Business Stripped Bare (5 page)

1. Employees are number one. The way you treat your employees is the way they will treat your customers.

2. Think small to grow big.

3. Manage in the good times for the bad times.

4. Irreverence is OK.

5. It's OK to be yourself.

6. Have fun at work.

7. Take the competition seriously, but not yourself.

8. Think of the company as a service organisation that happens to be in the airline business.

9. Do whatever it takes.

10. Always practise the Golden Rule, internally and externally.

The egalitarian spirit of Southwest Airlines has driven its success. Even in the first quarter of 2008, with a weak economy and soaring jet-fuel prices, it achieved record operating revenues – a staggering $2.53 billion – and its net income actually went up – by 30 per cent! – to $43 million. You don't achieve results like that without the loyalty of a huge number of happy and satisfied customers.

Herb and Colleen and the managers of Southwest understood, better than most in this industry, that employee satisfaction and customer service are two sides of the same coin. They have maintained their culture of customer service by employing people who are right for the business, and by giving them the tools and incentives to do their work well. Until recently, they had no serious rivals. Now, I'm proud to say, they've got Virgin America to contend with: a younger, fresher organisation. This is going to be a memorable tussle, but a tussle rather than a fight because the real enemies are the huge, heavily protected legacy carriers in the United States who have fed off barely disguised subsidies from Congress for nearly a decade whilst letting their planes age, service standards collapse, prices rise and people become demoralised.

*

Every once in a while, the vast Virgin Group has to remind itself who it is. This is never a one-man job. Stephen Murphy's arrival as chief executive was part of a major overhaul of Virgin's operations. Along with colleagues such as Gordon McCallum, Robert Samuelson, David Baxby, Frances Farrow, Patrick McCall, Mark Poole and Will Whitehorn, Stephen and the team have helped reshape and redefine where we wanted to be as a business.

Now, that paragraph probably struck fear into your heart. Restructuring is a pretty bloody process, right?

It can be. If your business has ossified to the point where you haven't a clue what's wrong, and in desperation you've called in a bunch of management consultants who charge by the hour, then, let's face it, your troubles began some while ago.

I'm not saying for a second that the Virgin Group finds structural changes painless. But we do have this advantage over most businesses: we're modular. We can shed limbs and split functions without turning the whole operation upside down. Over the years we've been criticised for turning ourselves into a ragbag of unconnected businesses. Our critics miss two important points. First, they're not assigning enough importance to the Virgin brand. (I'll try to explain our brand philosophy, and how it has helped us thrive in diverse businesses, in the next chapter.) The second point is:
so what?
Ending up as a ragbag of assorted companies now and again is no disadvantage to a group that does its housework regularly and keeps its businesses as small, independent and entrepreneurial as possible.

Circumstances and opportunities change. The
world
changes, come to that. The only constant is change itself
. When I started in business, the standard one-liner about commercial short-sightedness was 'People will always need hats'. Oh, how we tittered, as we stuffed those LPs in big brown envelopes and lugged them to the post office. These days the line to raise a youthful sneer is probably 'People will always need rock albums'.

Companies aren't change-proof, and no company will last for ever. And in the Virgin Group particularly, they come and go. What's wrong with that? Companies do things. They are tools designed for a particular purpose – or they should be. If they are superseded, or surplus to requirement, we shed them. We try our level best not to shed the people, or the know-how, but the company itself is not something we allow ourselves to get too nostalgic about. When Virgin renews itself, critics who tut-tut at all the leaves falling to the ground have failed to spot the tree.

And in the mid-1990s and early 2000s, we did lose leaves. We lost whole branches. We began to look carefully at what worked for us and what didn't. We cooked up the Investment Advisory Committee – a more formal structure for considering fresh business projects and monitoring the performance of our existing businesses. (Dr Yes was peeved, but he bit his tongue.)

And not long after, on 14 February 2007, we had the chance to show what a leaner, more clear-headed Virgin Group could do. The combined company of NTL, Telewest and Virgin Mobile relaunched in the UK as Virgin Media, creating the largest Virgin company in the world.

