Now the real race begins

Update Saturday 28th

I appeared on TV3’s The Nation this morning, sitting alongside Tim Smyth from Core Builders Composites. We had a good chat before, during and after the show, and he had read the post below (not the update) and agreed with the thesis that the greater race is how to step up the industry. His own company uses digital manufacturing techniques – automating the creation of the moulds and the manufacturing of  composites. Composites are what we know as carbon fibre, kevlar in things like bikes, boats and buildings, and the material can be lighter, stronger and cheaper for many applications. Moreover there is now accelerated local knowledge in aerodynamics that we can use.

Tim’s take on the automatic control is that is was there the whole time, and that the dramatic improvements can be put down to the normal (hyper fast) continuous improvement processes with a large contributing fact to the tuning of the wing sail. That does make sense to me as  recall that the commentators said that the Oracle USA wing sail was using a less advanced technique than Team NZ’s – at least near the beginning of the regatta.

We also talked about the frustration with finding money to invest in business and buy capital plant – their business cost just $7 million to set up here – versus the ease of finding money for beach houses and electricity company IPOs. We both agree, for instance, that the electricity industry is nearing the point where it will be disrupted.

Overall let’s maintain focus on the prize – the $40 billion in exports    

Update – Friday 27th.
As expected, Oracle USA stormed home to win the last race and the cup, and well done to them, and to everyone in the regatta.

However. A big word that, However it seems that emerging although unverified news is that that Oracle may have been using an illegal weapon, a “special foil adjuster system” that allowed then to gain control over their foiling. Time will tell and I would not want to pass judgement, but perhaps the changes made were not under the rules.

It is well recognised that Oracle was having serious foiling stability difficulties at the outset of the regatta and that their performance could not match that of ETNZ. Half way through the series it was acknowledged that Oracle had fitted an automatic control to their hydrofoil trim, and that this modification was approved by the measurement authorities.

Since this modification Oracle’s performance has almost unbelievably improved.

The ‘legality’ of this device has been justified and accepted on the basis that it does not actually ‘drive’ the trim of the foils…..this is still performed by the muscle power of the crew, via hydraulic linkages. That may be so, but the device, using its sensing and directives, has been described as ‘automatic’. This implies that the trim of the foils is determined by what can only be described as ‘superhuman’ technology.

So we shall see what passes, but it appears that the America’s Cup may once again end up in a court. New Zealand, as one of the top three least corrupt countries in the world, finds that breaking the rules is beyond the pale, and it would be far away from Team NZ’s culture to do so. However if Oracle USA are found out then this country will be horrified – and it would be seen as a major scandal with implications well beyond sport.

To draw out the business analogy, New Zealand companies in my observations, will tend to play by the rules when competing offshore, and many lose business as they are not aggressive enough to bend or break the rules. We do, I hazard, draw the line too early sometimes, and should be a lot less afraid of creating our own rules, within reason, where we can. But cheating? That’s not us, and we should promote trust-based ways of doing business through-out the world by the best way possible, through the success of our own companies.
End of update.

The moment I realised Emirates Team New Zealand was in trouble was when Oracle Team USA played their postponement card for Race 6, with the scores at 4 points to NZ and minus 1 to USA. That was the signal that Oracle USA was clear that they were slower than New Zealand, and that they had to radically improve.

“We feel they have an edge on us at the moment, especially upwind,” said Spithill. “We need to do a bit of work here and we’re going to play the card, strategically, and hopefully improve in time for the next race.”

How right he was. The time gave the shore team permission to design and implement major improvements, and over the ensuing days it was clear that the USA shore team were in afterburner mode, and the improvements in speed kept coming. Meanwhile the Oracle USA team’s sailors just kept getting better and better, to the point now, 12 races later and tied at 8 races each, including Oracles’ 2 point penalty, the Oracle boat is clearly faster in all modes, upwind and downwind.

How did this happen?

Team New Zealand ran an exemplary campaign, right up until the last few days when they ran out of resources. They were the first to foil, had the most time on the water, were the first to semi-foil upwind and had a clear advantage over all the other teams in crew work.

At 8 races to 1 ahead it seemed to many that the Americas Cup was all over, but for me two of those races we won by out-sailing a boat that looked a little faster than ours. Since then it’s become increasingly clear that the Oracle USA team had really woken up, and fuelled no doubt by a budget beyond belief, they took the steps, and perhaps risks, required to make their boat faster and faster.

Their boat was re-measured before each race, as they were improving it but also, it seems, customising it to the conditions. They, for example, they chopped the bowsprit off for races in high winds when a code zero sail was not required. They copied and improved upon the New Zealand boat design and the way the sailors handled the boat. As they became faster that gave their skipper and crew more confidence on the water, and results on the board.

We have heard little about what is happening behind the scenes, but I suspect that there a lot of the credit should go to the many smart people in front of computers, using video and sensor feeds to manipulate immense volumes of data, running major simulations and constantly improving things for the Oracle USA team.

