Fellow iconoclast and entrepreneur Freddie Laker had attempted to take on British Airways with a low-cost trans-Atlantic airline a few years earlier and had been driven out of business by the competition. Nevertheless, Mr. Branson, sensing a kindred spirit, sought Mr. Laker's counsel in the early 80's. The airline, Mr. Laker advised him, had to concentrate not just on low cost but also on offering
quality and value for the money. It had to be innovative and, most of all, fun. The airline's employees, therefore, were the real asset, not the planes. And it was Mr. Laker who brought out the Barnum in Mr. Branson. "Freddie Laker sat me down and said, 'If you are going to take on Pan Am, T.W.A. and British Airways, you've got to use yourself and get out there and realize that if you dress up in a captain's outfit when you launch the airline, you'll get on the front page. If you turn up in ordinary business clothes, you'll be lucky to get a mention. Remember, the photographers have a job to do; they'll turn up to one of your events and give you one chance. If you don't give them a photograph that will get them on the front page, they won't turn up to your next event.'"
Despite his public persona, Mr. Branson claims to be shy and introverted. He says he had to force himself to make speeches, embrace the photo opportunities and take part in the public relations soirees. But, he tells other chief executives, it can be done. "Before we launched the airline, I was a shy and retiring individual who couldn't make speeches and get out there," he says. "I had to train myself into becoming more of an extrovert." And the metamorphosis has paid off. His outrageous stunts and accessibility to the media have provided huge competitive advantage in the brand wars. For example, his media stunts in introducing Virgin Atlantic's new "drive-through" airport check-in, and later Virgin Cola, spawned widespread newspaper coverage and led to five-minute segments on NBC's "Today" show and a national audience of millions of Americans -- at no cost to Virgin. He won a highly publicized libel settlement of nearly $1 million from British Airways in the early 1990's and milked the David-slaying-Goliath angle for all it was worth. Branson is quite pleased that most business leaders remain below the parapets. "From a competitive point of view, the longer they continue to think that way, the better for us," he states. He relates a conversation with a BBC producer who told him that 99 out of 100 invitations to British chief executives to appear on television are refused. Conversely, Virgin is always available for air time. "With a television spot, you are reaching 10 million people," Mr. Branson says. "It would be bloody stupid to say no." EMPLOYEES FIRST
A genius for publicity, however, is only one facet of Mr. Branson's business talent. Perhaps more crucial to his success is his order of priorities. While most chief executives focus on creating shareholder value and devote their attention primarily to customers, Mr. Branson believes that the correct pecking order is employees first, customers next and then shareholders. His logic is simple and sound: If your employees are happy, they will do a better job. If they do a better job, the customers will be happy, and thus business will be good and the shareholders will be rewarded. To this end, Mr. Branson goes to unusual lengths. He regularly takes out entire flight crews for dinner and parties when he arrives on a Virgin Atlantic flight. He even stays at the crew's hotel rather than in expensive digs downtown. He gives every Virgin employee a Virgin card, which provides big discounts on the airline as well as at Virgin Megastores and other Virgin businesses. Because of Virgin's many disparate businesses, Mr. Branson likens his role to that of a commander of many armies fighting battles around the world. "In a sense, you are ultimately directing the war, and the critical thing is constantly being in touch and motivating your troops and helping people if they've got a problem," he says. So he is continually on the road, visiting Virgin businesses, talking with employees and customers. Branson is known for his ever-present notebook and pen, which he pulls out whenever he chats with employees or customers. He insists that this is a crucial element in his role as chairman and that by writing things down, he creates a regular list of items for immediate action. Most chief executives, he notes, will chat with employees in the course of their travels but by the next day will remember little of what they were told. Branson reads mail from employees every morning before he does anything else. This habit, which he started in Virgin's early days, changes the company-employee dynamics dramatically. Employees do not hesitate to air their grievances directly to Mr. Branson, and he has proved with his actions that he not only listens but also responds. He says that although Virgin has 20,000 employees around the world today, he gets only 25 to 30 letters each morning. "It's not as many as you think because they know they can do it," he explains. The letters run the gamut, from small ideas to frustrations with middle management. Branson addresses every one either by answering personally or by initiating some action. "Instead of needing a union when they have a problem, they come to me," he says. "I will give the employee the benefit of the doubt on most occasions." His loyalty to the rank-and-file employees is returned in kind. Working for Virgin, especially in Britain, is nothing short of a badge of honor. While being interviewed for this article, for example, Mr. Branson was vacationing on his private Caribbean island, called Necker. Along with him for his sojourn, he had brought 20 employees from various Virgin companies. And these were not senior executives, but the rank and file -- a housekeeper from Johannesburg, a switchboard operator, a reservations clerk, a pilot -- who were invited because of excellent performance. This is a regular perk for Virgin employees, and Mr. Branson, rather than feeling intruded upon, delights in the company. "The idea is to have fun, but by talking to employees, you learn a lot as well," he says. Reminded that it is the rare chief executive who takes employees along on vacation, Mr. Branson laughs and says, "I can assure you, it's no sacrifice." But it sends a powerful message and creates enviable loyalty in his growing work force. In fact, Virgin employees are as likely to say they "work for Richard" as for Virgin. Branson also hosts an annual summer party for all Virgin employees at his country home outside London. This year the party lasted seven days, and more than 25,000 employees and family members attended. Nearly all were greeted at the door by Mr. Branson, who is likely to be the first in the swimming pool. He also attends as many orientations for new staff as possible in order to set the tone and send the message. "I say: 'Get out there and have a good time. Really enjoy yourself, because most of your life is spent working, and you ought to have a great time doing it.' It's much nicer paying the bills when everybody is having a good time." And all the while, Mr. Branson is Virgin's most enthusiastic cheerleader, offering constant praise to employees for their efforts. He recalls how his mother and father always looked for the best in their children, and he does that now with his own son and daughter. "I will praise, praise, praise," he says, "and only criticize if they are going to kill themselves crossing the road. People know when they've done things wrong; they don't need to be told. When I write my letters to employees, you'll never see a line of criticism." STAYING THE COURSE
