The strategy study of an automotive company that has transcended its early roots, to become an organization that stands for performance excellence in all that it does.
There are few brands that engender such fanatical support as some of the leading car manufacturers around the world. There’s a gravitas that comes with fast cars that you just don’t get with many other companies. And in that very small group, you’ll find McLaren.
Those numbers speak for themselves, but what makes this company even more special is the social cache they hold in the hearts and minds of millions of car enthusiasts around the world. As far as aspirational brands go, there are very few that are in the same league. And in this growth study, we’ll dive into the story of McLaren and dissect how they’ve become the company that they are today.
The story of McLaren starts back in 1963 when New Zealand born Bruce McLaren decided that he wanted to create his own racing car to take on the greats of Formula 1. It didn’t take him long to find success, and the team won their first Grand Prix just 5 years later – foreshadowing the immense success that was to come.
To understand where the company came from, we have to get a grasp on the mercurial character that was Bruce McLaren. If you listen to anyone who knew him speak about him, you’ll hear a lot about his willingness to push boundaries and his extreme passion for driving. From a young age, he was captured by the adrenaline of motor racing and he wanted to play a part in it. He knew that in order to compete at the highest level, he needed to pay attention to every single detail that played a role.
Some call it perfectionism, he called it table stakes.
His ethos bled into everything McLaren did in the early days and it created an automotive company that refused to settle for mediocrity. They were going to win at all costs and there was a hunger there that you didn’t find that often.
Unfortunately, tragedy struck in 1970 when Bruce McLaren himself lost his life during a tragic testing accident. As is the case with high-speed racing, the risks are real and in a second, everything changed. While the racing world mourned a hero gone too soon, the McLaren company had to decide what they were going to do.
No one would have blinked an eye if they moved to shut things down. After all, the company bore his name and was built around his vision. Even though they had accomplished a lot in those 7 years, there was still this sense that it was Bruce’s company. His fingerprints were on every aspect imaginable. It would take a mammoth effort to continue in those circumstances.
But McLaren was built differently. As a company, they made the tough decision to muster whatever they could and march on forward. Because that’s what Bruce would have wanted. And thank goodness they did because they would become one of the greatest automotive companies in the world, delighting car enthusiasts around the world for decades.
In this growth study, we’ll explore some of the principles, strategies, and decisions that carried them along this journey – with the hope that you can pull some value that you can apply to your own organization. We love learning from the best and here we have a wonderful case study that we can draw a lot of insight from.
Let’s drive on.
There’s an expression that goes “How you do anything is how you do everything”. And what that tries to explain is that our attitude towards the small things in life is congruent with how we tackle the more important parts of life. The small things are the big things, in essence. In a sporting context, the analogy goes that the way you perform in training is how you will perform in the real contest. The small details matter.
This is an ethos that McLaren really embodies throughout its organization. Following the example of their founder, the company has always been incredibly detail-orientated. Racing is a sport of tiny margins and it’s often the small things that make all the difference.
Take the McLaren factory, for example. If you speak to anyone whose been inside the headquarters in Woking, you’ll hear a similar refrain. It’s probably the cleanest and most organized factory you’ll ever see. Everything has its place and it operates with a level of precision that is hard to fathom from the outside. The company has set itself very high standards and the culture is that a meticulous factory is one that wins.
This is in stark contrast to most car factories which operate under a model of controlled chaos for the most part. McLaren’s decision to be very strict with how they run things is rare and it certainly doesn’t come without its costs. They expend resources and mental energy maintaining these standards, and the actual return on this effort is difficult to see directly.
But what they know is that each small decision that they make to be as close to perfect as possible, gives them an edge when it comes to the actual car itself. A well-organized factory eliminates all other distractions and forces laser-like focus on what truly matters. This makes for a highly professional environment that delivers world-class performance time and time again.
We may not all be running large factories in our organizations, but the principle transfers to all sorts of work. When we take care of the small details and we hold ourselves to high standards, this comes through in the final product. The small things are much more important than we realize. And when this becomes a part of our culture, it opens up opportunities for our people to bring their absolute best to the table.
