The Virgin Way: Everything I Know About Leadership (11 page)

But, just as it was doing in the photography world, digital technology, especially in the shape of Steve Jobs and iTunes, was about to dramatically transform the recorded music business for ever. The industry had seen an ever-evolving parade of different formats over the years, from vinyl record albums and singles, to eight-track tapes (remember those?) to cassette tapes, which heralded the portable era and eventually compact discs that for a while everyone seemed to think were the ultimate solution. But it wasn’t to be, and the arrival of online digital downloading rendered CDs, and with them our bricks and mortar retail model, obsolete faster than you can say ‘iCry’. We desperately tried to compensate for the nosedive in CD sales by stocking all kinds of other products, like computer peripherals, board games, books, and even pop-culture fashion items. Then in 2005 we made a belated last gasp attempt to squeeze our way into the download business with Virgin Digital and the Virgin Pulse MP3 player, but it was incompatible with the all-conquering iPod and so became a classic case of too little too late.

Mea culpa
. As appears to have been the case at Kodak, I was guilty of turning a deaf ear to the dire warnings and as a result I paid the price – literally!

We still have a limited interest in a couple of stores but we could have saved ourselves a lot of money had we – or that should really be ‘had I’ – been willing to read the writing on the wall a little sooner, cut our losses and bid a fond farewell to a business that had served us well for three decades. As a somewhat quirky friend of mine likes to say, ‘If things don’t change, they’ll be the same tomorrow as they are today.’ Well, things do change, and in cases like the digital revolution you have just got to recognise you’ve come to a watershed and move on.

LEADING FROM THE PERIPHERY

Another myth on leadership is that successful entrepreneurs should be able to take their ideas and run with them when they become the nucleus of a new business. Management guru Peter Drucker deftly defines an entrepreneur as, ‘
Someone who searches for change, responds to it and exploits opportunities. Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource.’

None of that suggests to me that an entrepreneur is expected to stay around to lead a company once he or she has set the ball in motion, but neither does it say that they cannot stay around the periphery as a force for on-going change. I sometimes think that entrepreneurs have a lot in common with scouts for professional sports organisations. They are out there talent-spotting, whether with established stars on other teams or undiscovered, up-and-coming raw young talent that hasn’t made it big as yet. They usually understand how the corporate puzzle fits together every bit as well as the team manger but are the unsung heroes who have the insight to recognise something special and recommend bringing in new and better players to improve the team. In fact, they often add more value to the overall picture by
not
trying to manage it – something I didn’t cotton on to early enough with Megastores.

It is no small coincidence that I felt such a strong tie to our music business as it was the last one I actually ran before I drifted off into my new career as a serial entrepreneur. That said, over the years I have spent a lot more hands-on time around some Virgin companies than others – the early years at Virgin Atlantic would be one example – but I usually make a conscious effort to try and stay out of the day-to-day decision-making as it really isn’t my thing. And besides, when I expect our senior people to take ownership of their decisions then the last thing they need is someone like me continually trying to foist his usually inexpert opinions on them.

What an entrepreneurial eye can bring to an operating business, however, is that same spirit of inquisitiveness that recognises gaps that can be filled with new products and services and, in turn, occasionally new spin-off business opportunities. At the same time, the Virgin way of managing our businesses is all about maintaining and promoting that almost childish curiosity level in our people to ensure they are never accepting of the status quo and always looking for ways to improve upon it. The subject matter experts are often way too willing to take the obvious path (their expertise, after all, is based on what they have seen and done in the past) and so every once in a while a few jabs in the ribs from an annoying entrepreneur is not a bad thing. As David Tait, who was one of the first people at Virgin Atlantic, likes to tell it, in the early stages of the airline I reminded him of his young kids as my favourite question was always ‘Why?’ And to this day it’s probably still my favourite question, especially with a new business segment about which I know very little. It’s not that I don’t trust the staff, it’s simply that I want to understand how things work. The upside to my constant ‘why-ing’ is often that it makes people start to revalidate a few long-established practices and in the process sometimes stumble on better ways to do them.

