Guest blogger:Des Dearlove, Co-founder of the Thinkers50, the global ranking of management thinkers, and Visiting Professor at the IE Business School.
Fancy a trip around the moon, or a long weekend in an orbiting space hotel? Sounds like science fiction, but if Richard Branson has his way, it could soon be a reality. In January 2008, Branson unveiled the design for the first Virgin spaceship. Virgin Galactic is just the latest stop in the meteoric rise of Britain’s best known entrepreneur and founder of the Virgin business empire.
Branson, the man with the beard and the toothy grin, is a business phenomenon. Born in 1950, he has been walking on the commercial equivalent of the moon (or is it water?) for over three decades. In 1970, he started a mail order music business, before moving swiftly on to create the Virgin record label – and a host of other businesses.
The Virgin empire now spans travel, hotels, consumer goods, computer games, music and airlines. There is even a range of Virgin-branded financial products – including pensions, credit cards, loans and life insurance. Today, Branson is the driving force at the centre of a web of over 200 companies, employing more than 25,000 people worldwide. New Virgin ventures continue to be added to the eclectic collection of companies gathered under the umbrella of the seemingly infinite elastic Virgin brand. Virgin Mobile, for example, was launched at the end of 1999 to sell mobile phones and provide mobile phone services. Other recent additions included Virgin Active, a health and fitness company; Virgin Cars, an online car retailer; and virgin.com, offering a raft of Virgin products over the Internet, to name but a few.
Branson himself has distilled Virgin’s four core competencies. These are:
- The ability to identify appropriate growth opportunities
- The ability to move quickly
- The willingness to give day-to-day management control to relatively small operating teams. “We try to keep our companies small,” he says. (Even though the airline now has 6,000 staff, Branson likes to think it has “retained a small company environment and informality”.)
- The ability to create and manage effective joint ventures
Others have suggested Branson’s own real, core competence is the ability to motivate people and push them to the limit. Still others point to his relentless and sometimes ruthless negotiating skills.
Careful dissection, however, reveals that the truth is more subtle. The Branson phenomenon can be reduced to a number of lessons that can sharpen the business acumen of any manager or entrepreneur.
So what are the business secrets of the man who built one of the world’s great brands? Here are just a few of things that Branson can teach us.
1. Never give up: Like many other successful entrepreneurs, Branson has had his share of failures. And like other successful entrepreneurs, he knows that setbacks are par for the course. A combination of persistence, a strong brand and an unshakable belief in his own abilities enables him to shrug off the disappointments. When a postal strike crippled Branson’s fledgling mail order music business in the 1960s, he opened a record store. When Branson and the Virgin record label’s biggest selling recording star Mike Oldfield fell out, the resourceful music mogul signed the punk band the Sex Pistols and, later, Boy George. Even today, Branson continues to meet with the occasional failure – much as he always has. Virgin Cola, for example, which had hoped to take the American cola market by storm, lost its fizz and retreated from the US market in 2000. And closer to home, when problems at Virgin trains severely depleted the brand’s reservoir of goodwill in the UK, Branson talked about newer, faster, tilting trains with his usual irrepressible enthusiasm.
“Whenever I experience any kind of setbacks,” Branson observes, “I always pick myself up and try again. I prepare myself to have another stab at things with the knowledge I have gained from the previous failure. My mother always taught me never to look back in regret, but to move on to the next thing. The amount of time that people waste on failures, rather than putting that energy into another project, always amazes me. A setback is never a bad experience, just a learning curve.”
2. Play the underdog: The second lesson from the Branson business masterclass is to pick on someone bigger than yourself. “At Virgin, we have a strategy of using the credibility of our brand to challenge the dominant players in a range of industries where we believe the consumer is not getting value for money,” Branson explains.
He has consistently positioned Virgin as David against the corporate Goliaths. Virgin airlines took on the might of British Airways, fending off a dirty tricks campaign to establish itself as a major transatlantic airline. When Virgin Direct decided to enter the UK financial services market, Branson explained, “We looked long and hard at the marketplace and realized that although there were 600 companies selling pensions and other investments, they all charged almost identically high prices. There was always an upfront commission (often hidden), a high annual fee, and usually a Mr. or Mrs. Ten Per Cent sitting in the middle raking off a fat commission. It was like a giant cartel…”
“The consumer,” Branson announced with typical bravado when Virgin Direct was launched, “has been taken for a ride for too long by an industry which has been able to hide its charges”. His approach works. Branson comes across as the crusader, the people’s champion. He is the business buccaneer attacking vested interests and cosy cartels with a sense of fun and derring-do.