But if Mr. Branson is part father figure, part psychologist and part camp counselor, he is also an astute and demanding businessman. He can be ruthless, manipulative and controlling, according to various press reports about him. He insists, for example, that Virgin have no less than 50 percent stake in any company bearing the Virgin label and that his managers retain control of the operations. He has also orchestrated shrewd business deals that helped finance Virgin's growth without using the company's money. Branson says such deals are possible only because of the strength of the Virgin brand. For example, the recent creation in Britain of the Virgin bank, which is an operation separate from Virgin Direct, was financed to the tune of $500 million by other investors, and Virgin retained a 50 percent stake without coughing up a penny. "We're launching new companies that are 100 percent funded by external investors based on the power of the brand," he says. It would seem that the very power of the brand would be kept under tight control, lest it become diluted. Yet, being an inveterate risk taker and thrill seeker, Mr. Branson needs big challenges to keep him interested. Taking on Coke and Pepsi was one way to do that. Virgin Cola, according to Mr. Branson, is ready to overtake Pepsi in Britain, and he insists the soft drink will outsell Pepsi outside North America in his lifetime. About Coca-Cola, he is more restrained. He does not expect to topple Coca-Cola, arguably the world's best brand, anytime soon. But this does not bother Mr. Branson in the least. He says that Virgin Cola will grab a market share of 1 percent or 2 percent in the United States and that this will be "enough to pay the bills and get a base to start building on." The real challenge, he adds, "is taking on the biggest brand in the world and seeing what we can do with it." Acknowledging the gamble on cola, Mr. Branson suggests that he is taking an even bigger risk in putting the Virgin name on the British Rail, Britain's most run-down and neglected network. With no money invested in its infrastructure in the past 30 years, the public train system was simply grinding to a halt when Virgin decided to run it privately. The company is investing $2 billion on new high-speed trains and a renovation of all the tracks. But it will be four years before the restoration is complete, and so the Virgin label must endure being associated with an inferior product for a long stretch. The company, Mr. Branson says, could not pretend that Virgin had not taken over ownership. Efforts to improve existing conditions have already paid dividends in the first 12 months, with on-time performance improving from 78 percent to 90 percent and 16 percent more people using the trains, resulting in a £25 million profit, compared with a loss of £20 million the year before. Branson admits that "this is the biggest risk we've taken with the brand in Britain." Disgruntled passengers who never bothered to complain when the British Rail name was on the trains feel justified in airing their frustrations now that Virgin graces the engines. Though Virgin has failed at other business investments and escaped with its reputation intact, sustained problems with the railroad could tarnish the brand. But Mr. Branson, ever the optimist, foresees a positive outcome. "You can't be afraid to take risks," he says. "I believe that if my balloon goes down in 10 years' time, the success we've made with Virgin trains will be a greater part of my legacy than Virgin Atlantic. There may be short-term damage, but in the long run, it was the right thing to do." Though the Virgin brand is so inextricably tied to his name, Mr. Branson insists that the brand will live on even if one of his risky adventures does him in prematurely. "It will be a different kind of brand, probably more mature than it's been before and slightly less risque," he says. "But there is no reason commercially that it shouldn't go on in strength." The more crucial lesson, he says, is retaining the values he has instilled even as the company grows larger and larger. "You've got to treat people as human beings -- even more so as the company gets bigger," Mr. "The moment I start to think 'I've made lots of money, I'm comfortable, I don't need to bother with these things anymore,' that's when Virgin will be at real risk." BRANSONISMS
Richard Branson did not become a favorite of the business media solely on the basis of his publicity stunts; he is also eminently quotable in sound bites. Here are some gems from our interview with him:
"Obviously, the David image has done Virgin no harm. And if we ever became a Goliath, I think another David would set up and take us on." "You never enter a new business unless it will enhance the brand." "You fail if you don't try. If you try and you fail, yes, you'll have a few articles saying you've failed at something. But if you look at the history of American entrepreneurs, one thing I do know about them: An awful lot of them have tried things and failed in the past and gone on to great things." "We look for the big bad wolves who are dramatically overcharging and underdelivering." "There are quite a few things I've done that even I thought might have been one step too far. But if you are willing to make a fool of yourself and make people smile -- as long as you do it with a sense of fun -- you can get away with it.""We look for the big bad wolves who are dramatically overcharging and underdelivering." "We're launching new companies, 100 percent funded by external investors, based on the power of the brand." "I'm absolutely certain that in my lifetime we will overtake Pepsi in the world outside America." "If something happens to me, bizarrely, it might be the best thing that happens to the brand in that when a rock star gets killed, the sales of his albums triple. As long as I go quick, with my reputation still intact, then I think the brand can go on living well indefinitely." "If you grow a company from scratch, you can get the right people from day one; you can get the products right from day one, get the pricing right. It's much easier." "In a sense, you are ultimately directing the war and the critical thing is to be constantly in touch and constantly motivating your troops and to see how you can help people if they've got a problem." "I'm not 100 percent sure that children should go on and run their parents' business, because they are not necessarily the right people to do it." "If you can find people who are good at motivating others and getting the best out of people, they are the ones you want."
