Managing Organizational Innovation in Sport

Abstract

In this chapter we focus on how the organizational thinking behind the way in which Formula E has evolved as a business model from 2012 until today. In order to exemplify how Formula E has enhanced its organizational capacity for innovation and how entrepreneurial facilitation is practised, particular emphasis is laid on its integrational collaboration with partners when it comes to car manufacturers and events. The latter is discussed in a critical perspective as Formula E events have been the subject of both criticism and praise.

Introduction

Since the European Commission around the millennial shift effectively ended Fédération Internationale de l’Automobile’s (FIA) monopoly in hosting world motorsport events (but in return gave FIA full control of its own championships; see Næss, 2020), there have been numerous attempts to introduce new racing series similar to Formula E, albeit with traditional business models and technology. In order to explore why Formula E seems to persevere in contrast to most other single-seater racing series established in the early 2000s, this chapter analyses the role of the organizational structure of Formula E. More specifically, the key question is ‘what leads individuals to establish organizations that employ radically new routines as opposed to organizations that simply reproduce established ways of doing things’ (Aldrich, 1999, pp. 80–81)?

In what follows, we examine the organizational ecosystem of Formula E by concentrating on: (a) its business model and (b) its collaboration with event hosts. Regarding (a), we focus on how the organizational thinking behind the way in which Formula E has evolved as a business model from 2012 until today and its collaboration with partners. Whereas Formula 1’s (F1) business model relies on sanction race fees in addition to major financial injection from commercial rights, Formula E is much more dependent on sponsorship. In fact, sponsorship generates almost 50 per cent of Formula E’s revenue, compared to about 15 per cent in F1 (Sylt, 2019).

On the other hand, F1’s commercial rights amounted to $608.3 million in 2017, while Formula E’s commercial rights came in at $6.5 million the same year (Sylt, 2019). Hence, hosting a Formula E event is a cheaper offer than a Formula 1 race, although in return, as the race has to be in an urban area, there is a different level of complexity in organizing the event—in which city councils, sponsors, residents and numerous other stakeholders are involved. In the second half of the chapter we therefore review how Formula E events come to be in order to assess the collaborative approach as a driver of organizational innovation.

Organizational Innovation, Entrepreneurship and Institutional Fields

Sports organizations cover a myriad of different organizational forms, from federations to clubs, student athletics and holding companies. Even with this diversity, we dare to say that most sports organizations are generally conservative entities—and we do not mean that in a derogatory way. Characterized by an internalized respect for history and past achievements, they tend, as noted in a study of Canadian community organizations, to be regarded as beacons of ‘tradition and informality, resulting in a governance strategy that is often reactive and pragmatic, as opposed to proactive and strategic’ (Hoeber & Hoeber, 2012, p. 213). For that reason, as well as for economic, cultural (i.e. with the role of volunteers) and legal reasons (so-called organizational determinants), their scope for innovation is not always the greatest. Yet the ability to renew itself has long been considered ‘to be just as important for sport organizations that, like other organizations, compete for limited resources to promote their particular sport (e.g., government grants, members to participate or spectate, sponsorship, media coverage)’ (Newell & Swan, 1995, p. 318).

The argument that competition for limited resources is a driver of innovation is one of this chapter’s cornerstones. Seemingly taking into account Croci’s (2004) claim that a sports organization needs to innovate structurally to collaborate with its external partners and to ‘get on with its neighbours’ (such as the European Commission and other non-profit associations), the organizational history of Formula E embodies the claim that ‘the propensity among entrepreneurs toward innovation as opposed to the reproduction of existing ideas is seen to be a function of the types of social relationships those entrepreneurs are embedded within’ (Ruef, 2002, p. 428). Moreover, Ruef (2002) argues that the general relevance of tie strength for innovation, rather than diffusion, relates to two underlying dimensions of social relationships: information and influence. For sport, information and influence as they are defined here often converge. Learning from Desbordes’ (2001) comparative study of skiing, sailing and cycling industries, the importance of having the capacity to use external influence as a driver of innovation is one of the lessons that sports organizations should heed. As Desbordes (2001, p. 145) explains it: ‘collaborations with suppliers, laboratories, and other firms are essential, in order to constitute a network of competencies.’