New Zealand lost their chance to turn things around, their momentum and probably the regatta for me a few days ago, when they failed to ever play their postponement card. It was increasingly clear that the Oracle boat and crew were faster in all modes, but Team NZ were not prepared, or more likely able, to make the major changes required to keep up with Oracle. Was it money, team size or simply lack of creativity? Dean Barker’s quote from yesterday is telling, as he compared Team NZ with the Oracle USA team and their huge resources:

“We have little tweaks here and there, but there’s nothing major we can do. We don’t need to make massive changes. The boat is going well, we just need to sail it well.”

Team New Zealand had a clear advantage in their program of continuous improvement, but hats off to Oracle, who ran a poor campaign for many months, but got it together in the last few weeks. Their larger team and budget, more ambitious program and in the end high-performing team has delivered.

Take nothing away from either team, as this has been a stunning rate of development for boats that were never meant to be able to hydroplane on just one foil. The scale and speed of the races are right up there with Formula 1, and New Zealanders and New Zealand firms are across all of the teams and the competition itself. It’s been amazing, and the Wikipedia page on Hydrofoils does need some serious re-writing.

And we could still win, as I write this.

So this regatta must happen again, whether we win or lose, in some form or other, with radically fast boats like these. The great thing is that New Zealand technology will continue to play the key role in the regatta, as it has for this campaign for all teams.

The Lessons: be brave

As in business, it’s always been clear that in America’s Cup racing that standing still is not good enough to win, and companies must continuously improve their products, services and internal processes.

However sometimes that’s not enough, and a business can beheading in the wrong direction. In that case, as it when Oracle USA was heading for defeat, some major changes in strategy are required. The time to make these changes is as soon as you realise that the competitors have an advantage.

Arguably Team NZ needed to do the same a few races later, once it was clear Oracle UA was faster. That’s hard to do when you are one race away from winning, but, again, as in business, it’s all about the growth rates not the results today. That’s why the real competitors to watch out for are not the sleepy incumbents, but the rising stars whose growth rates will eventually lead to domination.

In the mobile phone industry the incumbent competitors, including Nokia, Blackberry, Motorola, and Microsoft, failed to change their approach radically enough to cope with the emergence of the iPhone, allowing Apple, Google and Samsung to dominate.

The newspaper industry had far longer to decide, with the very obvious rise first of free classified papers, and later of the internet-fuelled competitors like Trade Me in New Zealand and eBay and Craigslist elsewhere. It took a long time for them to wake up, and the only decent response I’ve seen was when an industry outsider, David Kirk as CEO of Fairfax Media, to buy up the major New Zealand online player, Trade Me. An inspired purchase that since then has delivered 22% annualised return to shareholders (Fairfax Media or not).

Oracle USA had essentially unlimited resources, and the same is required if a company is going to repurpose itself for a major strategic shift. Most large companies are simply incapable of doing so, with embedded bureaucracy, norms and people who believe in one version of the ecosystem. We sometimes see these companies forming internal innovation groups, but they generally fail as they are either staffed with people with the internal mindset, or are constrained by having to work for the same. A true shift in direction must be driven come from the top, who unleashes the folks at the very bottom who generally know the answer. This needs a strong CEO with the support of the board and shareholders. Sadly that support usually only comes when it is far too late, as the quarterly results have already plummeted.

There is a great Harvard Business School series of case studies on Team New Zealand’s earlier campaigns. The kiwi teams ran superb campaigns to win and hold the cup. The cases hold many valuable lessons in high performance leadership and teamwork, and in continuous improvement. This regatta demands a new case study.

Now the real race begins.

New Zealand has gained a lot from this  Americas Cup campaign, win or lose. The campaign was backed by our Government, and by a number of high profile sponsors. Less known is that behind the scenes were a number of high net worth individuals who put their own time, money and commitment into the team, receiving little in return. Our sincere thanks to them.

But the challenge now is whether we can we take advantage of our collective edge in understanding the technology behind this new dimension to sailing. From previous regattas we saw the formation or acceleration of companies like Southern Spars, Doyle NZ, Structurflex and a host of boat builders.

We have a chance to be the first to bring, somehow, the advanced technology back to more mainstream sailing as well as to other industries. Can a local firm become the first to bring semi-inflatable wing sails to the industry? Can we create computer-controlled rigs that can automatically find “the right mode” for yachts? Can we apply the hydrodynamics and aerodynamics lessons learned to bicycle building and other endeavours? Can we move beyond an elite sport to more mainstream products?

I suspect we can, and will certainly be looking closely for stories of companies who are doing so. Meanwhile we have a whole other race on here, the rce to meet Sir Paul Callghan’s vision of $40 billion per year in high tech driven exports. That’s a slower race, but the companies that will drive it are currently in formation and rapid growth stage.

Well done.

My congratulations to everyone involved – we’ve run an amazing campaign and as we head into tomorrow, win or lose, we can be proud of what we have achieved.

But let’s win – that would be much better.

Published by Lance Wiggs


4 replies on “Now the real race begins”

  1. Great post Lance! One thing we can be assured of that this is win for NZ Inc regardless. It’s our own little version of the space race where the innovation driven from a unique pursuit has huge potential.

    The irony to this is that if you added up the NZ Oracle licences over the years we probably paid for their campaign as well. ;)


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