Now, have you heard the story of the dog who chased the car? Chasing the car was great fun – but now that he's caught it, what the devil does he do with it? This was pretty much my dilemma as I contemplated Virgin Media's 10 million customers and 13,000 employees across the UK. Up till then I'd always thought of myself as a 'small is beautiful' kind of entrepreneur. Virgin Media was not by any measure small. It wasn't beautiful, either. There were acute issues that had to be addressed, and this would mean months of hard work. This time, James Kydd, Ashley Stockwell and our senior brand and customer service people were on hand to remind us who we were, reshaping the company so that it maintained and contributed to the Virgin brand.

The NTL part of our business, in particular, was in a very sorry state. We needed to make drastic changes to its levels of customer service. For one thing, the people dealing with complaints didn't seem that interested in helping people.

We found out why: it turned out that they were spending their entire working lives reading from scripts.

These went straight in the bin. We told our call-centre people to solve problems with one call if possible, and we reallocated resources to the front line to improve customer operations.

We wanted to keep things simple for the customer and for our own people, and it seemed to us that the best way of doing this was to let people just get on with their jobs. There was scepticism at first. What would happen if one of our customer-service people overstepped the mark? What if people started offering customers too much?

My response to that was pretty much 'Live and learn'. I don't think anyone should be criticised for being overly generous when handling a disgruntled customer. If one or two of our people got themselves into a tangle, it just meant that they'd do better next time.

In the airline business, you learn very quickly not to skimp on the goodwill gestures. They let people know that, whatever the difficulty, you're still working for them. Even better is quick, accurate information. As we know, 'quick' and 'accurate' almost
never
go together, but we do what we can, and in the meantime, our gestures go a long way to reassure some seriously inconvenienced people. Of course, families who've been waiting for many hours could be let into the business lounge. Yes, of course we can make you more comfortable: would you like a massage? You've been fantastic, and we'd like to say thank you: here's a flight upgrade for next time. None of this is in the service manual, because you can't dictate attitudes from on high. All you can do is hire the right people and empower them to sort things out as they happen.

If someone has paid you for something, and it goes wrong, being cagey or defensive will kill you stone dead. You will never see that customer again, nor their family, nor their friends.
If someone has a lousy experience at your hands, they will warn people
. The knock-on effect of this destroys businesses. If, on the other hand, you are able to sort out your customers' problems better than they expected, then they will be your loyal friend for life.

We began this chapter by discussing entrepreneurship, and we're finishing with thoughts about customer service. A curious combination, no?

I feel very strongly indeed that young, independently minded businesses can provide customers with great service: it's the monoliths and the business establishment that make customers' lives a misery
. I think this because the values of the Virgin brand are all about customer service; we are focused on the customer in a way that most businesses aren't.

But I also want to make a wider point.

In the 1970s, when we set up Virgin Records, no one in the UK used the word 'entrepreneur' any more. Or if they did, they considered it something unsavoury. A businessman running a number of firms was seen as a 'chancer' – the television comic stereotype was Del Boy, the wheeler-dealer on the outside of the law, in
Only Fools and Horses
, or
Minder
's Arthur Daley, the gin-drinking spiv played brilliantly by George Cole. In earlier days I was regularly dismissed as a 'Del Boy' myself (this always puzzled me; I thought I was more like Rodney). In fact, throughout history the entrepreneur has always been a favourite villain. From Ancient Greece to Shakespeare's
Merchant of Venice
right through to the film
Wall Street
, entrepreneurs represent 'moneymaking' and 'capitalism' – and in some sections of society those are still dirty words.

The UK media's view of business people has changed – but not nearly enough. Some elements of the British press still can't quite get their heads around the idea that business is a worthwhile pursuit, which actually provides most of the tax revenue, employment and wealth of the whole nation. Entrepreneurs have taken the risk in starting companies, innovating products and offering the services that make people's lives easier, better and safer.

As my friend Jon Butcher puts it, 'Entrepreneurs have literally destroyed poverty in the Western world as the rest of the world knows it, and as history knows it. No other social system can compete with the entrepreneurial free market system in terms of productivity, raising standards of living and creating permanent prosperity. Asia has exploded out of poverty in my lifetime thanks to entrepreneurs. Huge chunks of poverty should be taken out of Africa in the next ten years thanks to up-and-coming entrepreneurs. So capitalism actually works. Communism and true socialism are no longer taken seriously because they simply don't work. They actually hurt people. They've kept entire generations in poverty. They are disastrous though well-meaning systems that have ruined hundreds of millions of lives. Yet somehow there are elements of our culture that still associate profit-making with vice.'

