He may be well-known for his jester antics, but Richard Branson’s empire is built on a foundation of innovation and dedication, writes Tom Skotnicki
There is never any doubting Sir Richard Branson’s love of the spotlight. In May, he received worldwide coverage after he dressed up as a female air attendant on a flight from Perth to Kuala Lumpur.
At 63, he may no longer be breaking world sailing and ballooning records, but he remains true to his image as a type of business court jester.
It would be easy to dismiss him but for his success in building a significant empire and turning Virgin into one of the world’s strongest brands and arguably the group’s greatest asset.
Branson credits Freddie Laker (low-cost airline pioneer who started Laker Airlines in the 1960s) with making him realise the need to be far more outgoing.
“The late Freddie Laker was an extremely inspirational business figure I met in my early years. One of the best pieces of advice he gave me was when I was thinking about setting up my own airline. He said: ‘You’ll never have the advertising power to outsell British Airways. You are going to have to get out there and use yourself. Make a fool of yourself and get yourself onto the front pages. Otherwise you won’t survive.’
“I’ve been making a fool of myself ever since!” Branson tells Mt.
However, beneath the Branson bonhomie lies an entrepreneur with a great understanding of people and an instinct for opportunity.
On the surface it would appear the mix of businesses in which Virgin is involved is relatively incompatible. It is true to say Branson has never been inclined to stick to a single industry sector.
The Virgin empire is involved in airlines, railways, retailing, cosmetics, beverages, finance, telecommunications and banking. However, apart from Branson and the Virgin brand, the common factor is a focus on customer service and leveraging some advantage for the consumer.
Branson plays down suggestions some businesses are core and others have less importance.
“It’s difficult to pick just one, as we have had many successes to be proud of over the years,” he says. “For me, the triumphs that stand out the most are when, despite a lot of doubt and criticism, Virgin has entered a sector and truly turned it on its head in a positive way.
“Watching the faces of my staff, whether that be at Virgin Atlantic when we first launched in 1984 or at Virgin Trains in 1997, when the doubters and the critics who said we’d never do it, we’d never turn an industry around, we’d fall flat on our backsides, were being proved wrong,” Branson says.
“There’s no better satisfaction than watching the people around you, who have worked day and night to get something right, realising that dream.”
Branson puts an enormous emphasis on the strength of his staff. He has always attempted to provide opportunities for talented executives.
His first appointment as CEO of Virgin Blue, Brett Godfrey, was a financial officer at Virgin Atlantic when he presented the opportunity for a new airline in Australia to Branson. In recognition for his role in developing the concept he was given the CEO role.
The other defining characteristic of Branson’s method is his belief the brand must always be primarily involved in providing a fresh approach to customer and client service. Several of the Virgin businesses have had a transformative effect on the industries in which they have been involved.
This is apparent from the (high-service) low-cost airlines through to innovative products in areas such as insurance and mobile phones.
Branson’s first independent entrepreneurial venture began in the mid-1960s when he was still at school. He founded a student magazine in a London basement that dealt with the perennials of sex, drugs and music and was on several occasions censored by the authorities.
To raise additional revenue, the magazine started a mail-order business using the Virgin label. In the early 1970s, during a postal strike, the first Virgin music store was opened and despite some legal fallout over selling records consigned for export, the business began to generate some reasonable cashflow.
Branson’s decision to start a music label under the Virgin brand proved to be a stroke of luck in his business career.
The totally unknown label had a smash hit with its first release, Mike Oldfield’s Tubular Bells, which eventually went on to sell five million records. It was a one-off and the label struggled for only minor hits in the next few years.
Despite the signing of prominent bands such as the Sex Pistols, the commercial successes failed to follow. It was not until the early 1980s when the label signed Culture Club that it emerged as a force in the music industry.
Along with the growing retail operation the commercial credibility helped Virgin establish itself as a hot commercial label drawing a range of top recording artists in the 1980s. It also provided Branson, who was still just over 30, with the funds to invest in other businesses.