For profit-oriented sports organizations, as in, for example, football, this challenge of exploiting information and influence has been met with business models, brand thinking and strategies borrowed from commercial enterprises (Edensor & Millington, 2008; Rohde & Breuer, 2016). With that, they have adopted two challenges with organizational innovation. The first is being open to the influx of new ideas because they are profitable, and the second is ‘that these ideas then be translated via a process of organizational change within the adopting organization so that their usage is appropriate’ (Newell & Swan, 1995, p. 317). Hence, there is a crucial difference between organizational innovation in grassroots voluntary sports organizations and professional profit-oriented sports organizations. In voluntary sports organizations, the impetus for organizational change is often the need to rationalize structures that have previously been dealt with on an ad hoc basis. For profit-oriented sports organizations, there is a need to stay innovative and flexible in order to ensure competitive contingency (Newell & Swan, 1995).

As organizational innovation involves challenging the conservative, tradition-bound influences of sports organizations, successful organizational innovation in sport often requires changes in management models (Hartley, 2005). A central factor for success here is that changes in management and organizational structures are in coherence with local capabilities and needs. For sports organizations, increased organizational capacity can be achieved through innovative strategies related to policy environment and partnering with local institutions (Osborne et al., 2008). The sport and innovation literature refers to, for example, establishing open communicative systems, involving end-users in operation processes and co-creating programmes with several NGOs to increase the organizational capacity of sports organizations (Svensson & Mahoney, 2020; Tjønndal & Nilssen, 2019). Ringuet-Riot et al. (2013) mention that innovation in organizational systems can facilitate performance improvement and solve problems that hinder potentially impactful projects. However, development practices contain dichotomies in terms of actualizing organizational innovation: local or exported management models, heuristic or modern approaches and leadership or committee-oriented work. Reducing these dichotomies requires a practice-based understanding of the organizational processes of sports organizations at different levels (voluntary vs for-profit) and in different geographical, cultural and social contexts.

An important factor in enhancing organizational capacity for innovation and change is how entrepreneurial facilitation is practised. This approach follows Watson’s (2013) replacement of the common view of entrepreneurs as ‘a special category of person’ (p. 408) with ‘actors’. In Watson’s view, entrepreneurs can be a group of people, an organization or other corporate functions engaging in innovative deals benefitting the overall goals. Under the heading ‘How to collaborate successfully in the ecosystem’ (see Chap. 1), Wilbaut (2015, p. 86) writes in the eStory—Formula E’s official pamphlet—that ‘Effective ecosystems manage to turn outsiders into collaborators and cultivate profitability by encouraging others to create valuable offerings. In such an environment, enabling external innovation becomes as important as improving internal capabilities.’ In order to operationalize this vision, Agag and his associates have until recently—mainly worked as a start-up in the sense of overcoming a typical issue for innovators at the periphery of a mature field (motorsports), as outlined by Albertini and Muzzi (2016, p. 111): ‘when entrepreneurs are radical innovators they have—at the same time—to interact with existing institutions to be credible and to get identity and legitimacy and to change the institutional environment to create the new context for the growth of the venture.’

All of this comes under what are called ‘institutional fields’. According to Delbridge and Edwards (2007, p. 93), ‘“field” in this sense “denotes those various conditions under which the environment shapes the organization” (…) Fields represent differentiated, interdependent networks of organizations and institutions that together reveal a recognized area of life.’ There is a set of ‘institutional logics’ in these fields, which means a set of principles and practices that are necessary for the organization’s existence, such as the commercial motives for a corporation, or medical qualifications at a hospital. Several studies demonstrate how these principles and practices influence how members of organizations interact with each other and others outside the organization (Pahnke et al., 2015). Hence, to challenge these logics we need to know how they constrain and enable entrepreneurial agency (Watson, 2013, p. 413; see also Chap. 7), especially if we consider the place of motorsport in the environmental debate. As underlined by De Clercq and Voronov’s study (2011, p. 323), ‘sustainability and profitability will be an important aspect of entrepreneur legitimation.’ As up to now they have represented two competing logics in motorsports, the focus has usually been on the balance between them. However, De Clercq and Voronov (2011) argue that ‘the issue is not so much whether the aforementioned win–lose or win–win scenarios are accurate but rather, how expectations about sustainability and profitability are institutionally embedded’ (p. 325).

