobility used later fictive family histories to justify their claims to rule. A local example comes from the Milanese noble family Visconti. Their famous arms shows a giant snake, which is eating a man. Due to the family legend, a dragon lived in the fifth century near Milan and many citizens became victims of its appetite. A real plague for the city, until a heroic member of the Visconti could kill the beast. Another interpretation says that the snake is a symbol for a Saracen leader, who dueled with Ottone Visconti in the First Crusade.[14] Alfa Romeo took the snake and included it into their famous badge. Through the time it should receive several updates, the original version from 1910 was still including a traditional illustration with a clear recognizable man. In 1972, the badge received a new version, and from that one on it is more abstract, until the victim is hardly recognizable as human, for what many viewers today just see a fire-spitting dragon. This stayed the same also with the latest update