Business Stripped Bare (2 page)

Our global chief executive, Stephen Murphy, who operates in Switzerland, and Gordon McCallum (our UK chief executive), ask some very tough questions. They will rigorously push and pull your business plan about to see if there is a profitable business underneath. Facing the committee can be daunting for the uninitiated – and you are normally expected to be well prepared, with the facts at your fingertips. But these people don't bite, and (unlike some of their television counterparts) they are not remotely rude. They can ask for more meetings so that deeper questions can be answered. Often the committee meets several times before a final decision is given. We look at spending plans, income forecasts, the marketing budget, and when the company is likely to break even. We work out our exit strategy – will it be a sale, or a flotation on a stock market? And, above all, we look at the key managers who will be running the business. This is the holy grail for us, because it's the people that make a great business idea work.

More often than not, after all things are considered, they'll recommend that we don't invest in your business. The possible reasons for this are so many and various, they're not even worth agonising over. Dust yourself off. Learn what lessons you can. Make your next call.

The Virgin team acts just like any other commercial venture capitalist organisation. It assesses your potential, whether it fits with the group's ambitions and strategy, and of course brand values, and what the possible returns and profits will be. Then it works out what kind of stake the Virgin Group should take. In return, the new company gets the full range of Virgin's expertise – and I'll agree to help raise the profile, make key introductions and offer any advice that I can.

The Investment Advisory Committee are my trusted lieutenants and they know almost everything there is to know about the Virgin global business. I'm rarely at their meetings – the team don't like my interruptions and interference. I know this because they have a nickname for me. They call me Dr Yes – a parody of the wonderful James Bond movie
Dr No
.

If I like your idea, but the investment committee have concerns, then I usually ask them to go and find solutions to the problems they've identified. I prod these people constantly. I remember, before we developed our mobile phone business, I was on to them every week saying: 'Why aren't we in this yet?' The committee didn't want to launch Virgin Blue, either, but in the end they saw sense!

But, you see, I have an ace up my sleeve. If I believe in your business idea, I can be quite persuasive in getting people to accept my point of view. I never do this lightly – but, as I've said, usually go with my gut instinct, disregarding whole volumes of painstaking research. I would love to be able to tell you that every ace I've played has turned out to be a Virgin Blue or a Virgin Mobile. But I can't – which is why I make my senior colleagues at Virgin very, very nervous!

Should we decide to go ahead with you, we sign up as branded venture capitalists (occasionally, as unbranded investors), take a stake in the company, and then look for a return on that investment after about two to five years.

And that, the cynics will say, is that. Of course, businesses also have a duty of care for the health and well-being of their people (and you will hear what we have done in South Africa for our staff with HIV/Aids). Beyond that, though, business is 'just business': a scramble for profit. Right?

Well, that might describe crime; it certainly doesn't describe business.

Ethics aren't just important in business. They are the whole point of business
. We're in business to make things. And when you decide what to make, that, right there, is an ethical decision.

The more successful you get, the bigger and harder the ethical questions become. I spent the first half of my career creating businesses that we could be proud of, that paid the bills and ensured that the Virgin Group was strong and survived. It has been our aim to establish Virgin as the 'Most Respected Brand in the World'. It has to be one that is trusted in each and every marketplace. I think once the Virgin Galactic space programme starts, we have a chance of being the most respected brand in space too!

On the back of that work, I've built the second half of my career, creating what I call 'war rooms', to tackle environmental problems and disease, bringing together global leaders to form the Elders – compassionate people who wield their huge influence for the good of humanity. The entrepreneurial skills we use to get these projects up and running are the same ones we used to create Virgin Records and Virgin Atlantic. Why would they be any different? Business is about getting things done. No, scratch that: business is about getting
better
things done (whilst building profits) and setting up a not-for-profit 'social' business is not really any different to setting up a commercial business.

Make no mistake: being better is hard to do, and only gets harder the bigger you get. If you've got a brand with 300 companies, you've got to be diligent and make sure that nobody makes a mistake that damages the business's reputation. That means no bribes, no backhanders and no hidden payments to oil the wheels of commerce. It means treating people fairly and equitably.