Considering the expectation from Formula E’s partners of sustainability as a driver of organizational innovation, Albertini and Muzzi’s (2016) three-step model for divergent change implementation becomes relevant. The first step, which concerns a new vision, has already been outlined and needs no further introduction. The second step is about selecting the right partners, where Formula E exemplifies the claim from Jarvenpaa and Standaert (2017, p. 4736) that ‘the entrepreneurial firm has to constantly play, poke, and shape the contours (limits) of the landscape to attract new partners and user communities.’ Here, Agag and his small start-up team has over the years put together a management team that apparently seems fit for purpose when it comes to exploiting the ecosystem for innovation targets.

Managing the Organizational Development of Formula E

Before Agag, there was actually a competing championship in the making, when South African company Formulec, established in 2008, commissioned French company Segula Technologies to develop an electric formula racing car. After a year or so of testing, it was announced in 2011 that in 2012 a Formulec World Series would start as a championship and be very similar to the current Formula E:

Formulec is the only Formula series which really makes sense as a street race due to the extremely low noise levels produced by the vehicles—this means that the public can view a world class racing event on the streets of their own city.¹

Meanwhile, Agag, who had similar ideas of his own, was supported by FIA, which fancied the Formulec idea but was not convinced about its commercial ability to convert into a fully fledged alternative to Formula 1. The solution was that Agag and Banuelos bought Formulec, set up a holding company as the future promoter of Formula E and integrated the technical know-how of Formulec into a new company called Spark Racing Technology (SRT).² Now equipped with their own supplier of electric racing cars, as well as entering into a partnership with McLaren to supply powertrains (a company that has been in Formula 1 since the 1970s), Agag succeeded in getting FIA’s approval on technical rules, with 2014–2015 as the first full season. Shortly after this, Formula E and its new investors employed people with experience inside and outside sport. New CEO Jamie Reigle, for example, said that one of the reasons he accepted the job was because the business structure established by his predecessor was so sound:

What’s really compelling is the fact we have an integrated business model, meaning we control the events, we control the TV rights, we control the digital rights, we control the sponsorship, we control the branding (…) If you were to say that to someone at the Premier League or the NFL or other sports properties… it’s very rare where you’re integrated in that way.³

Integration is a keyword for Formula E in more sense than one, according to Eric Ernst, who in March 2018 became Formula E’s Head of Technology, after having worked with Volvo America’s Cup:

We do use roles within our company to guide integrators to help us build certain things. So I don’t want to have 30 people in my department that work six or seven months on the championship and then I have them six months in the office under-occupied or I have to let them go and re-hire them again. I think that approach of getting partners in to help us build the championship, us running the design and the philosophy and culture of how we want to do it.⁴

This approach was confirmed by Formula E’s Chief Marketing Officer Jerome Hiquet, who in 2019 said:

it’s on purpose that we remain very close to what our partners are telling us. It’s easier when you’re a 5-year-old organization to build that with your partner from day 1, and to maintain this relationship, than if you’re a bigger organization where there is potentially less need, or if the dynamic is a bit different. Maybe in 10, 15 years’ time we won’t be able to do what we’re doing now. B2B, B2C brands are embracing us because of our scale and our access to a younger generation and our purpose. We know we need our partners to continue to grow, and we know we’re providing a platform for them to be able to scale in a way that they wouldn’t be able to do through other partners or through other marketing activations.⁵