After dabbling in the charter airline business for several years, starting in the late 1970s, he became convinced British Airways was vulnerable to competition and launched Virgin Atlantic in 1984.
In 1986, at the height of the stock market bubble, he sold off a partial shareholding in Virgin before buying back the shares after the 1987 crash, claiming investors were too focused on short-term returns.
However, by the early 1990s, in the face of an economic downturn and rampant increases in inflation and interest rates, Branson decided to sell his music label to Thorn-EMI for close to £1 billion.
The funds helped stabilise his airline during a difficult period and eventually Virgin sold a 49 per cent interest to Singapore Airlines for close to $US1 billion.
Late last year Singapore Airlines sold the shareholding for about a third of the purchase price to US carrier Delta.
Branson admits to having some hits and misses in his business ventures. Outsiders suggest the most damaging was the decision to establish Virgin Trains on a franchise from the British government in 1997. It took more than a decade for the operation to start generating real returns and at one stage it looked as though the franchise would revert to another operator in 2012 although it has since been extended to 2017.
However, even then it was never a solo risk on the part of Branson – 49 per cent of Virgin Trains is owned by the Scottish-based transport operator Stagecoach.
This use of business partners to share risk is a feature of his approach to investment. Branson is extremely proud of his company’s achievements with Virgin Trains.
“I’m a strong believer in learning from your own mistakes and picking yourself up after making them.
“Business is about taking risks and sometimes they do not come off. The key thing is to not allow mistakes to inhibit you in your next venture or to prevent you from trying again,” Branson says.
Branson recalls that his mother Eve, who is renowned for her entrepreneurial spirit and energy, always advised not to live life with regrets or wallowing.
“My mother always taught me never to look back in regret but to move on to the next thing.”
Branson, when asked to name those who inspired him, mentioned only one businessman, Freddie Laker.
“I have been very, very lucky and met some truly inspirational men and woman over the years … Nelson Mandela, Al Gore, Archbishop Tutu, Mary Robinson to name but a few – people with truly good hearts who are not afraid to say what they believe and raise the issues for people across the world who would otherwise go unheard.”
Branson may have used philanthropy as a means of garnering further attention but he has strong beliefs about equality of opportunity and the responsibility of leaders to future generations.
The claim that Branson lacks a driving business philosophy may be somewhat true. As a dyslexic with a poor academic record he learned early on to rely heavily on instinct. It is still said that Virgin operates with a high degree of informality in its corporate structure.
However, the suggestion that Branson is essentially a passive investor rather than a manager underestimates his influence as an iconic figure for the staff of the many enterprises in which he is involved. It also fails to account for the strength of the Virgin brand and its values.
Branson claims a business philosophy has evolved within Virgin over the past 30 years.
“If you had asked me this question 25 years ago I, and my colleagues at Virgin, would have laughed and asked you what a business philosophy meant! But as we have increased in size and expanded into more than 30 countries across the world, I guess the best way to describe what Virgin has become is a branded family investment group.
“We invest in many sectors, with different partners, across the world, but insist on every business we enter that the ‘Brand’ and its values are king.
“At the end of the day our business plan in this respect is simple – if we do not stay true to our customers, why should they stay true to us?”
Despite a more disciplined approach to business, the reliance on his gut feeling has not altogether disappeared.
“Instinct is actually more about the ability to think on your feet, assess risks and be willing to make quick changes to your business and your plans. In every business’s life you find cross- roads where you have to make a choice about expansion, investment or people. You have to be sensitive to changing circumstances and be able to revise plans if needs be. This is the instinct I believe is important.”
In the past 20 years Branson has become an inspiration for millions of entrepreneurs and budding entrepreneurs around the world and he is convinced they can play an important economic and social role.
He supports the philosophy of the founder of the microcredit and microfinance movement, Nobel prize winner Muhammad Yunus, that all people are born with an entrepreneurial spirit but it frequently remains dormant through lack of opportunity.