Meticulous attention to detail gets results.
Key Takeaway: Every small detail in our business is a potential leverage point to gain a competitive advantage. By treating each small decision with respect, we get the big things right much more frequently.
Building on the above, another aspect that keeps McLaren on the cutting edge is its continuous drive towards constant improvement. In the world of motor racing, things are never static. With every lap around a track, you’re receiving a range of data that can be used to tweak and adjust how you go about putting that car together.
To give you a sense of the scale here, McLaren manufactures a new part for their Formula 1 cars every 17 minutes, 24 hours a day, 7 days a week. That’s simply staggering and it points to the extremely fast feedback loop that they’re able to integrate as they search for tiny improvements everywhere they look.
Another key example is how they work on continuously improving their pit stops. At their main testing center, they have a pit stop station that aims to simulate the in-race pit stops as accurately as possible. The race teams will regularly run practice runs where every run is recorded and analyzed for ways to make it faster and more efficient. This is a game of small margins and this practice can unearth tiny improvements that make all the difference.
If you look at it in business terms, the car (and the surrounding support) is a prototype that goes through continuous iteration day after day. As every new data point comes in, that acts as a new test – which provides information on performance. McLaren’s success is dependent on their ability to assimilate that information and evolve the car as a result. So, what you might start with at the beginning of a season will look quite different by the time you get to the end.
This is exactly how we should view organization building. Your company is never static, there are always forces acting upon it and your ability to adjust is going to dictate whether you can remain relevant over time. You should be using the data that you gather to better understand how you’re performing and where you can make improvements. And then you should implement those small improvements wherever possible as you fine-tune how you operate.
This needs to become a part of your company philosophy if it is to scale throughout the entire organization. You want to craft a culture that acknowledges that there is no final destination per se, but rather a journey where you’re constantly learning. Something is humbling about this realization and it helps you avoid complacency – especially when things are going well. There are always things to learn and there are always things to improve upon.
If you’re not learning and growing, then you’re dying.
Key Takeaway: Focus on implementing small iterations over time as you collect data from the market. This focus on continuous learning and improvement will serve you well as you navigate an ever-changing business landscape.
Any sporting brand worth its salt knows that they would be nowhere without their fans. The relationship between the brand and those who support it is one that cannot be taken for granted because at the end of the day the growth of that particular company relies on selling a story.
When you follow a sports team of any type, you’re buying into a story about what they stand for and how they’re going to compete moving forward. And it’s in our nature to get very emotionally invested in these outcomes. That’s what makes sport such a powerful force in our society.
Combine that with cars, which remain a highly-valued status symbol in our society, and you get some very, very passionate fans. McLaren understands this deeply and they’ve made it a priority to invest time and resources into building their fan communities around the world – because that’s what drives the status of the brand itself. Everything that they can do to engage with those people has a direct impact on the bottom line of the operation.
In modern times, most of this community-building happens online. Social media has become the town square and McLaren has managed to build one of the most engaged audiences in the world across every platform you can imagine. And they’ve done that by leveraging a few key strategies:
These pillars help to cultivate a strong online community that then act as brand ambassadors for the company itself. Their efforts in building these audiences compound over time and continue to drive the McLaren brand to new heights again and again. We could learn a lot from the authenticity and the deep understanding they have of their customer base.
Key Takeaway: When building an online community, focus on building direct relationships and then investing in them through genuine engagement, human to human.
A highly underappreciate aspect of McLaren’s commercial success has been their dedication to maintaining their high status through careful aesthetic decisions in everything that they do. They’ve always had a keen eye for design and they refuse to compromise on that. As a result, McLaren has become a very aspirational brand, one that maintains a certain gravitas no matter how you engage with it.
While some call this elitist, the truth is that the company knows exactly how they want to position themselves in the market. They are not for everyone and they know that. A keen sense of style and aesthetic excellence draws in those who value class and sophistication above all else. This turns the brand itself into a status symbol that, when worn, portrays important signals that have value in our social dynamic.