In other words, as underlined by other studies of innovative partnerships (see, e.g. Pahnke et al., 2015), Formula E also influences its partners. The explanation is that so far, Formula E has supplied teams with a platform to showcase their products. To be part of this platform, and gain access to a well-marketed concept as well as an entire race infrastructure, teams pay with the help of sponsors. This works well in a start-up phase, where the brand investment seems to outweigh the financial cost in the context of ‘Dieselgate’ (see Chap. 1) and the fact that Formula E is growing commercially. Talking about Formula E as a start-up, in 2019 Agag said that: ‘We can adopt crazy ideas that other sports can’t, because they have all this past heritage. We can risk fumbles.’⁶ Yet, at some point fumbles are not as charming as they can be in an early phase, and some motorsport commentators (see Rencken, 2019) are certain that the business model will at some point be questioned by teams that—like in Formula 1—want a revenue-share arrangement. For a money-making entity like Formula 1, this principle has been a stalemate of the championship since the 1970s and the object of numerous lawsuits and brawls, not least because some Formula 1 teams are constantly favoured by the commercial rights owner (Næss, 2020).

In contrast to Formula 1, though, Formula E has operationalized Albertini and Muzzi’s (2016) third step in its model for divergent change implementation: legitimation of the new venture. With the massive promotion recently of Formula E’s ISO certification as proof of a credible sustainability strategy, it is interesting to note that in the eStory , Formula E’s official ‘value pamphlet’ from 2015 (Wilbaut, 2015), certification is never mentioned—although the focus is on how Formula E as an ecosystem for environmental sustainability-friendly innovations can improve air quality, provide cleaner mobility solutions (electric ones) and make a positive impact on urban development. According to Julia Pallé, Formula E’s head of sustainability, this shift in strategy emerged from a reading of environmental strategies elsewhere and picking certain known eco-relevant themes that would align with the championship’s core issues.⁷ Racing in cities meant focusing on air quality, energy use and waste management. To coordinate the efforts to improve in these areas, Pallé says that the next step was to develop a management system to anticipate the expectations in the stakeholder network and find partners that could operationalize the resulting tasks. This meant on the one hand securing support from the Formula E’s leadership group to develop an organizational culture of working towards ISO certification, which consist of 29 clauses, which include specific clauses on leadership, supply chain management, event sustainability objectives and sustainable development principles and statement of purpose and values. On the other hand it meant collaborating with external partners like SGS (Société Générale de Surveillance), the Swiss-based accreditation company that helped the Rio 2016 Olympics to achieve ISO20121 status, as well as organizing a large stakeholder meeting with local community officials and the like based on what Pallé calls a SMART approach (a concept from management thinking, first coined by Doran, 1981).

On the financial side, therefore, Formula E seems to be in better shape than ever, with the influx of money from substantial investors like Saudi Arabia and the recent entry of major car manufacturers like Porsche and Mercedes. Relatedly, sponsor deals are also still different from those in, for example, US motorsports, where one-off sponsorship deals are far more common than the Europe-based annual arrangements and provide at least some element of stability even when the COVID-19 pandemic is still heavily impacting motorsports.⁸ On the competitive side, however, lessons from motorsport history warn about the loss of participants should they turn out to be regular ‘backbenchers’ or fail to convert opportunities for technology transfer between race and road cars into a profitable relationship (see Chap. 3). In the bigger picture, a third dimension is also worth noting: the race organizers and their patience with events that may or may not be beneficial to strategies of growth and sustainability, and the rivalry of urban areas hosting these events. While interest in hosting events has been taken for granted, and for good reasons given the conceptual match between Formula E’s value proposition and contemporary politically correct objectives on sustainability, recent developments and increasing research on the phenomenon suggest that it might not be all that simple.