Entrepreneurs are also the greatest philanthropists, from Andrew Carnegie in the nineteenth century to Bill Gates today. Carnegie, who made his vast fortune in the US steel industry, paid for almost every library in the Western world built in the nineteenth century, which brought about an educational revolution.

So, let me spell it out. Entrepreneurship is not about getting one over on the customer. It's not about working on your own. It's not about looking out for number one. It's not necessarily about making a lot of money. It is
absolutely not
about letting work take over your life. On the contrary, it's about turning what excites you in life into capital, so that you can do more of it and move forward with it. I think entrepreneurship is our natural state – a big adult word that probably boils down to something much more obvious like 'playfulness'. I believe that drudgery and clock-watching are a terrible betrayal of that universal, inborn entrepreneurial spirit.

For centuries – and certainly since the Industrial Revolution in the eighteenth century – industry has swallowed lives and, in turn, helped to give business a bad name. Men and women have had to conform to a mechanical model of work. They have been treated like cattle (literally, in many cases). Within my lifetime, upheavals in politics, science and technology have changed the nature of work, especially in the developed world. For some of us, it is our incredible good fortune that we are all having to think less like employees, and more like entrepreneurs. The era of 'jobs for life' is over – at last!

Inspire your people to think like entrepreneurs, and whatever you do, treat them like adults. The hardest taskmaster of all is a person's own conscience, so the more responsibility you give people, the better they will work for you.

For thirty-five years, the Virgin Group has steered clear of rote mediocrity and steamed full-speed ahead into a world of pleasurable scheming, spiked with the occasional cock-up. The way we have worked has allowed us to live full lives. I can't give you the formula for this, and you probably wouldn't follow it anyway. After all, you're having to respond to the circumstances you're in, while doing the job that you're doing. I hope this book will give you some ideas about how you can empower your employees – and empower yourself, come to that. But you really have to find the solutions that work for you.

Here is the good news:
the more you free your people to think for themselves, the more they can help you. You don't have to do this all on your own.

Flying the Flag

When I was sixteen I was approached by a woman called Patricia Lambert who offered me £80,000 to sell Student — the magazine I had started at school — to IPC, now the Trinity Mirror stable of newspapers and magazines based in the UK.

It so happened that I had found a tiny island off Menorca which I was thinking of buying and living on. It was a beautiful place with one very small whitewashed house that had a loo which dropped its waste down the side of a cliff. Living in splendid isolation in the middle of paradise seemed like an attractive proposition at the time because, while our music mail-order business was taking off, running the magazine just got harder and harder. Until I'd sold the advertising I had no regular money to fund the printing and paper costs. It was edge-of-the-seat stuff at first but it had begun to wear me down.

IPC were not only offering me a lot of money; they wanted me to stay on as editor.
Student
wouldn't, strictly speaking, be my magazine any more, but I would get to keep a job I still enjoyed doing.

So I decided to accept, and I went along to lunch at IPC in Holborn, just off Fleet Street. They had all the directors around the table. And once we had shaken hands on the deal, I started to talk about my vision. I told the directors I wanted to set up Student holidays, a Student travel agency, Student record shops, Student health clubs – even a Student airline? I could see eyebrows being raised. After the lunch I got a call thanking me for coming – but the directors had changed their minds about the investment, cancelling the plan to buy my magazine. They were far too courteous to say so, but the writing was on the wall: they thought I was mad.

Many years later Patricia was good enough to write me a delightful letter telling me just how much they had been kicking themselves over the years as they watched Virgin stir up sector after sector, almost exactly as their young would-be magazine editor had predicted.

I suspect they were right in not dealing with me. IPC were and are in the publishing business. They are publishers. They know who they are, and they didn't need some kid, however promising, telling them all the other things they could be. The last thing they wanted was a wasp in the room, batting itself against their windows and getting more and more frustrated, and that, surely, is what I would have become.

Most businesses concentrate on one thing, and for the best of reasons: because their founders and leaders care about one thing, above all others, and they want to devote their lives to that thing. They're not limited in their thinking. They're focused.

