Business Stripped Bare (22 page)

'I'm really sorry.'

'About what?'

'About losing you. I'm phoning to say how sad I am today.'

'Sorry? Why?' she said. 'I've just got a very decent cheque and so have my team.'

'Well, I feel as if I'm selling you and the guys along with all of the furniture. I've signed a clause with the Royal Bank saying we can't go into mortgages in the UK for the next two years. Look: if you don't like corporate life in two years' time, come back to us.'

Two years to the day later, I phoned. 'Are you happy?'

My call had surprised her, and pleased her, but – yes – she was happy. She was doing extremely well with Sir Fred, helping develop the One account, and the First Active account. She was now responsible for all of RBS's consumer finance in the direct market – and later the whole mortgage business in the UK. She was such a fit and capable person: it occurred to me that she should be running a bank.

She kept in touch and on 19 December 2006 – the anniversary of launching Virgin Direct – she left RBS, departing on good terms. We were keen to get her back to Virgin to take hold of our money business. Luckily Gordon managed to persuade her to return after a short rest, and she rejoined in March 2007. I phoned her from Necker: 'Jayne-Anne – welcome home.'

By then Virgin Direct had evolved into Virgin Money – a joint venture model offering products with several different partners, whilst the business is owned by our group. Virgin Money undertakes the marketing and designs the products – credit cards, savings and investments, life and general insurance – while our partners provide the rest. (Bank of America operate our credit cards, which means the cards are on Bank of America's balance sheets, not Virgin's!) But (possibly fortunately given the unfurling of the mortgage crisis) we hadn't been able to get back into the mortgage business since selling the One account. I asked Jayne-Anne and the team she brought with her to re-establish the One account on another level to fill the gap left by all the struggling mortgage lenders. It was this springboard that gave us the ability to make a proposal for Northern Rock – which I'll talk about in the next section.

In this chapter I've tried to demonstrate how Virgin has delivered on some of its best ideas. I've tried to illustrate the importance of good communications and attention to detail. I've stressed how vital it is to think clearly, reducing a business to its essentials. Do not underestimate the effort required to do this. It is very hard to look outside your own industry, and think the way a customer thinks, particularly if, as is likely, your life's efforts are devoted to one operation, in one sector.

Virgin's brand values of informality and plain speaking are incredibly useful to us in our day-to-day delivery of business, because they keep us grounded. They stop us from losing touch. They prevent us from ever, in our wildest nightmares, contemplating anything as self-defeating as 'confusion marketing'.

Remember: complexity is your enemy. Any fool can make something complicated. It is hard to make something simple. Use experts wisely. Direct them. Give them work to do. They're not there to hold your hand. Ignore flak. Remember, everyone has an agenda, so the advice you receive from outside your trusted circle is not just to benefit you. Almost all of it will be well meant, but even the best of such advice needs interpreting.

Keep a cool head. You're in business to deliver change, and if you succeed, the chances that no one will get hurt are virtually zero
. This is the rough and tumble of business. Be sportsmanlike, play to win, and stay friends with people wherever possible. If you do fall out with someone, ring them a year later and take them out to dinner. Befriend your enemies.

Engage your emotions at work. Your instincts and emotions are there to help you. They are there to make things easier. For me, business is a 'gut feeling', and if it ever ceased to be so, I think I would give it up tomorrow. By 'gut feeling', I mean that I believe I've developed a natural aptitude, tempered by huge amounts of experience, that tends to point me in the right direction rather than the wrong one. As a result, it also gives me the confidence to make better decisions.

My plans acquire detail as I test them against questions that on the face of it are really quite simple – and more to do with emotions than figures. If we create the best health club in town, will existing gym users go to all the bother of transferring their membership to us? If the answer is 'Yes', then we will give it a go and see if it works.

This is the point where being a well-funded company puts you at a tremendous advantage. Big businesses can afford to do this sort of thing. The good news for small businesses is that the big ones rarely bother to use their advantage to its maximum. Why? Because they've forgotten how to think like entrepreneurs. Worse still: many of them have forgotten how entrepreneurs feel.

Damage Report

In 1969 I made the biggest mistake of my life. It was an event referred to as recently as late 2007 by the Liberal Democrat MP Vince Cable in the House of Commons during Virgin Money's bid for the Northern Rock bank. He said, when speaking under UK parliamentary privilege, that I was not a fit person to run a bank. In the UK, nearly forty years after a lapse in judgement, I was still being pilloried.

I was nineteen years old and driving a shipment of records to Belgium when I stumbled on the fact that records bought in Great Britain that were intended for export were not subject to purchase tax. So I bought the records I needed, pretended they were for export, and then sold them to British customers. The whole ploy involved driving four Transit vans loaded with records to Dover, taking them to France, then returning on the next ferry with the records still on board. It was not only illegal, it was really pretty stupid. In May 1969, I was caught red-handed by HM Customs & Excise, put in a cell overnight and charged under Section 301 of the Customs & Excise Act 1952. It nearly killed off my entrepreneurial dreams; thankfully it didn't – but it did teach me a hard lesson about never doing anything illegal or unethical ever again. I hadn't fully appreciated the seriousness of what we were doing or the potential damage it could do to my reputation. It was my mum and dad who bailed me out, putting up their home as security. In the end, customs agreed not to press charges as long as I paid back three times the tax that had not been paid – around £60,000 – and I was spared a criminal record. What I didn't know at the time was that the big record retailers were pulling the same stunt in a more systematic way, and they too soon ran into the same problem.