3. Keep it casual: The third lesson from the Richard Branson school of business is that a relaxed culture is good for business. While some leaders dress to impress, Branson’s legendary aversion to a suit and tie works in his favour. Dressed in his trademark sweater or open-necked shirt, he stands out from the business crowd. His casual style and anti-establishment air is perceived as hip and cool by his target market, if not always by the financial markets in the City of London.
One story illustrates the point. In the early days of Virgin, people were surprised by the sight of pony-tailed men with beards and jeans walking into Coutts & Co., one of the UK’s oldest banks. But when the fledgling firm experienced cash flow problems, and Branson had to ask the Coutts bank manager for a loan, Virgin staff argued that it was time for him to swallow his pride and put on a suit. But the young Branson grinned. “If I suddenly turn up at the bank wearing a suit and tie,” he explained, “they will know we are in trouble”. Instead, he went to the meeting in jeans and said that the business was expanding so quickly that he needed a bigger overdraft to keep up. He got the money.
4. Make work fun: Play hard, work hard is another ethic that permeates the Virgin culture – and the fourth Branson lesson. Virgin is a fun company to work for. It is an attitude that encourages staff loyalty. Ask what Branson brings to the Virgin party and his adoring employees will tell you it is the party itself. His extravagant thank you parties for Virgin staff are legendary. Branson himself explains, “I get the best people, I ask questions, and then I say: let us have some fun”.
Branson also treats employees well. “Staff should come first; if it means making £5 million less, then that is the right decision to make.”
But there is method in the madness, as the business commentator and Branson watcher Alan Mitchell observes, “He captivates the public and employees by the unexpected prospect of making the grey world of work sparkle with fun and excitement”.
5. Haggle – everything is negotiable: The fifth Branson principle – and one of his less well-known talents is his razor-sharp negotiating technique. Nice guys, so the saying goes, finish last, but not Branson. Despite – or perhaps because of – his Mr. Nice Guy image, Branson rarely comes out second best in any of the deals he makes. His charisma and affable charm belie a calculating business brain. It also helps that he has the cheek of the devil.
As Branson biographer Tim Jackson (author of the Virgin King) observed, “When there was business to be done, Branson loved to haggle: he had a street trader’s aptitude for negotiation… When the company was small and he was striking agreements on his own, Branson had enough cheek to demand far more than he ever hoped to win – but also enough patience to argue a deal point by tiny point if needed.”
6. Stand by your brand: The sixth lesson is to guard your brand at all costs. Counter to conventional branding wisdom, Branson has applied the Virgin brand to a motley crew of products and services that have little in common other than the brand itself. Some major corporations have destroyed a brand’s reputation by moving into unfamiliar markets. Yet the Virgin brand goes from strength to strength as it is affixed to everything from condoms to credit cards.
Western companies are often nervous about stretching their brands, but Branson takes inspiration from Japanese brands. “No one has a problem playing a Yamaha piano, having ridden a Yamaha motorbike that day, or listening to a Mitsubishi stereo in a Mitsubishi car, driving past a Mitsubishi bank,” he says.
Such success is down to Branson’s innate appreciation of the brand’s core values. “If you have twenty or thirty years of good reputation behind you, the public get to know you like you are a brother or sister,” he says.
In recent years, he has thought long and hard about what the Virgin brand stands for. He believes there are five key factors: value for money, quality, reliability, innovation, and an indefinable, but nonetheless palpable, sense of fun. Put the Virgin name on any product that does not come up to scratch and the whole company is brought into disrepute. “Our customers trust us,” he says simply. The Branson philosophy, then, is: look after your brand and it will last.
7. Smile for the cameras: The seventh habit of this effective entrepreneur is to generate copious amounts of publicity, rather than pay for advertising. Branson is a one-man publicity machine. Yet it was not always so, as he explains, “Up to the time I launched the airline, I was a reasonably shy person. I did not like doing interviews, avoided the press. I took my mother’s advice to let my businesses speak for themselves. But when we decided to launch an airline, Freddie Laker [the airline entrepreneur] said that if I was going to take on American Airlines, United and British Airways, I would never have the advertising spend that they employ… but if I went and made a bit of a fool of myself, I would get on the front covers.”
Branson has been making headlines ever since. Who needs legions of public relations people when putting on a dress or an astronaut’s outfit is all you need to do to promote your business? McDonald’s has Ronald McDonald, a six foot ginger-haired clown as a mascot; Disney has a large rodent called Mickey; but Virgin has its very own cross-dressing chairman. “I have worn almost every costume there is to wear,” says Branson. “It makes a back-page photo into a front-page one. And they come back for more.” No wonder. An air stewardess uniform to promote his airline; a wedding dress and high heels for the launch of a chain of bridal stores; semi-naked in bed with disc jockey Chris Evans to promote Virgin radio; with a CD player as underwear for Virgin Pulse; even in full spaceman regalia to launch Virgin Galactica.