Over the years numerous Virgin people have found that telling me something will never work is by no means the best way to convince me we shouldn’t try it – quite the opposite, in fact. As trite as it may sound, one of my favourite lines when someone expresses doubts about trying something new for reasons like ‘it has never been done before’ or ‘it’s been tried before and no one has ever succeeded’ is to say (with a smile), ‘Great! Well, why don’t we look at how we can do it differently and be the first ones to make it work?’ That was pretty much what we did with Virgin Atlantic, and once we got it in the air we have always maintained the same approach. I mean, how many other airlines would have seriously considered a crazy idea like putting massage therapists or stand-up bars on board its airplanes? Sometimes not knowing enough about the ‘correct way to do things’ and doing them anyway can open up the most amazing new doorways.

While I have never felt either the urge or the need to go back and grab the reins at any of our companies, some entrepreneurs have found that knowing when to step back into a company they founded can be every bit as important as knowing when to exit. The classic example has to be how after a twelve-year exile Steve Jobs returned to Apple and how the company (unfortunately for my beloved Megastores), which was on the brink of failing, really took off when Steve reassumed the full-time CEO role after a spell as what he jokingly called ‘iCEO for ‘Interim CEO’.

At Google as well, in early 2011, ten years after he had stepped out, co-founder Larry Page returned to the company as full-time CEO. When he left there were barely a thousand employees and when he returned there were 25,000. Needless to say a lot changes in any company that grows twenty-five-fold in just ten years! When Larry returned, his priorities were never officially announced but everyone seemed to agree it had to be stripping away some layers of management to reinvent that start-up energy and buzz that always seems to foster an altogether higher level of creative energy. Warding off the social media threats of Twitter and Facebook, which were both still in more adolescent corporate stages, was also I am sure a big motivator in Larry’s decision to step back in. One way or another the company has continued to flourish since Larry’s return to the top job. When he took over as CEO, Google’s stock price was hovering around the $500 mark and the last time I checked it had remained in a steady ascent and was pushing $1,200.

So, don’t believe anyone that tries to make blanket statements to the effect that entrepreneurs are or are not well suited to the task of running the companies they created. The inescapable fact is that no two people and no two companies are alike and even then circumstances and economic conditions can complicate any given scenario. If they persist in pushing for an opinion, then I would simply respond by saying, ‘Do the names Steve Jobs and Larry Page mean anything to you?’

Fortune favours the bold

I believe that ‘luck’ is one of the most misunderstood and underappreciated factors in life. Those people and businesses that are generally considered fortunate or luckier than others are usually also the ones that are prepared to take the greatest risks and, by association, are also prepared to fall flat on their faces every so often. In stark contrast, the ‘play it safe for fear of failing’ brigade are the ones who just never seem to get as lucky as the risk-takers. Coincidence? I don’t think so. Sadly the vast majority of people seem to view their chances of ‘getting lucky’ in much the same vein as the likelihood of being struck by lightning, as if it is something over which they have zero control. Well, in my humble opinion they couldn’t be further from the truth – anyone who wants to make the effort to work on their luck can and will seriously improve it.

I remember watching the final round of the British Open golf championship on TV and seeing one of the leaders chip out of a deep greenside bunker. His shot was high but it just clipped the top of the flagpole and amazingly the ball dropped right into the hole. One of the British commentary team exclaimed, ‘Oh my goodness, what a lucky shot!’ Another commentator in the broadcast booth (a retired American champion as I recall) immediately snapped back with a stinging rebuke, ‘Lucky! What do you mean “lucky”? Do you know how many thousands of hours we all spend practising shots like that? He was trying to put it in the hole and he succeeded. Let me tell you, he worked long and hard on getting that lucky!’ The same sentiment was more eloquently expressed once by Gary Player one of the all-time golf greats, who famously said, ‘
The harder I practise, the luckier I
get.’

Over the years, like that golfer, I have often been accused of being lucky in business, but I too believe that a lot of very hard work has played a major part in any luck that has come my way. I must admit to sometimes struggling to figure out where coincidence stops and good luck begins, or put differently, how just happening to ‘be in the right place at the right time’ can so dramatically play into one’s path through life.