Now the stakes are even higher. The threat of climate change is the biggest challenge we face as a planet. Virgin is, among many other things, a transportation group. A rail travel company. An air travel company. With a space tourist start-up. So we're making things worse – right?

Well. We cannot unmake air travel – or space travel for that matter. No one in business can unmake anything, any more than a band can unmake a song. Can you unmake your hangover? Your indigestion? Your children? Your last week's work? No. Welcome, then, to the first law of entrepreneurial business:
there is no reverse gear on this thing.

Virgin is dedicated to developing new renewable fuels and energy sources and greener technologies in rail, air and space to cut all our carbon footprints. It is responding to the current crisis decisively, the only way a business can: by making things. Virgin is trying to do a credible job for the environment. By making better things, it's making things better – and in this book, I hope to show you how.

I've enjoyed an incredible life – and I hope there is much more to come. I'm planning to work till I drop and I'll continue to challenge myself as long as I enjoy good health and still have my marbles. And I hope that the fortune that I have been granted can bring enormous opportunities to other people and make a real difference.

I hope you find
Business Stripped Bare
a useful read. My experiences may even shake up your ideas about what business is. They've certainly shaken up mine.

Find Good People – Set Them Free

'Mr Richard! Mr Richard! Do you have a minute, please?'

I was visiting Ulusaba, our private game reserve, close to the stunning Kruger National Park in South Africa. It's an enchanting piece of bush and, thanks to Karl and Llane Langdon, a well-managed one. The previous owners had planned to fence it in – all 2,060 hectares of it – to protect the local wildlife from poachers. We decided, on the contrary, to take the advice of our rangers, and have allowed our leopards, lions, elephants, cheetahs and rhinos to move and migrate freely between our land and the neighbouring Kruger.

The reserve had cost me nearly $6 million in 1999 – a testament to the salesmanship of the South African president, Nelson Mandela, who persuaded me to keep faith with his homeland. Even when times have been hard for the Virgin Group and I needed liquid cash, I could never bring myself to sell it.

'Mr Richard!'

I stopped and turned round and stood there, dazzled by one of the most winning smiles I've seen in my life.

'Mr Richard.' It was a woman from the village, dressed in a KwaZulu gown of bright reds and yellows. 'I've heard you are a very generous man. Can you lend me money to buy a sewing machine?'

At this time Virgin Unite, our charitable foundation, was busy at work in the villages in and around the reserve. The villagers had been walking a long way to Sand River for water that was not particularly safe to drink. So the foundation had sunk boreholes to provide the villagers with a nearby source of clean water. It taught skills, helped with the school and built a medical clinic. It created play areas for kids, and huts from which the villagers could sell their goods to tourists.

The tourists were our business too. For nearly ten years, Ulusaba has been a magical place, especially loved by people who come here to rent our upmarket lodges, one perched on the summit of a granite outcrop with stunning eagle-eye views across the bush, the other a tree house overlooking the Mabrak riverbed, where many animals come to drink and frolic.

I've been asked for money hundreds of times over the last thirty years, but rarely with such directness. You've heard of the elevator pitch? This was the elephant-pool pitch.

She told me she was a talented seamstress but that she needed cash to buy a sewing machine to get her business going.

'So how much do you need?'

'Three hundred dollars would be enough,' she explained. 'And, what is more, I'll repay it within three months and employ six people full-time.' The woman's determination and ambition were fantastic. So was her focus: she knew exactly what she wanted, and why. She got her $300.

And as I walked away I said to myself: That's money I'll probably never see again.

I wasn't being cynical. I simply had experience of how the odds were stacked. At Ulusaba – which means 'place of little fear' – I had come to know many local people who were working on the game reserve and looking after our visitors. And believe me, they have big fears. Malaria, tuberculosis and HIV/Aids stalk their daily lives.

Three months later I was invited back to the village to open some of the community projects supported by Virgin Unite, including crèches, orphans' homes and an Aids-awareness clinic. When I got there, six women came up to me, and gave me a gift of the most exquisite cotton pillows and tribal clothes which they had made. And, to complete my surprise, they returned the $300.