The Organization of Race Events

Before turning to the organization of racing events, it is relevant to note that the relation between sustainability and sporting events has been a topic of debate since the 1994 Lillehammer Winter Olympics was hailed as the first green mega-event (Sotiriadou & Hill, 2015). Among the critics we find Smith (2009), who argues that while events create a temporary feel-good factor, the actual do-good factor (what the event has contributed to in terms of financial growth, social integration and ecological progress) is much less certain. For motorsport in particular, events seem to have brought more negatives than positives. A group of researchers found no effects on GDP, employment and tourism in the European regions hosting a Formula 1 Grand Prix from 1991 to 2017 (Storm et al., 2020), whereas others argue that these events bring huge economic benefits to specific events such as the F1 Korea Grand Prix (Choe et al., 2017). For various reasons, politicians and the like still favour the perspective that events like these add value beyond the numbers.

At the time of writing, Formula E has visited 17 nations, and for its eighth season (in 2021/2022) is actively discussing 26 possible venues. As mentioned in the introduction, the race fees—the cost of being allowed to organize a Formula E event—are much lower than in Formula 1. Therefore, the incentive to organize these events has to be rooted in the city’s or local organizing committee’s value proposition, which in any case has to be legitimately anchored in a larger group of stakeholders. Unlike the process in which racetrack owners and associated stakeholders make a bid for a Formula 1 race, Formula E event hosts need to first send a formal letter of interest to FIA and Formula E before an official feasibility study is called. This study ‘involves technical and logistical staff from Formula E Operations and the FIA travelling to the city in order to evaluate the viability of the track. Then detailed commercial discussions take place with the city and any promoters that will drive the plans forward.’⁹ Along the way, the pros and cons of Formula E races are subject to debate in the urban areas in which they are meant to be held.

Previous research and reports have identified conflicts in the UK (London), Canada and Indonesia, to name but a few (see, e.g. Sturm, 2019). Usually, the debate concerns value for money, the level of intrusion in city life, and the trade-off between the benefits of projecting a positive imagery of a given city and the high cost of coverage. Different business models between cities also enable them to compare event organizing with others. For example, when hosting an event for the first time in 2017, the city of Montreal had a public injection of $24 million to make it happen. Only $1.5 million of this covered the first payment of race fees, whereas the road work and track building together came to $13.4 million.¹⁰ There was to be no second edition of the race, though, because the new mayor, Valérie Plante, only saw red numbers after the first race and faced increasing dissatisfaction from activist groups like Formule Citoyenne. According to Plante, suspending the contract with Formula E was even less expensive than hosting the upcoming events.¹¹ The Paris E-Prix used no public money, but was still harshly criticized, this time for ‘greenwashing’ the car industry (Ariès, 2018; see Chap. 3). Those supporting the race included Anne Hidalgo—the mayor of Paris, the city in which FIA has had its headquarters since 1896—who claimed that it would increase ‘public awareness of sustainable methods of transportation and aid promote car manufacturers continuing to invest in electric mobility and alternative energy solutions’.¹²

Others in France have also disagreed. One of the frontrunners in the mayoral race in Paris in 2020, Benjamin Griveaux, has pledged to cancel the French capital’s ABB FIA Formula E race if he is elected, citing Formula E as being an ecological aberration.¹³ Although Griveaux’s complaints about Formula E’s ‘thundering engines’ demonstrate a lack of knowledge about the racing series (thunder is perhaps the least fitting description of their engine sounds), he is not alone in looking at it this way—neither in Paris, nor in sectors of society other than politics. Neither is he alone in producing claims that a Formula E event ‘brings nothing to Paris and doesn’t convert anyone to electric vehicles’.¹⁴ In the city of Jakarta, which in September 2019 secured a deal to host the race for five consecutive years, the administration was criticized after arguing that the 2020 Formula E Championship ‘wonders to promote the use of electric vehicles in Indonesia’—despite the absence of electric vehicles in the city’s development agenda.¹⁵ To top it all off, it was later revealed that the cost of preparing for the race (about Rp 1.6 trillion, i.e. US$1.1 billion) was compared to Hong Kong’s plan, which hosted the 2018–2019 Formula E season and cost 300 million Hong Kong dollars ($39 million). This alone caused political dissatisfaction, as did a reversed decision by the steering committee to approve a request for the Monas area as the racing venue due to its designation as a cultural heritage site after first having denied it.¹⁶