A LUCKY EXORCISM

One classic example of this phenomenon had a huge bearing on the early success of Virgin Records. To our surprise and delight, our first-ever album release, Mike Oldfield’s
Tubular Bells,
had become a huge hit in the UK but we were still trying to get someone to take it in the US. Despite this European success and my persistent efforts, I just couldn’t seem to convince the legendary head of Atlantic Records, Ahmet Ertegun, that an all-instrumental album would sell in North America. Regrettably he just didn’t ‘get it’. Then one day while Ahmet just happened to be playing the album in his office (presumably still trying to figure out what all the fuss was about) in walked movie director William Friedkin looking for backing music for a movie he had in the works. By an amazing stroke of good fortune, before Ahmet could turn it off, Friedkin heard
Tubular Bells
, instantly loved it and that was that: he had his backing track and we had our US deal with Atlantic. Oh yes, and the movie he was working on just happened to be
The Exorcist
, which was destined to become one of the greatest box-office hits of the day and so it also helped introduce
Tubular Bells
to a global audience. You could call it luck if you want, but there again I’d spent a lot of time yammering away at Ahmet and if he hadn’t been intrigued enough to listen to it one more time it would probably never have been playing at that critical moment in time.

THE LUCK OF THE CHILEAN

And then there are those other serendipitous situations that come along perhaps once in a lifetime where being in the right place at the right time can tee up an opportunity with no preparation at all. When that happens it falls to the individual’s ability to recognise the situation for what it is and seize the moment.

My friend, let’s call him Antonio, was raised in Santiago, Chile and eventually attended California’s prestigious Stanford University where he would earn a post-graduate degree in Business Administration and Behavioral Sciences. One day, while he was attending Stanford, Antonio was standing at the back of a long line outside a movie theatre when he and the stranger next to him were told that the show had sold out and they’d have to come back another day. Equally miffed, the two of them struck up a conversation and, with some unanticipated free time on their hands, ended up going for a cup of coffee together. Over coffee Antonio asked what the stranger, who was also attending Stanford, was up to and was told that he and a fellow student were working on a research project that was something to do with search engines. As they parted company the other student handed over a copy of his research paper and suggested my friend read it over and they could talk some more the next day.

Antonio said he tried reading the highly technical document that night but the bulk of it was all about algorithms and the like and way over his head. He was, however, highly intrigued with the object of the exercise which was to organise the vast amount of information on the web according to the popularity of the pages. In short it struck him as an idea that had a lot of market potential. When Antonio met up with his new friend the next day, therefore, he asked how he could get involved. He was told they were in the early stages of raising capital to launch their business, that it was valued at a million dollars and they’d love to have him as an investor. In what was to become the watershed moment of his life, Antonio responded by saying, ‘Well, I have $10,000 that was earmarked for a second-hand car but I might consider putting it into your company instead. What would that get me?’ He was told it would give him a one per cent ownership stake and so they agreed that they had a deal.

If you haven’t guessed it by now, the student Antonio had been speaking to was one Sergey Brin, and his partner went by the name of Larry Page. Although it was initially nicknamed ‘Back Rub’, the plan had been to brand their company ‘Googol’ after the mathematical term, but they opted to change this to the quirkier ‘Google’. A wacky word, perhaps, but one that was destined to become part of the vocabulary in just about every language on the planet.

A counterpoint to my friend Antonio’s story is that of Ronald Wayne. Wayne had worked alongside Steve Jobs at Atari and became one of the co-founders of Apple with Jobs and Wozniak. At forty years of age, Wayne was almost twice as old as his young co-founders and so he agreed to essentially act as the venture’s ‘adult supervisor’ in return for which he was given a ten per cent stake in the nascent company. Among other things Wayne drew up the partnership agreement between the three, drafted the first company logo and wrote the Apple 1 manual. For a variety of reasons, however, Wayne just didn’t feel comfortable that things were going to work out – he also didn’t particularly enjoy working with Jobs – and so after only a couple of months Wayne called it quits and relinquished his stock in the company for a one-time pay-out of $800. Had he toughed it out and hung in there, that stock would today have been worth close to fifty billion dollars! So was it bad luck or bad judgement? Maybe a bit of both, but I’ll let you make up your own mind on this one.

My Chilean friend was no Ronald Wayne and has been astute enough never to sell a single Google share and has reinvested all his dividends. He never got the used car but that $10,000 is now worth billions of dollars. Suffice it to say that the luckiest thing that ever happened to Antonio was going to see a popular movie in a small theatre. Had there been just two more seats left, his life would have been very different! But in terms of making the luck work for him he had to have the smarts to recognise an opportunity when it came along and greater still the guts to risk his $10,000 – about all he had at the time – on a couple of young fellow students with a dream. This one I’d certainly put down to a combination of good luck and good judgement: two elements that the sum of which will always be greater than the whole.