After this shock, all the staff got together and we agreed to work night and day to settle our debts, expanding the company as fast as we possibly could in order to pay off these debts and to avoid me going to court.

It took us three years. But I learned a very important lesson:
never do anything that means you can't sleep at night.

One thing is certain in business. You and everyone around you will make mistakes. When you are pushing the boundaries, this is inevitable – and it's important to realise this. Even when things are running well, there is always the prospect of a new reality around the corner. Suddenly, all the good decisions you made last week are doing you untold damage. Where on earth did you go wrong?

At Virgin, we have always been prepared to face the facts – however unpalatable they might be. Failure usually occurs when leaders avoid the reality of business. You have to trust the people around you to learn from their mistakes. Blame and recriminations are pointless.

In business, as in life, there will always be external risk factors that are beyond your control. Oil prices triple. A terrorist blows himself up in a shopping mall. Hurricanes level entire cities. Currency fluctuations leave behind trails of bankruptcies.

But you can take measures to mitigate and manage business risks. Then, if disaster strikes, at least your attention won't be split every which way by other worries.
Always,
always
, have a disaster protocol
in place
. Because if something truly horrific occurs, a lot of frightened people are going to come to you looking for answers.

On 23 February 2007, at around 8.15 p.m., one of our new Pendolino tilting trains – travelling at 100mph – jumped over a set of points in Cumbria in the north-west of England, on a remote and scenic part of the West Coast Main Line.

On board was Margaret Masson, an elderly lady travelling back to her home in Cardonald, near Glasgow. Margaret – her family and friends called her Peggy – was thrown around in the coach as the train slid along the railbed and then careened down a steep embankment.

For ten years, Virgin Trains had been safely carrying millions of passengers all over the UK. Virgin Atlantic, meanwhile, had flown millions of customers around the globe without injury. That night, life changed in our business. We had our first casualties. Margaret Masson was dead. Several other people were seriously hurt.

Zermatt, Switzerland. My family and I came off the slopes after a brilliant day's skiing. There had been a welcome dump of snow and everyone agreed it had been a perfect day. In the evening, exhausted, we all sat down together to watch a film in the local cinema, when I felt eight or nine gentle buzzes on my mobile phone. I went outside. The text message said there had been a rail accident and that it was Code Black, indicating that it was serious. I phoned our then director of communications, Will Whitehorn (now president of Virgin Galactic), who sits on the board of Virgin Trains. The call went to voicemail – an unusual event for a person who is always in touch with me. I called Will's wife, Lou, on her mobile and she reminded me that it was his birthday; for the first time in a year, he had actually switched his phone off. I phoned Tony Collins, the managing director of Virgin Trains, and the man responsible for building the Pendolino trains.

'I'm afraid it's a serious derailment. The train's gone down a ravine and the police are trying to get to the passengers. We should prepare ourselves for the worst.'

'I'll be there in a few hours,' I said. 'Can you meet me?'

'I'll pick you up when you get in. Just let me know your arrival time.'

I couldn't get a helicopter because the snow I had just been skiing over and having such fun on was still falling, shutting down much of Switzerland. The airports at Sion and Geneva were both out of action. The best I could manage was to drive to Zurich, which was five hours away. I hired a car and drove through the night. I got the first flight out of Zurich at 6.30 a.m. The flight went to Manchester and I met up with Tony Collins and with Will, who had flown in from Heathrow. They briefed me on the latest situation, and then we caught the BBC morning news. The reports said the train was intact, and that this had contributed to the large number of survivors. That was heartening: Pendolino No. 390033,
City of Glasgow
, like all our new trains, had been deliberately built like a tank. An interim accident report, later confirmed, suggested that a track failure was responsible for the accident. This news, too, reshaped our task and made it somewhat easier, because we could be fairly certain by then that nothing Virgin Trains had done or failed to do had contributed to the incident.

As we headed to the Royal Preston Hospital in Lancashire, however, we still had little idea of the scale of the accident. The hospital registrar there said the emergency services had been gearing up for over 100 casualties when they first heard the news. Because the Pendolino carriages coped well, only twenty-four people needed to be taken to hospital – still, the scale of the medical preparations we saw was daunting.

We went up to Grayrigg, to visit the crash site. It was as if a massive Hornby model railway set had been picked up by a spoilt giant and dashed to the ground. With a jolt I recalled how much I'd had to argue with the Department of Transport – which provides large subsidies for the railway system – to allow us to increase the safety specifications of our trains. If this had happened to any of our old BR rolling stock, the injuries and the mortalities would have been horrendous. As it was, the carriages had held together. Even the windows were intact.