The conventional wisdom at business school is that you stick with what you know. Of the top twenty brands in the world, nineteen ply a well-defined trade. Coca-Cola specialises in soft drinks, Microsoft's into computers, Nike makes sports shoes and gear.

The exception in this list is Virgin – and the fact that we're worth several billion dollars and counting really gets up the noses of people who think they know 'the rules of business' (whatever they are).

We're the only one of the top twenty that has diversified into a range of business activities, including airlines, trains, holidays, mobile phones, media – including television, radio and cable – the Internet, financial services and healthcare. And believe me when I say this really upsets people. I remember in July 1997 London's
Evening
Standard
covered our advance into America with an article headlined 'W
HEN BRAND STRETCHING STRETCHES CREDIBILITY
'.

I think this says more about the business community generally than it says about Virgin. How far must we fly before pundits of one sort or another stop predicting our fiery descent? Our proposition isn't hard to understand:
we offer our customers a Virgin experience, and we make sure that this Virgin experience is a substantial and consistent one, across all sectors of our business
. Far from 'slapping our brand name' on a number of products, we carefully research the Achilles heels of different global industries, and only when we feel we can potentially turn an industry on its head, and fulfil our key role as the consumer's champion, do we move in on it. The financial services industry is an eloquent example. In three years, Virgin Direct acquired 200,000 investors and was managing £1.6 billion. As a result of its entry into the market, much of the rest of the industry brought their charges down too to compete.

Incredibly or not, Virgin has thrived by weaving its magic through many seemingly unrelated sectors. Between 2000 and 2003, Virgin created three new billion-dollar companies from scratch, in three different countries. Virgin Blue in Australia took 35 per cent of the aviation market and reduced fares dramatically. Virgin Mobile became the UK's fastest growing network. Virgin Mobile in America was America's fastest ever growing company, private or public. Our revenue per employee – $902,000 – is the best in the world, and we've got the highest customer satisfaction record too, with 95 per cent of our five million customers recommending us to a friend. Over the last thirty-five years we at Virgin have created more billion-dollar companies in more sectors than any other company.

And right now, as everyone is battening down the hatches and preparing for the twenty-first century's first really big global recession, Virgin turns out to be ready for the storm as well. Because its risks are spread, the failure of one part – even a major part – will not ruin the whole. (Imagine if we hadn't diversified and if we had just stuck with the record and music industry, which today faces huge challenges because of the digital download revolution – we might well have disappeared!)

So here's the question: if Virgin has more fun when times are good, and weathers well when times are bad, why doesn't every company try to 'do a Virgin'? And why are the business teachers still telling young entrepreneurs to stick to what they know?

Well, I think the business teachers are
right
. You
should
focus on what you know. You
should
also focus on what gets you up in the morning. And for most people, that means you
should
focus on one core business.

The odd thing about Virgin – and this is what people often have difficulty with – is that Virgin's particular focus made it
absolutely imperative
that it diversified into many businesses. Contrary to appearances, Virgin is as focused as any great company. Its oddness comes from what it focuses
on
. We might have hit upon the exception that proves the rule: our customers and investors relate to us more as an idea or philosophy than as a company.

Virgin's success upsets people because it seems to contradict the wise rule that you should stick to what you love. Where's its focus? Where's its centre?
Something
must be getting that Branson bloke out of bed in the morning – but what the devil is it? We thought it was music, but then it was air travel, which we sort of understood because of his ballooning, but then it was trains, money and mobile phones, and what is it now? Healthcare? Space? Oh
help
!

I've never made any secret of what gets me out of bed in the morning.
It's the challenge. It's the brand
. Maybe it's something to do with my surname. I remember a journalist from the
Daily Telegraph
magazine did some research into the root of my name and discovered that, yes, 'Branson' was originally 'Brandson': my distant ancestors made their living branding cattle!

For me, the brand is central. Whenever I say this to people, however, an awful lot of them feel their eyes misting over. 'What the devil does he mean,
the brand
?'

I'll try to explain. Let's start simply with a quick sketch of what a brand can do.

IPC, as we know, publishes magazines. What I want you to do is name three of its titles. If you're in the industry, you'll have no problem reeling off a dozen. (They're very successful.) If you're not in the industry, you won't have a clue. Why would you? The IPC brand means plenty to the industry, but nothing to the punter. The punter wants the flavour, tone and content of the magazine, not its purse-holder. The punter cares about the magazine's brand; the owner's brand would merely get in the way.