It all comes down to the story once again. The aesthetic choices play into how the company wants you to perceive the brand. And they go to great lengths to control this.
Your organization might not consider itself a premium or luxury brand – but that doesn’t mean that your aesthetic choices don’t have an impact. Everything from your logo all the way down to your emails carry with them a certain style that potential customers will judge, whether directly or indirectly. So, instead of leaving that to chance, the best companies are able to craft a story that appeals to their target audience.
Don’t neglect your aesthetic style. It says more about you than you’d care to admit.
Key Takeaway: Your design style says a lot about the brand you’re building, so take care to align your aesthetic appeal with the target audience you’re hoping to engage with.
It was only in 1992 when McLaren ventured away from the Formula 1 circuit and decided that they were going to start manufacturing some road production cars that would be sold to the general public. This was a risk, for sure, because that’s a very different business to the racing business, but it felt like the right next step for the brand – as long as they could execute well.
They started with a limited run of an F1 sports car that had a rather unusual seating setup. Instead of having the driver’s seat on one side and the passenger seat on the other, they opted for a middle driver’s seat with two other passengers flanking on each side. Regulators didn’t like this at all, but it achieved its purpose – creating a buzz around McLaren road cars and announcing their entry into the space. They only made 100 of these in total and while they sold for $1m back then, you’d be lucky to get one today without forking over $10m+.
For every year after that, McLaren declared that they would develop a new car model, and fast forward to today, they’ve created some of the most iconic sports cars on the market. Maintaining their image and eye for detail, they are one of the most sought-after brands for car enthusiasts the world over.
To better understand their growth in this sector, let’s look at some of the key pillars of their strategy that stand out:
These are just some of the unique decisions that McLaren has made as they transitioned to offer road car models. The success is difficult to ignore and their cars still hold a significant social cache, even in a highly competitive sports car market with so many household names.
What they’ve proven is that they can transfer the key principles and company culture from the racing background across to a new vertical – and find the results that they wanted. This bodes well for a future where they really can tackle anything they put their minds to.
Key Takeaway: When transitioning to a new market, port over the existing values, culture, and ethos that made you successful in the first place. This gives your customers peace of mind and gives you the best chance of finding traction in the new vertical.
Designing a car is an art and a science, and there are thousands of different ways that you could tackle it. McLaren has always been a company that tries to use data in every instance because they believe that high performance is not something that you can intuit necessarily. It comes from consistent feedback loops that are tested under pressure.
The way that they do this practically is by using a wide array of sensors to track and report on the performance of every single part of their car. These sensors are designed to assess various factors and record those readings in a way that can then be analyzed. When you’re able to combine all of these data sources and process them efficiently, you can arrive at insights that you wouldn’t have found yourself.
This analytical approach is a humble one because it doesn’t presuppose any genius from the engineers themselves. All they do is set up tests for the car to go through and monitor the results as they search for an optimal level. Their value comes in the analysis and interpretation of what they’re seeing – which is a great example of first-principles thinking.
This is something that every company can learn from because we find ourselves today at a watershed moment for data. With recent advancements in machine learning and artificial intelligence, data has risen to the surface as the key asset of the current time. Organizations of all types are looking to collect more data and then analyze it in a way that can push them towards their goals. The companies that do this well will succeed, and those that don’t will fall behind. It’s as simple as that.
If you aren’t using data to drive your business decisions, you aren’t truly connected to what you’re doing and you’re relying on your intuition as a business owner to get you through. In some cases that might work out, but over a long enough time scale you’re going to be found out.
Data provides an objective view of your business and it’s not something you can afford to ignore. Spend the time and resources required to build a strong data analysis function and you give yourself the best chance of iterating towards a product or service that perfectly fits the market you’re selling it into.
Key Takeaway: Wherever possible, use data to drive your decisions. Keep your feedback loops small and make small iterations as required, as you search for your optimal solution.