It was while I was surveying the devastation that I was first told about the bravery of one man. Since that time, whenever I think of the courage of our test pilots, or my friend the explorer Steve Fossett, who's sadly lost to us now, or the ballooning guru Per Lindstrand, I also consider the resolve it must have taken to deal with 400 tonnes of derailed train. The actions of the train driver Iain Black, a former policeman, were incredible. Once the train had derailed, its own momentum propelled it a further 600 metres along the railbed. Iain battled to slow the train down on the stones. He stayed in his seat for a quarter-mile, trying to control the train. He didn't protect himself by running back from his cab. Instead, he did everything he could to save his passengers, and in the process he sustained serious injuries to his neck. It was his selfless action that averted more casualties. In my book, he is a true hero.

We stared numbly at the wreckage for a while, then returned to the hospital.

I met Margaret Masson's family in the hospital mortuary, of all places. They were clearly devastated. I offered them my condolences. We found ourselves hugging each other.

The next minute – or that's how it seemed – I was facing television cameras and a press pack hungry for answers. I thought I was going to choke up. I came very close, but held it together and stuck to the facts as we knew them on the day.

At the time I couldn't say much. Again, I offered my condolences to Peggy's family. I also expressed my gratitude to Iain, who lay in another hospital nearby with injuries that would keep him off work for many months. Our other on-board staff – Karen Taylor, Derek Stewart and Gordon Burns – had all behaved in an exemplary fashion, and well beyond the call of duty, ignoring their own minor injuries in order to lead customers safely from the train.

After that, if I wanted to help people – the police, emergency and hospital workers, the mountain rescue volunteers, railway colleagues from Virgin, Network Rail and other companies – the best thing I could do was to keep out of their way. I left feeling unsatisfied: was there really no more that I could do? There didn't seem to be, but I comforted myself with the thought that at least I'd been there.

It is a boss's duty to get to the scene as quickly as humanly possible. If you delay showing your face in public after something like this, recriminations, anger and blame set in. This will be bad enough for you; imagine what all that confusion and worry does to the people who've been affected by the incident. In my view, if the press are demanding early answers for good and just reasons – and that was very much the case here – it is imperative for business executives to be prepared to face the media at the first opportunity. Every senior executive should be capable, if push comes to shove, of becoming a visible company spokesperson. I remember, after a serious plane crash at Kegworth in January 1989, Sir Michael Bishop, who was CEO of the airline British Midland, spoke to the media straight away with great clarity and care.

When Virgin Trains was putting its own emergency procedures in place, we analysed a number of serious rail incidents, and had been consistently appalled by the amount of time it took before anyone stood up and said: 'Speak to me about this'. And we were daunted at how fast confusion and blame set in as people waited for any kind of statement from anybody about what had happened and why.

So our disaster-planning scenarios have three main aims: to get to the scene fast; to be efficient in dealing with the passengers, staff and media; and to be honest about what is happening. The other lesson to come home was that the tremendous planning and refusal to skimp on costs on building the Pendolino to the very highest standards in the world really paid off and saved the lives of people who would not be here today if they had been travelling in the old trains we replaced.

*

You can't protect yourself against the unexpected, so you need to keep your house in as good an order as you can. If disaster strikes, you don't want to find yourself doing twelve things at once and misprioritising them in public. It's vital, therefore, that you take control of your internal business risks – the ones you
can
influence.

I've failed to follow my own advice here on a couple of occasions – and I've always regretted it. For instance, I'm not always good at cutting my losses. I should have faced up to the realities of the market and sold off Virgin Megastores years before we did. My decision to overrule my colleagues and hold on to them for too long cost us a lot of money, only balanced by the fact that the chain's very existence and brand was the distributing channel and bedrock of the early success of Virgin Mobile.

I don't think that a chairman need fall on his sword if someone messes up in the company. Chairmen must learn from the incident and try to make sure that particular mistakes are never repeated. An apology on behalf of the company – perhaps in a public forum, sometimes in person to the individual who has been messed up – is an appropriate starting point. I know business books that say you should never admit to failure, but I would not tolerate such an attitude among my people. I see nothing wrong with admitting a genuine mistake.

An entrepreneur has to make the tough calls. Some say it requires a ruthless streak. I don't agree. I don't think I'm ruthless, although I have been portrayed that way by a few people who don't really know me and have never met me. There are some things in my business life that I regret – and I have made mistakes about people. One of my faults is that I have often been so focused on a business project or an idea that I have been unable to appreciate what was going on in someone's life right in front of my nose. I've tried to learn from this, taking extra time to listen. Actually, I think it is counterproductive to be ruthless.
You've got to treat people as you would yourself, or better.

Let's be clear about the manager's responsibilities here. There's an idea abroad that people no longer resign when they should. To hear some people spin it, you would think resignation is the only effective action the manager of a troubled company can take. This is patent rubbish. And for the record, there never was a time in business or political history when talented people resigned over trifles, or out of some notion of honour. It's a myth.