Adam Morgan
Jul 25, 2014

Cursed by too much of a good thing

Scarcity of resources can force teams to perform better.

Adam Morgan
Adam Morgan

The Resource Curse is a concept coined by the economist Richard Auty to describe the tendency for countries that are rich in natural resources tend to perform worse economically than countries that have none. While this is not inevitable, the possession of resource wealth all too often leads to economic and political behaviour that limits the sustainable growth of the country, rather than accelerate it.

One sees the apparently counter-intuitive lesson that less wealth leads to stronger performance reflected in the journey made by the McLaren Formula One team after the banning of tobacco sponsorship in 2005. Tobacco had bankrolled the business and its lavish lifestyle — the private jets that flew the teams to the races and the best hotels. The mindset in F1 at the time was that money bought performance.

The ban was greeted by many in the business as a death knell. How could they possibly replace that money? But McLaren boss Ron Dennis took a different view. He asked the team to examine everything they were doing in minute detail to see how they could be better. To become more insightful about how to be more effective, in effect. Their focus was now on making the car go faster and becoming as competitive as possible in securing a new sponsor; everything else went. A case of cut where appropriate, but also change methodology and invest in new people, technology and practices where to improve performance.

While the initial response by many in the team, for instance, was that cuts could only result in the cars going slower, the result has been the transformation of McLaren (and F1) at every level. They have become more curious, insightful and inventive about how to improve performance, as well as the experience and value they can offer their sponsors — all brought about by freeing themselves from The Resource Curse.

Adam Morgan is founding partner of eatbigfish. Follow him on Twitter @eatbigfish.

 

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