Ferrari: Values and Culture of a Prestigious Automaker | In Practise

Ferrari: Values and Culture of a Prestigious Automaker

Former Chief Product Officer and SVP Production Processes at Ferrari

Learning outcomes

  • Core values that drive the culture at Ferrari
  • Organizational design of Ferrari versus other OEMs
  • What drives the superior capital efficiency of Ferrari versus competitors
  • Fixed and variable cost breakdown for Ferrari versus other OEMs
  • Biggest risk for Ferrari in the next 5 years
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Executive Bio

Ervino Riccobon

Former Chief Product Officer and SVP Production Processes at Ferrari

Ervino has 24 years experience in the auto industry. He spent 18 years at Mckinsey as a consultant in the advanced industry practice with the majority of his time in the automotive segment. After working with Ferrari throughout his time at McKinsey, the luxury automaker created a new role that concentrated on creating cost competitiveness with responsibilities of purchasing and manufacturing efficiency. Ervino saw the company transition from a business within a large mass automaker to a standalone publicly listed luxury sport automaker. He was one of a small team of Executive Officers at Ferrari during a crucial period of the company's history. Read more

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What struck you most when you first started at Ferrari?

First of all, I would say it was the fact that all the people were in the same location. When you are a consultant, you study the theory of how you can really build a network. Also, I was probably spending half of my time on the phone with remote people to optimize my time when I was consulting, with teams, with clients, et cetera. So, I lost the importance and the value of personal contact with people. The fact that all the people, literally all the company is in the same location, reachable by a maximum of 5 minutes on foot, is of enormous value. People meet each other very frequently, they have lunch together, those who live far away and only go back home at the weekends also have dinner together in the same canteen, that creates an enormous sense of community and shared values. Shared values are really quite present in every single meeting. The fact that people meet each other so frequently means the feeling of shared values is really strong. As a consultant, I have also never met a company with such strong and aligned values, so the sense of passing Ferrari to the next generation to make it stronger, the atmosphere surrounding the company that you need to preserve and nurture, and that aligns people in a way that I have never seen in any other company. So that's the magic. I was struck by that. I came from a company where the magic was already there, but Ferrari is possibly even more intense from that point of view.

How would you describe the culture?

I think the culture is the culture of the winner. People are there to win. So there is no compromise. The strength of the winner is the strength of delivering no compromises and being able to shape the industry. Altogether forgetting what competitors are doing, because you know that you shape the pace, the behavior and the trends of the customer and the market, and that all the others will need to follow you. It's not arrogance, it's the sense of really shaping the industry.

So you never looked at competitors’ strategy or performance?

No, ‘you never look at competitors’ is the wrong statement. It's that you don't care whether competitors are doing different things. If you have a clear idea in mind, you don't really care whether the others are following you or not, whether the others have a different point of view or not. Of course, you do care about what they do and the ideas that they have, but you are not afraid to have a contrarian view because you have the consciousness, you have the self-confidence and you can shape the market around that. You know the others will follow inevitably, because you are so much bigger and you are so much stronger than all the others. You can afford to be the leader. That means that you need to deliver above and beyond your competitors every single time. That's the challenge and that creates a sense of ownership. You collectively know that you can only serve if you stay ahead of all the others. There’s a clear sense of that.

How does management encourage that pressure on delivery but also the pressure to innovate and be at the front of design and shaping the market?

It's clear. In order to be a winner, you need to have the most beautiful, the best performing, the most fun to drive car in its segment. Otherwise the car does not pass the test and you don't develop it. You can only be the number one, if you are not worse than any competitor, on any of those dimensions. It's an easy bar. You need to be better than all the others on those three key dimensions: style, performance and pleasure to drive. So if one of the three does not fit or you feel that others are better, then you need to improve. That's very clear. So there's no compromise. There are also very clear rules to avoid compromise. For example, you can’t cheat on materials, you can’t cheat on noise, on sound, like the others are doing. If you tell your customers that everything is in aluminum, then you can’t have the surface in aluminum and the structure in plastics, because you told the customer it's aluminum, even if they don't see it. So, if the sound is the sound, you can’t do what Porsche or others do: you can't have an amplifier. The sound should come naturally from the car. Nobody's questioning that. So it's a pretty obsessive rule but everybody agrees on it. Nobody questions that these are the values that make you stand out from the crowd. It's pretty unique.

