The Virgin Way: Everything I Know About Leadership (25 page)

Accordingly in late August of 2012 we threw down the legal gauntlet and filed an application before the high court of London requesting a judicial review of the decision to award FirstGroup the contract. Obviously our filing didn’t seem to bother the Department for Transport too much, as they dismissively told the press that there would be ‘no delays in awarding the franchise to FirstGroup’.

The court hearing was set for the middle of October, but with only a few weeks to go the government had still not disclosed any of the information we’d requested on how they had reached their decision to award the franchise to FirstGroup. Fearing things were not looking good for us, some of our senior team were starting to get cold feet and came to me to recommend that it was maybe time to withdraw from the legal proceedings. ‘Let’s forget the lawsuit,’ they said. ‘Nobody ever wins judicial reviews and if we get a bloody nose in court it will be very damaging to the brand as a whole.’

To address these apprehensions we hastily convened a war room meeting at our family home in Oxford where we discussed our options over cups of tea and several rounds of biscuits.  Despite the concern that we might not prevail in court, Virgin Trains CEO Tony Collins was convinced that there was something akin to a smoking gun at the Department for Transport. Patrick McCall, my key adviser on Trains, confirmed the numbers did not make sense. Others including Nick Fox, our usually cautious PR director, felt it was better to go down with a fight than slink away at the eleventh hour.

I knew it was a big decision to pit the company’s reputation against the might of the government, but something inside me just didn’t sit well and, besides, it has never been the Virgin way to just lie down and play dead. The room that day was pretty well split down the middle, but knowing our long-term partner Sir Brian Souter (then chief executive of Stagecoach) and his right-hand man Martin Griffiths shared my views, I made my decision. We would stick with it – and if we went down at least it would be with all guns blazing!

The week before we were due to face down the Department for Transport in the high court, I was in New York on a business trip when my assistant Helen received a surprise telephone call from the Secretary for Transport’s office in London, asking her to set up a call with me for 7 p.m. that evening – midnight in the UK. I agreed to take the call and immediately started agonising over what it could possibly be about: where our own people had failed was
he
now calling to try and talk me into throwing in the towel?

At 7 p.m. on the dot the phone rang and I found out. With little or no preamble, Patrick McLoughlin, the Secretary for Transport, got straight to the point, and pulling no punches he very apologetically told me the department had made some terrible mistakes and they would not be seeing us in court the next week. As my pulse quickened he went on to explain that they had uncovered several ‘significant technical flaws’ in the bidding process because of mistakes by Department for Transport staff and as a result they were cancelling the bidding process immediately.

I believe I may have been dancing a highland fling around the room as he continued to stress that we and FirstGroup had done nothing wrong and that ‘the fault lies wholly and squarely with the Department of Transport’ and there were likely going to be some suspensions of the staff involved. After we hung up – excited that our hard work had been vindicated – I immediately started to wake up our team in London. I even woke the chairman up to tell him the glad tidings, and while I did have to bite my tongue on a couple of occasions, the words ‘I told you so’ never passed my lips. Instead I sat down in my hotel room with our social media head Greg Rose and drafted a blog thanking all the staff at Virgin Trains and our customers for their incredible show of support. We had listened to their advice, we had acted and we had won!

Over the next few weeks, as more details emerged, we learned that what the Department for Transport had identified as ‘the flaw’ was exactly what we had been trying to tell them all along – they simply hadn’t done their sums very well and had accepted some highly unrealistic assumptions about the growth of passenger numbers and inflation towards the back end of the franchise. Or more simply stated: they had failed to realise the level of risk they were taking on board by accepting the FirstGroup bid. Anyway, on the ‘all’s well that ends well’ front, we have since been given approval to continue running the West Coast line until April 2017, so the decision to ‘sue the bastards’ would appear to have been the correct one. I am in no doubt that none of these ‘flaws’ would ever have seen the light of day had we not gone for the judicial review – the thing I was repeatedly told nobody ever wins.