But where was the original entrepreneurial seamstress? I asked.

'Mr Richard, she is so sorry she can't be here personally to see you. She is off to the market selling the products,' they told me.

I've thought of her often since that day: a confident, direct, intelligent woman, using a sewing machine to better her own and others' lives. Never mind
Dragons' Den
: if you want to meet entrepreneurs, come to Africa. It's a continent full of opportunities for the creation of wealth, enterprise and future prosperity.

Since the mid-1970s, the economist Professor Muhammad Yunus has been saying much the same thing about the women of Bangladesh. But how do we foster entrepreneurism in communities that, whatever their potential, have virtually nothing?

Muhammad Yunus started his Grameen Bank as a practical economics project in 1976. He won the Nobel Peace Prize in 2006 for pioneering an economic system in which small, low-interest loans are extended to people who are unable to obtain a loan from a traditional bank. Grameen's rule of thumb is to keep the interest rate as close as possible to the prevailing market rate in the commercial banking sector rather than moneylenders' exorbitant rates. It has transformed the lives of millions and the bank now has 2,400 branches, and 7.5 million borrowers. The default rates – at 2 per cent – are lower than those of any other banking system. Every year, 5 per cent of Grameen borrowers move out of poverty. His work has spawned a global movement.

Muhammad is a proponent of 'social business'. He said in an interview with the
Santa Barbara Independent
:

Ordinary businesses are aimed at making money . . . there is no consideration of how people benefit, it is all about making profits. Social business, on the other hand, is all about social benefits, not personal gain. Profits are important to social businesses, which seek to sell products at prices that make it self-sustaining. A social business is not a charity – but profits are not its ultimate goal. When a social business turns a profit, the original investors are repaid, but the rest of the profits stay with the company in order to achieve its long-term social goal of helping the poor.

His view is that many of the problems of the world remain unresolved because capitalism is poorly understood and poorly practised. The issue, he says, is not in the capitalist system itself, but in the hash that people repeatedly make of it. He completely rejects the common view, that capitalism is all about the bottom line.

He says: 'In this narrow interpretation we create a one-dimensional human being to play the role of entrepreneur. We insulate him from other dimensions of life, such as religious, emotional, political dimensions . . . Everyday human beings are not one-dimensional entities, they are excitingly multidimensional and indeed very colourful.'

Muhammad thinks capitalism can – and should – enrich the whole person.

I'm not good at theory. Almost everything I've learned, I've learned by doing. However, Muhammad's opinions excite me. They confirm a lot of the gut feelings I've developed about business over the years. And topping my list of gut feelings is this:
business has to give people enriching, rewarding lives, or it's simply not worth doing
.

Later on, we'll be returning to Virgin's African adventures, and some of the wider political questions this story throws up. For now, though – since we have to start somewhere – let's start at home. Let's start with you. Wouldn't it be wonderful if your company were full of people like the seamstress who accosted me that day in Ulusaba? Think what you could achieve.

Well, there's no reason why it can't be, and in this chapter I'm going to tell you how Virgin tries to foster the entrepreneurial spirit at every level of its business.

First of all, take a cold, hard look at your present surroundings.

Are you really going to be able to empower the people around you? I ask because, for all I know, your workplace may be a sink of despair. And while we've had a few notable successes in this area, it is, I would say, superhumanly difficult to change a company's existing culture.

Virgin learned this the hard way in 1996, when we acquired Euro Belgian Airlines and turned it into a cheap, cheerful, go-getting budget airline called Virgin Express. Well, that was what Virgin Express was supposed to become. We rebranded the airline and floated 49 per cent of its stock on the Brussels and NASDAQ stock markets. We knew it wouldn't be easy, because we'd be in competition with solid low-cost airlines such as easyJet, Ryanair and Go, with all the benefits they had of being based in the UK. Not only that, we would be based in
Belgium
(remembering how much it cost us to operate there brings tears to my eyes to this day). Nevertheless, I believed that with a quick transfusion of the Virgin spirit, we could make a go of it.

Boy, was I wrong.