How would you compare this culture at Ferrari versus other more premium OEMs that you may have come across in your consulting days?

I think that there is no comparison whatsoever. All the others that I have seen are competing against others and they don't try to stand out from the crowd. The only one who has exactly the same thought might be Rolls Royce. Rolls-Royce is in the luxury non-sport segment, it has the same story, although much smaller of course. They have the same attitude of shaping what comfort means, what style means, what ultimate luxury means for cars that are not sporty. So, they are in a completely different type of segment but have the same attitude. All the others are one or two notches below. They can’t really compete.

Why is that?

Of course, every single motor can compete, but the culture of the company can’t compete.

What is it that makes OEMs like, say, Bentley or Aston Martin, one or two notches below Ferrari?

Bentley in some segments is competitive to Ferrari, in others it’s not. For example, the Continental GT and also the Bentayga are somehow competitive. Other models are not. Aston Martin is definitely not a competitor of Ferrari, because Aston Martin is definitely priced one notch down. I don't think there is any Ferrari customer, or very few, who would hesitate between Aston Martin and Ferrari. It's also a completely different positioning.

How would you compare the culture of Bentley or Aston Martin to Ferrari?

I'm not familiar enough with the culture of these two companies to be able to comment on that. Frankly, I don't know. I can only comment on their market positioning. I think the most important challenge for Bentley - and I don't know how well they have been able to manage it - is how to be part of a group, as Ferrari has been for 4 years, without being blurred into the much bigger group. I don't know how independent Bentley manages to be, frankly speaking.

Now, Ferrari is a completely different entity, but when it was part of Fiat group, I think the secret to success was to preserve it as completely separate from the rest of the group. Not in terms of management, I moved from one to the other, for example, because the top management was considered part of the same cluster. But, in terms of all the operational functions, all the processes were completely separate, and that was key to preserve Ferrari.

How does the organizational design of the company drive the culture of Ferrari? You mentioned how everyone is in the same place, are there any other material differences in how certain functions are set up compared to other OEMs?

The car makers organizations are typically pretty conservative, more or less. First of all, organization is more than boxology, so you need to look at different aspects of the organization in a broader sense. But, if you look at the structure of the organization, I think there are two major differences between Ferrari and its competitors. One is the strong integration of supply management and product development, because, for example, purchasing reports to the CTO, the chief technical officer, which is quite unusual in the car business where purchasing typically functions and reports directly to the CEO, and is primarily in charge of cost reduction and cost efficiency. In Ferrari, on top of these targets, which are still very important, the other major driver is to support the development of new cars. The contribution of suppliers is so critical to the development of new cars, because in many instances you go to the limit, or you go into performances that are unknown to you and to your suppliers, that you need purchasing to be very closely integrated with the product development teams. So, that's the major difference. The other difference is that the technology department is looking not only at the make technologies, so the processes that Ferrari manufacturers in-house, but is also very heavily supervising and cooperating with the suppliers’ processes.

If you look at the skills that are in Ferrari, they have people who know about plastic injection molding, about carbon fiber production, so they are people who are capable of going to suppliers and supporting them in their development process, not only in Ferrari’s own processes, which is quite unusual for a car maker, again, because in many instances you have to deal with suppliers who have never done that process before. If you go to the limit, you can’t manage the process at arm's length. You need to manage it as if it were your own process. So that's the major difference vis-à-vis other manufacturers.

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Ferrari: Values and Culture of a Prestigious Automaker

November 18, 2019

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