Branson has recently been gracing US television screens in his own TV show The Rebel Billionaire: Branson’s Quest for the Best. In the show, sixteen young entrepreneurs attempt to keep up with and impress Branson as they jet around the globe undertaking a series of challenges. One thing viewers can be sure of is that their host will showcase the Virgin empire en route.
8. Do not lead sheep; herd cats: The eighth lesson is about leadership. Branson does not expect people to blindly follow him. Instead, he operates as a back seat leader. He knows when it is time to get out of the way and let others get on with building and running the various Virgin businesses. He finds talented people and then creates a challenging but fun environment within which they can thrive. He inspires and enthuses, cajoles and provokes and acts as a catalyst for entrepreneurial reactions within the company. Then – and this is important – he gets out of the way so they can run the business.
“Virgin staff are not merely hired hands,” he explains. “They are not managerial pawns in some gigantic chess game. They are entrepreneurs in their own right.”
9. Move fast: Branson’s ninth business lesson is all about speed of execution. “One should just get on with it and learn from mistakes,” he says. “I love what I do because every single day I am learning something new.”
He delights in taking on, and out-manoeuvring large corporations. To do so he relies on being more nimble than the incumbents. The strength – and potential weakness – in this approach is apparent from his cola skirmish.
Virgin Cola grew out of the development of a premium cola formula by a Canadian company called Cott. The company approached Branson with the proposition of putting the Virgin brand on the new formula. Branson’s immediate concern was the level of come-back from Pepsi and Coca Cola. In the UK, Virgin Cola was created in just eight weeks. There simply was not time for the big cola companies to put their defensive plans in place. In November 1994, Virgin Cola was launched and managed to seize a seven per cent share of the take-home market.
But hubris set in when Virgin decided to take on the cola giants in a pitched battle. Efforts to launch Virgin Cola in Australia failed and market shares in France, Belgium and Japan remained miniscule. The decision to take the fight to the cola heartlands of the American domestic market was a show of bravado rather than business sense. Pitted against the might of the cola barons, Virgin failed because it ignored the basic rules of successful guerrilla warfare: it gave up the advantage of home territory; and it lost the vital element of surprise. Without these, Virgin was just another brand. Far from home, it neither had speed nor agility on its side – and eventually it had to admit defeat.
10. Never lose the common touch: The final Branson lesson is a combination of humility and pragmatism that means he keeps his finger firmly on the pulse.
Imagine that you are a passenger flying economy class with your family on a transatlantic flight with a leading airline. Some time into the flight, a man you immediately recognize as the chairman of the airline introduces himself and politely asks if he can join you. He then proceeds to perform a few conjuring tricks to amuse the kids before producing a note pad and pencil. “What do you think of the airline?” he asks, noting any suggestions you might have. “Is there anything I can do to improve the service?”
How many airline managers – let alone chairmen and owners – take the time to talk to their customers like this? Yet we all know that they must travel on their own flights all the time, just as Branson does. The difference is that he uses the opportunity to listen to his customers.
Despite his extraordinary wealth and a privileged public school education, Branson still retains an everyman aura; people see him as the ordinary man in the street. They identify with him and he identifies with them. He appears to understand the hearts and minds of the masses. This is because he listens to others; he does not let success go to his head; he treats everyone as an equal – be they politicians, CEOs, or customers. There is something meritocratic and decent about Branson.
Not everyone sees him this way, of course. Some suspect that beneath the jokey, disarming exterior there is a ruthless businessman. How else could he be so successful? Others prefer to think of him as the hippy idealist or loveable rogue that struck it lucky. “I am lucky. I can talk to people. When I first came to London as a teenager, it was such a lonely place to be. Now people come up to me in the streets or on the underground. I am lucky to know everybody.” And that is the crux of it. We think we know him.
On 30 March 2000, plain Richard Branson became Sir Richard Branson. Knighted in the New Years Honours list for services to entrepreneurship, the habitually casually attired Branson donned a morning suit for the first time ever at his investiture ceremony at Buckingham Palace. Respectability beckoned. But so far he has stoutly resisted the temptation to join the establishment. With typical élan, party-loving Branson celebrated his Knighthood by holding a reception for the 250 other people receiving Honours on the same day. When asked how it felt to be Sir Richard, Branson answered, “It feels great. It feels odd sleeping with a Lady, though.”
Mr. Des Dearlove is the author of Business the Richard Branson Way, published by Capstone. His books are available in more than twenty languages.