“In my experience, many young people have in them an entrepreneurial spirit and they display exceptional drive. But each of them needs support on their journey. There are some great entrepreneurs out there, with a little help and nurturing, they really will go on to make a difference in their chosen field,” Branson says.
“Virgin Media Pioneers champions undiscovered talent by giving people all the tools they need to succeed in their chosen career or business. Jamal Edwards (digital entrepreneur and commentator) is a great example of a born entrepreneur who, with a little guidance, has gone on to create a very successful online music platform, SBTV.”
Branson is a believer in management training. He has acknowledged its important role in skills development within the Virgin Group in recent years. However, he warns against perceiving it as offering the total solution or only option for talented individuals.
“I believe that business education can work for many … however, I warn against it being the complete answer to success. One needs to blend a business education with strong instinct, drive, enthusiasm, vision and people skills to create lasting success in business.”
The strong belief in drive, vision, ideas and people skills is a fundamental aspect of the Branson approach to business. Those who have worked with him describe an uncanny ability to read people. It is a skill he apparently developed early, partly to compensate for his difficulty with reading.
The drive is common to most entrepreneurs but his reference to “vision” appears to refer to the ability to generate ideas and work through to outcomes upon which he places great value. He could add to that an understanding of one’s strengths and weaknesses with most of the Virgin businesses involved primarily in service delivery.
Branson apparently (like Warren Buffett) never invests in businesses he does not understand. Therefore, he may provide mobile services but would never go into areas such as computer chip manufacturing.
Branson is fundamentally a helicopter manager watching the action from well above the playing field.
He says running a large diversified group of companies is “all about the art of delegation”.
“From a very early time, when we went from one company to two companies, I realised I couldn’t do everything myself. I had to learn the art of delegation and try to find people who were better than me to run the companies – that wasn’t that difficult! I am fortunate that over 40 years I have built a strong, capable and independent management team,” Branson says.
He says in recent years he has preferred to spend his time following interests such as tackling climate change and setting up social organisations to help those in need.
“I have always believed that I needed to find good people to run my businesses and to delegate day-to-day management to others. I did this from a very early age – and that has allowed me to go and set up new ventures, sometimes in new sectors or countries.”
Virgin has few hard and fast rules on the businesses or sectors in which it will invest.
“There are many different reasons for entering new businesses. It can be as simple as a business sector really interests me or one of our directors at Virgin and we see areas in that sector where our brand can make a real difference to the customer’s life,” Branson says.
Branson certainly does not dismiss passion as a factor in investment.
“I think being an entrepreneur you have fun when you see your ideas and businesses grow and become successful. I’ve had great fun turning quite a lot of different industries on their head and making sure those industries will never be the same again, and I hope that they will really benefit the consumer.
“It is very important that you are passionate and really love what you do when starting a new business. Do not enter a new business with the sole intention of making money,” he advised.
Branson has a strong dislike of bureaucracy and has been known to break companies and operations into smaller divisions to avoid it.
Asked about how he manages so many disparate entities, he says it is a matter of ensuring time is spent efficiently.
“As a successful business matures and expands, bureaucracy usually starts to take hold and members of the senior management team find themselves overwhelmed by the sheer number of meetings and volume of correspondence. The key is to manage your time efficiently [and] by keeping meetings short you are forced to stay focused and to the point.”
As far as his personal wealth, it would appear his whirling-dervish approach to business has paid dividends for the student who was banned from getting his views across in the school newspaper and so started his own. Latest estimates place his personal fortune at about $5 billion.
Branson has always projected himself as a leader rather than a manager.
Asked what distinguishes a good leader, he says it is bringing out the best in people. But it is apparent he is talking about more than charismatic leadership capable of providing inspiration.
“I believe a good leader brings out the best in people by listening to them, trusting in them, believing in them, respecting them and letting them have ago.
“When employees tell you about their good ideas for the business, don’t limit your response to asking questions, take notes and follow up. If you can, ask those people to lead their projects and take responsibility for them. From those experiences, they will then have built the confidence to take on more.”