Sturm’s (2019) research on the 2015 London E Prix adds more perspectives to the complexity of event organization in Formula E. Shaped as a case study of the issues of staging a race in London’s Battersea Park, Sturm explores the challenge of hosting motorsport events as part of a strategy to rejuvenate a city in a green direction. The ideal was to stage the race as a platform for innovative technology by lowering the barriers for spectators, but the reality was this: hosting a race in a historical parkland without sufficiently consulting with those with an interest in it made the event troublesome from the beginning (Sturm, 2019). Overlooking the fact that infrastructural issues are as important to acknowledge as the race content itself indicates that the combination of motorsport and green image requires a different approach to that of a classic race. Green attributes may be added to a location or destination brand in the planning stage and be positioned as a ‘green city’, but only if they harmonize with the sentiments of an extended stakeholder group. Sturm’s conclusion, together with the other above examples, is consequentially supported by Getz’s (2009, p. 68) argument that generating ‘social equity’ through an event with an emphasis on sustainability ‘requires full integration of residents and other stakeholders in the decision-making process for bidding on, creating and marketing events, and in assessing their impacts’.

A final example that demonstrates the requirements for successfully hosting a Formula E race is the story of the Swiss city of Bern. After hosting a successful race in Zürich in 2018, Swiss E-Prix Operations AG, which coordinated the 2019 event in Bern, faced unexpected difficulties that, in the end, led to the company’s bankruptcy in January 2020. Sources point to a myriad of reasons for this, such as higher security costs, less agile cooperation with the canton (including a fierce battle over the cost following vandalism) and political criticism of ‘greenwashing’ (especially as Formula E’s major deal with Saudi Arabia was sealed between the first and the second event in Switzerland) (Bern, 2019). But the evaluation report also points to a more major concern, which relates to why the race was received so much better in Zürich. In Zürich, the sense of ownership among the city’s own residents, the political goodwill to see the race as an investment in an already established strategy for sustainable urban development rather than a trade and the innovation link to its prestigious technical university ETH Zürich came together in an understanding of the event as a showroom for Zürich. Bern, in contrast, seemingly approached the event in a more instrumental way. Similar to Montreal, the city saw itself as any other stakeholder that was in it for the money and was less concerned (at least compared with Zürich) about the necessity of integrating the significance of social capital into the complete event assessment. For example, the Bern report states that although the planning was considered satisfactory, the actual implementation was under par. A reduction in public transport offerings and a desire to place the racetrack as close to the old part of Bern as possible, both of which complicate inner city mobility, were insufficiently addressed in the implementation phase. In other words, attention was drawn to the short-term problems rather than the long-term goals (Bern, 2019).

The experiences described above are important for potential Formula E race event hosts in terms of helping them to avoid making their predecessors’ mistakes. Simultaneously, it is in Formula E’s interest to contribute to reducing the risk of drawbacks once the race is agreed on. Formula E does this by cooperating with UK-based GL Events as its official, global overlay partner. This means a bespoke 13,000 m² of infrastructure around the track for the E-Village, pit garages, race control, the media and TV compound, catering and medical facilities and a state of the art double-deck structure for the E-motion Club, the most prestigious tier of Formula E hospitality.¹⁷ Moreover, Formula E collaborates with local organizing committees and has special envoys, such as Richard Bate, the chief safety planner. His responsibility is to plot an event setup that minimizes intrusion into everyday city life, ensure a pre-contract Occupational Health and Safety (OSH) due diligence and negotiate with those indirectly involved in the event. Bate’s approach is comprehensive and includes the police, building control officers, traffic controls and other stakeholders in the city wanting to host a major sporting event.¹⁸ It also includes collaborating with Massimo Foroni, the motorsports team operations manager at Formula E’s logistics partner DHL, which, for example, prior to the Paris E-Prix had access to a representative dedicated to working and ‘briefing the right people in the city council’.¹⁹