LUCK DOWN UNDER

Over the years, we have had quite a few events around the Virgin companies that have been described as lucky but perhaps none bigger than in 2000 when we set up shop in Australia with the fledgling Virgin Blue. We started in anticipation of having at least two major competitors in Qantas Airlines and Ansett Australia. Qantas was the flag carrier and Ansett had been around since 1935. We knew that Ansett had been experiencing financial difficulties but they had just been acquired by Air New Zealand and Singapore Airlines so we thought they were probably going to work things out. That was not to be the case, however, and over the Christmas period of 2000 we got a major traffic boost for our then tiny operation when the Australian aviation authorities partially grounded Ansett’s fleet for maintenance infractions. They bounced back, however, and in April of 2001 actually made an abortive attempt to buy us out – I was having none of it – which was a clear indication that as small as we were, they probably saw us as a major future threat to their survival.

By September the writing was on the wall for Ansett when, having funded their loss of almost $200 million in the previous year, Air New Zealand and Singapore Airlines cut them adrift. Then on 14 September 2001 Ansett grounded its entire fleet of 100-plus airplanes and ceased operations, stranding thousands of passengers and pitching upwards of 16,000 staff out of their jobs. Ansett’s demise not only suddenly thrust us into the limelight as the country’s second largest carrier but it also opened up terminal space at a number of airports around Australia where we had been struggling to get decent facilities.

So was it luck or was it more a matter of just happening to be in the right place at the right time? I think as with my friend Antonio it was a bit of both. We went into Australia to start the airline anticipating that Ansett would be part of the scenery for a long time to come. We were comfortable that we could give them a run for their money and our plans were not based on them going out of business. Did Ansett’s demise help us to expand and flourish in Australia at a faster rate than we might otherwise have done? Absolutely! But like Alberto having the courage to hand over his $10,000, we too had taken the step of putting ourselves in the right place when someone else’s misfortune became our good fortune.

This wasn’t the first time we had experienced such good fortune with our airlines. What happened in Australia was almost a carbon copy of what Virgin Atlantic had experienced in the UK fourteen years earlier. In late 1987, just two and a half years after we took to the skies, British Caledonian (popularly known as ‘B-Cal’), then Britain’s second largest airline, which had been struggling for several years, was acquired by British Airways. At first we opposed the takeover, thinking it would make for an even more powerful BA, but we quickly realised that this particular cloud had a very silver, if not positively golden, lining. As soon as B-Cal ceased operations it opened up some very exciting new routes authorities for us – we were able to pick up London to New York’s main international gateway JFK (we had previously been limited to operating into Newark, New Jersey), as well as Tokyo and Los Angeles, to which we started service to in 1988, 1989 and 1990 respectively. Boston, San Francisco and Hong Kong would follow later. Had B-Cal stayed around, we might never have gained access to these very profitable routes, or at the very least it would certainly have taken much longer for us to get operating approvals. Once again, some called it luck but I prefer to see it as a direct consequence of having the courage to put yourself in the right place at the right time – despite all the so-called aviation experts who, as one, had averred that Virgin Atlantic was the wrong idea in the wrong place at the wrong time!

It has always intrigued me how people are so quick to say, ‘Wow, they got really lucky with that one’, thereby totally dismissing any possible contribution the lucky one may have made to the positive turn of events. The same people are seldom as swift to say ‘Oh that was just bad luck’ when someone experiences a problem, even if through no real fault of their own. I firmly believe that smart leaders and clever entrepreneurs have the knack of engineering their luck – it’s also known as risk-taking – just as Brett Godfrey rolled the dice and they came up sixes by having us in Australia at exactly the right time. So work hard at improving your luck: remember not to stand under a tree during a thunderstorm and never be afraid to talk to strangers – you never know, your Sergey might be out there!

You can call it what you like, luck, good fortune, coincidence, serendipity, right place at the right time, or even ‘hard work’, but I think no one has defined this mysterious element any better than the Roman philosopher Seneca who some two thousand years ago said,
‘Luck is what happens when preparation meets opportunity.’

Amen to that.