Our Brussels-based low-cost carrier was one of the toughest challenges we have faced. Debilitating European regulations on the thirty-five-hour working week and high fixed costs meant that there was little room for radical changes. This is a nightmare when you are trying to run a low-cost operation and arrange rosters and crew patterns. But if it was bad for us, imagine what it was like for the staff. They were cynical about the business, for the very good reason that there was no fun, no camaraderie and no real sense of ownership.

We set about changing all that – or tried to – and landed feet first in a can of worms: strict union regulations, tortuous pay negotiations, constant strike threats. I had to go in myself and try to sort it out, and it taxed my own legendary reserves of karma. The crucial lesson I learned was:
avoid taking on someone else's legacy
. In June 1999 I wrote in my notebook with reference to the turmoil at Virgin Express: '
Almost for the first time in my life I can't sleep at night. Fighting the outside world is easy. Trying to make peace among one's own staff is hell. We must never allow another company to get into this mess.
'

As life turned out, shortly after that diary entry we made Neil Burrows the CEO and he set about turning the business around with incredible hard work and great leadership. However, just as Neil had got the costs into line with the most competitive in Europe and finally turned Virgin Express into a credible people business which worked, 9/11 bankrupted our biggest partner SABENA. Eventually, in March 2006, Virgin Express and SN Brussels Airlines merged to create Brussels Airlines and Neil went on to lead the combined businesses merging the two cultures and creating what is today a very successful airline in the capital of Europe. It was a salutary experience, and the business message is clear: if you're in the mood to buy a new business – wait. It can take a long time to change a business culture. Are you sure you wouldn't be better off starting one from scratch? So many business acquisitions end up being disasters because the people involved fail to understand the real challenges involved with getting different types of people to all work together and share the same goals. They look only at the numbers.

This lesson can be applied more widely, and that's what I want you to do now. Look around you. If the people you're responsible for have already been crushed beyond recognition, and if your bosses are more interested in putting you right than in listening to what you have to say, you are better off hunting out more promising surroundings for yourself.

Even better, start from scratch. Seek out people with the right spirit, bubbling just beneath the surface, and get working with them.

The people you need are rare, but they're not hard to spot, so let's start with them.

You will find the 'Virgin type' of person all over the world. I bump into them frequently in bars, cafes, hotels and small businesses, in libraries, post offices, in hospitals, at the jetty in the Caribbean, even in government offices and the civil service. Virgin types pop up everywhere, and in every nation. These people don't know they're special, but they are; they are out there, and you can spot them.

If you're in charge of a company, or a human resources department (I hate this description – I call them 'people' departments!), you should be searching for them, too. These people, by their nature and their outlook on life, enjoy working with others. They're attentive. They smile freely. They're often lively, and fun to be with. I don't underestimate qualifications – I just don't assume they're going to tell me anything about a person's character. Having 'savvy' is much more important than having a formal education. The things you learn can only complement who you are – and in my book, who you are counts for a whole lot.

I am always on the lookout for talent – it's not easy to find energetic and enthusiastic people with the right attitude. We look for people who can grow into their work, and respond with excitement when we give them greater responsibility. Jobs, after all, can be learned. Recently, we noticed two guys doing a brilliant job of running the water-sports activities at a rival hotel. Everyone loved them. We didn't need water-sports people. But we needed managers: and we asked these guys to run our island home in the Caribbean, Necker. In business, someone who can stay cool and calm under pressure is an asset. This is especially true for the Virgin Group, as so much of what we do involves dealing directly with the public. Today's consumer can be very demanding, especially when things aren't going according to plan.

I want to keep the Virgin Group fresh. So I have tried very hard to re-create, in every company, the atmosphere of Virgin's early years. There's no rule book. The past is the past. We can't preserve it; it would be silly for us to try. But what we can do is look for the next generation of the right sort of people. Like everybody else, we're looking for dedication, and belief, and a willingness to go that extra mile for colleagues and customers. But we keep certain other thoughts in mind, too. It seems to me that when you love what you do, you're too busy to stand on your dignity. When you're good at what you do, you don't worry so much about your image. So I think it's a positive sign when people don't take themselves too seriously.