Furthermore, in terms of designing the race track and maintaining the lives and livelihoods of the people and businesses affected by the 14-day event (10 days to build the track and set up the associated structures, such as paddock buildings, grandstands and the E-Village), the 100-tons plus of materials needed to erect this happening has to be transported into the city without causing problems.²⁰ A major part of achieving this goal is whether the Allianz E-Village is successful. Basically, this is a miniature Tivoli centred on Formula E-related activities which is set up at every Formula E race. It is often organized in zones—the recharge zone (relaxation), the stage zone (family-friendly happenings), the taste zone (food and drinks) and so on—which the guests can frequent to explore different sides of the championship. The idea is to provide a low-cost, diverse and sustainability-oriented addition to the race itself and, through that, promote the championship’s core values as well as invite local actors to take part in the partnership. According to Allianz—a large multinational insurance company that used to sponsor Mercedes in Formula 1 until it switched to Formula E in 2017—the idea behind E-Village is ‘to tear down the barriers of traditional motorsports’. Jean-Marc Pailhol, the Head of Group Market Management and Distribution at Allianz SE, said that:

We believe that now is the time to engage in the development of new ecosystems, defining the future of urban mobility in a sustainable way. What better way than to partner with Formula E which not only brings the discussion to metropolitan cities around the globe but also adds the excitement of fully electric racing. We are particularly excited to host the ‘Explorer Zone’ in the Allianz eVillage which allows visitors to experiment the latest digital technology, such as 3D printing, drones and virtual reality.²¹

As such, the E-Village connects with the grander idea of what a Formula E event should be in terms of influencing the audience and its partners towards a more sustainable future, as well as hooking up with the value proposition of what an event can contribute to a city in terms of financial boost, environmentally friendly technology and attracting tourism and investments. At each event, Formula E collaborates with two types of stakeholders. First, the event organizers appoint companies specializing in produce to manage the Allianz E-Village, which as indicated above is a large festival-like area dedicated to fun, technology and family activities related to the main event. At the Paris E-Prix, for example, the E-Village was built on the Invalides esplanade covering an area of 39,000 m² and hosted 46,000 fans throughout the event.²² Apart from local partners, E-Villages also include local restaurants and community initiatives. In 2019, Julia Pallé, Formula E’s Sustainability Director, said about the New York race that ‘we hired a staff of 45 for this event and most of them come from Red Hook’ (the area of New York City where the event was located). Moreover, Modis, one of the event sponsors, funded two scholarships for Red Hook students to attend a city university.²³

The design of the E-Village is rooted in a desire to provide an inclusive option to those wanting to take part in the event without being racing fans. According to Hover and Heijnen (2020), 40 per cent of E-Village attendees are families with young children, while 35 per cent are university students interested in technology, cars, sustainability and the arts. At some events, there is also an E-Lounge, a more exclusive option for those with a special interest in going ‘behind the scenes’ in the E-Village (tickets started at €750 at the Berlin E-Prix). Second, the content of the E-Village changes from city to city. For example, at the 2018 Zürich E-Prix, the city’s prestigious technical university (ETH Zürich) had its own pavilion at the E-Village, where it presented three projects: Duckietown (a fleet of autonomous mini taxis, relating to a project first started at the Massachusetts Institute of Technology in 2016), Swissloop (high-speed travel capsules—so-called pods—that were meant to shoot travellers from A to B in vacuum tubes) and the electric AMZ racing car (a participant in the Formula Student competition where the aim is to foster new engineering talent).