Who published the last novel you read? Which production company made the DVD you watched last night? You probably don't know, the companies know you don't know, and you know what? – nobody minds.

Brands exist as a means of communicating what to expect from a product or service – or to highlight the family likeness between different products and services. An established brand on a new product is a guarantee that what you're getting will be, in its own way, like something you've enjoyed before. This is not always a good thing. Readers of Mills & Boon romances may want the same kind of story again and again; families look forward to taking their kids to see the new Pixar movie, regardless of whether it's about animals, toys or cars. On the whole, though, novelty and discovery count for a lot in the entertainment sector, and the last thing you want to do is stick some galumphing great label over everything you do, suggesting to your audience that your new thing is just like your old thing.

At the other end of the spectrum – perched in splendid isolation in the far, far infrared – there is Virgin. The Virgin brand tells you that using
this
credit card is rather like using
this
airline, which, in turn, is rather like using
this
health spa, and listening to
this
record, and paying into
this
pension fund.

What's the family resemblance? What resemblance could there be between these diverse goods and services?

Pretty obviously, it has something to do with the customer, because when you look at the range of things we're involved in, the customer is about the only factor common to all of them.

And that really is all there is to it
. The Virgin brand is a guarantee that you'll be treated well, that you'll get a high-quality product which won't dent your bank balance, and you'll get more fun out of your purchase than you expected –
whatever it is
.

You see, what gets me up in the morning is the customer, and the idea of giving the customer a good time. No other brand has become a 'way-of-life' brand the way Virgin has. And we achieved it, not by clinically deciding one day to become a way-of-life brand, but simply by following our appetites and the things we were curious about. I've always and continually been interested in learning new things and, equally important, I've always wanted to share what I learned with other people.

Should you follow the 'Virgin formula', and focus your company around the customer's experience? Probably not. Not unless your heart's really in it. Not unless, like me, you wake up of a morning saying to yourself, 'Let's give people some
fun
!' Obviously, I hope you care for your customers. But I can't tell you that your company should be
about
customers. What your business is about is up to you.

The Virgin brand came into existence gradually, to reflect what I was fundamentally interested in. And to my own surprise, it wasn't publishing magazines; it wasn't even music. My driving force, I realise now, was
finding new ways to give people a good time
– ideally, in places where they were least expecting it. Like airports.

While the brand has its roots right back in the seventies with my beliefs and spirit, I think Virgin Atlantic has done more to capture and articulate what the brand stands for and personifies to consumers. Many other Virgin companies have adopted those powerful values of innovation, honesty, caring, value and fun. So I believe it's about great customer service and giving people a good time.

This is why Virgin wears its sense of humour on its sleeve.
We want to inform and entertain people
. You don't have to be a Virgin customer to enjoy our adverts and our publicity stunts. We have found over the years that giving people a good time, and making them feel like they're in on the joke, has been better for the brand than any amount of complex campaigning.

I'll give you a quick example: on Virgin Atlantic flights we had these beautifully designed salt and pepper pots. At least, we had them when we took off. By the time we landed, most of them had disappeared. Our passengers were swiping them and using them at their own dinner tables. What to do? We decided to make a joke of it. At the bottom of each pot we stamped the words 'Pinched from Virgin Atlantic'. We turned an embarrassment into a piece of cheeky loss-leader promotion. We got people onside by bringing them in on the joke. In itself, this was a fairly trivial matter; repeated across our whole group, our fun-loving attitude makes a tremendous difference to our business.

Irreverent humour is one of Virgin's brand values, and this has to do with our wanting to be honest about the ups and downs of our business and to share what we think with the people who matter most to us – our customers. The people who read our adverts are the same people who read about our tussles, our setbacks and our mistakes. So why would we want to pretend the real world doesn't affect us? Everybody knows of our run-ins with BA over the years. When the world's press gathered to watch BA erect their London Eye Ferris wheel on London's South Bank and we heard they were having technical problems, we scrambled our airship. The banner trailing behind it read: '
BA can't get it up
.' We also had a lot of fun when we introduced onboard massages on Virgin Atlantic, running an advertisment in the newspapers saying '
BA doesn't give a shiatsu!
'