In the car industry, sustainability is a key topic that dominates the headlines in more ways than one. As the true impact of climate change has revealed itself, there is tremendous social pressure to shift away from fossil fuels and towards renewable energy. This has always been a challenge for supercars and racing cars because so much of their performance came from burning fossil fuels – it was difficult to imagine an alternative that could match it.
It wasn’t until Tesla came along and delivered an exceptional performance with an electric car that the industry started to take this more seriously. And since then, every car manufacturer you know of has started to innovate and build electric vehicles of some type.
McLaren is no different. In true McLaren style, they unveiled the McLaren Artura – a sleek and sophisticated hybrid sports car that melds a petrol and an electric motor together to provide the ultimate driving experience.
While not completely electric, this car proved that McLaren was looking to innovate in this direction and they’ve spent a huge amount of money and time on their electrification efforts. It wouldn’t be out of order to expect that they would release a fully electric car at some point in the near future.
However, it’s not something that they’re going to rush. They will do everything they can to ensure that every detail is taken care of, never putting the brand at risk in anyway. They aren’t determined to be the first at all costs, they want to do it right.
As they build these cars of the future, you can bet that their strong data analytics foundation is going to be of great help as they deal with the tradeoffs involved in the manufacturing of electric cars. Only time will tell as to what this will eventually look like – but it’s great to see them moving this way.
Key Takeaway: Sustainability is a key trend moving forward and if you aren’t taking steps in that direction, you’re going to be left behind.
The most interesting strategic move that McLaren has made recently has been their decision to restructure the group and sell off their applied business division entirely. In a huge deal with Greybull Capital, the company has divested in that particular business in an attempt to focus on their global luxury supercars and their motor racing. The applied business teams will remain the same and will still service customers as before, but the restructuring gives the group a better capital structure and stronger profitability going forward.
If you listen to the executives speak, it’s clear that this move is intended to deliver better margins for shareholders, while also consolidating their brand as a motor racing company first and foremost. But what cannot be denied is that this is also a reaction to the economic impact of COVID-19. The pandemic brought retail sales to a grinding halt and the company suffered through a rather tough year or two as a result. They are still recovering from the hit to revenue (as so many companies are) and this restructuring provides an opportunity to start again from a clean slate, so to speak.
With this restructuring comes a significant round of refinancing that should serve to reposition themselves for the post-pandemic era, with a tighter balance sheet and a more streamlined capital structure. The brand itself remains as strong as always – and that’s what they’ll be betting on to get them through the next few years.
If we abstract this to our own businesses, it’s generally true that a narrower focus is better because all of your resources are deployed to one goal, rather than being dissipated across a wide range of different things. This is especially true for a luxury brand like McLaren where less is more. The exclusivity is part of the appeal and that’s why this move makes a lot of sense without any additional context.
For your organization, it’s worth doing an audit on everything you’re doing and where your revenue is coming from. Perhaps there are pieces of your business that just aren’t providing the appropriate return based on the effort and resources that are going into them. You might find that if you were to drop those and focus on the better-performing pieces, you’d have a much stronger business overall.
This often feels counterintuitive because we want to do more. We are excited by the new market potential and we have a natural inclination to look to expand. But there is power in knowing what you’re great at and establishing yourself as the number one player in that arena.
Focus will be rewarded. Stick to your guns.
Key Takeaway: Focus is key. Identify the things that make your company great and double down on those. Don’t hesitate to let others go if it isn’t aligned with your mission and brand.
McLaren will always be an aspirational brand that keeps car enthusiasts on the edge of their seats. But we hope that through this growth study, you’ve got a better sense of the business principles that you don’t see on the race track. These pillars and decisions have molded everything that McLaren has created and they’re the reason that they remain one of the most important car companies on the planet.
By understanding how they’ve achieved what they have, you should be able to apply some of those insights to your own organization as you seek to take it to the next level.
Each of these pillars has stood the company in good stead for decades now and they represent timeless business principles that can be leveraged for your own growth. Take a leaf out of this book and you could just find yourself outracing the competition.
Literally, and figuratively.