For newcomers, the existing layout of a Formula E event provides a framework that ensures brand coherence yet leaves some room for local creativity. One of the potential newcomers to be visited by Bate and others from the Formula E management should the application materialize is the Dutch bid for a Formula E race called ‘Brainport Eindhoven Region’. In 2020, a study was commissioned by Research for Sport and Public Policy at the Mulier Institute to assess its potential economic and social impact. Assessing broadly the characteristics of Formula E, the Mulier Institute report provides a rich image of what it takes to determine the potential legacy of a Formula E race. Envisioning a three-year/three-race package deal, the researchers state that a bid must be grounded in Formula E as a ‘story context for projects on sustainability, waste reduction, technology, social awareness, smart mobility, smart city and innovation’ (Hover & Heijnen, 2020, p. 13). This story, the report continues, matches the characteristics of the city of Eindhoven (evaluated as the most innovative city in Europe by the European Commission in October 2019) and the surrounding regions. North Brabant, in particular, aims to be among the top five most innovative regions in Europe (Hover & Heijnen, 2020, p. 14). It also connects to the championship’s major sponsors, Dutch beer brand Heineken.

These relations are then used as the basis for an assessment of potential economic impact, social impact (feelings of pride and the like) and opportunities for leveraging. Notably, the researchers are critical of existing sponsor agencies’ estimates and conclude that the potential economic impact is in the region of 20–30 million euros rather than the three times as high figures offered by others before them. Moreover, the marketing impetus, which is crucial to Formula E, is also in danger of being overemphasized. Hover and Heijnen refer to a study by Robeers (2019), who found that sport broadcasters neglected the green message and instead concentrated on themes associated with traditional motorsports. In a worst case scenario, the researchers argue, too strong an emphasis on the green message can be counterproductive and generate greenwashing criticism, as in the case of Paris mentioned above, and like the case of Bern. Notwithstanding, the researchers conclude that there are multiple benefits of hosting a Formula E race, and from our point of view the report reflects how Formula E is organized: as a start-up. Hosting three races has a low probability of financial success in three years, but as a driver for innovation—rather than being the innovation itself—a series of races could kick off synergy effects between industries and partners that are not visible in the subsequent KPI report.

Conclusion

In contrast to most sports federations or organizations, Formula E is primarily a business, with sport—and races in particular—as a defining element of its activity. As examined in this chapter, there are many things that sports organizations can learn from Formula E’s organizational development. First, as a newcomer to a mature ‘institutional field’, it needed to position itself by emphasizing assets other than those commonly utilized by sporting organizations to attract investors, fans and partners. Rather than associating itself with other motorsport history, tradition and legacy as selling points, Formula E was regarded as a start-up and used the momentum of its entrepreneurial spirit and contextual receptivity to further its commitment to create novel partnerships in various departments. In particular, Formula E has merged its bigger commitment as a Trojan horse in the climate debate with having made incremental steps from a small holding company to a large brand through a specific type of relational networking tailor-made to its conceptual core as a sport-entertainment brand with a purpose.²⁴

Second, when it comes to awarding events, Formula E’s expansion strategy relies on a mutual agreement between parties to see the championship as a start rather than the final product, and the relation between motorsport and green technology. As illustrated in the analysis of the business model and the organizing of events, the integration of strategic elements used to keep the brand narrative watertight ensures a coherent management of the championship even though several external factors pose potential risks for the future. For the business model, there will be a continuing debate about Formula 1’s revenue sharing model, especially when the interest of car manufacturers wanes. The extent to which Formula E will be able to maintain an aura of technological freshness despite cost caps, while other industries may move past them as innovators, is also part of the equation. For the events, there will continue to be debates about their financial and social impact, not least by those who prefer car-free cities and those who argue that a Saudi Arabian benefactor weakens the goodwill of a significant part of the political elite in Europe and Asia.

Conclusively, according to Agag, the differentiator against similar ventures in the past and even today has been the ‘purpose’, which he claims is part of the ‘new business model for sport’. Although many of the elements are familiar—sponsorship, broadcasting rights and fan engagement activities—not all sports have a grander ‘why’ (as immortalized by management gurus like Simon Sinek, see Sinek, 2017). Agag says: ‘If you don’t have the purpose, that’s when your sport will slowly lose energy, fizzle out and disappear. If you have a strong sport and are able to add purpose to it—it has to be authentic—you’re in good shape.’²⁵ In other words: The more reciprocal the ecosystem of the firm is managed around its purpose, the more advantageous it will be for actors with a stake in the business.