I have to say, though, that I had nothing but admiration for the way the Secretary for Transport handled what was obviously a very embarrassing screw up by his department. First of all, he was recently appointed to the position and so the way the bidding system was set up hadn’t happened on his watch. Secondly, as recently as a couple of weeks before the dramatic late-night volte-face, he had told the House of Commons that he was satisfied that the bidding had been handled fairly and with due diligence. As a latecomer to the scene he could only have done this based on the word of his people in the Department for Transport who had handled (or more accurately ‘mishandled’) the bidding. The Department for Transport could very easily have just issued a press statement with the news but Mr McLoughlin had instead decided to call me personally – probably not the easiest call he has ever made! He also didn’t hide behind the fact that it was his predecessor’s miscalculation or weasel-word his way around the situation. In addition to the mea culpa he’d given me during our phone conversation, in subsequent interviews he continued to use no-nonsense phrases like ‘completely unacceptable mistakes’ and ‘deeply regrettable’.

Too often decision-makers, whether in business or politics, are happy to step up to the microphone or meet with the press when there is good news to dispense but, fearing it might damage their standing with the shareholders or voters, the same people can be conspicuously absent when the news is less palatable. This mentality of ‘go to ground until the firestorm passes’ seldom does either the leader or their company’s reputations any favours and invariably only serves to add a secondary round of damages.

SHIP HAPPENS

In recent years the best (or should that be worst?) example of bad decision-making being compounded by more bad decisions could well be the peculiar behaviour of Carnival Corporation’s billionaire chairman and CEO Micky Arison when his cruise lines suffered two major accidents in the space of a year. When his ship the
Costa Concordia
ran aground on a little Italian island (that it should not have been anywhere near) killing thirty-two and seriously disrupting the lives of thousands of passengers and their families, where was Micky? All that matters really is that for reasons unknown he made no attempt to get there. As soon as he was briefed as to the severity of the situation – all he had to do was turn on a TV set to see the disaster that the rest of the world was watching – he should have had his corporate jet fuelled up and been on his way to Italy. Instead Arison buried his head in the sand and went to a basketball game to watch the Miami Heat (the NBA team he owns). Amazingly, even after the lambasting he took for failing to make his way to Italy as soon as he heard of the
Costa Concordia
disaster, it seems he isn’t one to learn from his mistakes.

Almost a year later another of Arison’s huge cruise ships – the ironically named
Carnival Triumph
– was towed into Mobile Alabama after a fire had destroyed the ship’s generators and left the passengers stranded at sea for five days in disgusting conditions with no power, refrigeration, water or toilet facilities. After his appallingly bad decision a year earlier, there was Micky (again) opting for basketball over comforting his customers. The day when he should have been dockside in Mobile handing out blankets and compensation cheques to angry passengers, he was instead tweeting that tickets were still available for an upcoming Miami Heat game!

When a CEO or president speeds to a disaster site there’s really nothing tangible they can do to unravel or rewind what has taken place. Similarly, in ninety-nine per cent of cases they are unable to immediately answer the most common question of ‘Who or what do you think was responsible for the accident?’ The first thing one learns in any good crisis management training is not to offer opinions, speculation or hearsay until such time as the experts confirm the cause – something that usually takes months or even years. All a company’s leaders can do is to show that they care enough to be there and demonstrate their sympathy for the victims and support for their own people who are handling the situation. When, on the other hand, a leader like Micky Arison decides to stay home and watch the story as it unfolds on the world’s media, that sends a very different and equally clear message that is hard to interpret as anything other than ‘I really don’t give a damn.’

As the tragic tale of Malaysia Airlines’ flight 370 demonstrated, no two emergency situations are ever quite the same. At the time of writing there is still no answer on the fate of the aircraft and everyone on board but the airline’s handling of the incident has been the focus of some pretty damning criticism from despairing relatives and the media. While some say the airline’s representatives were clearly unprepared to deal with the 24/7 demands of journalists from all around the world, the amount of contradictory information and speculative statements coming from them was quite extraordinary. In such awful and unprecedented circumstances my heart went out to everyone involved – including the embattled CEO of the airline. All I will say is that if, God forbid, such a situation were ever to happen to them again, I am sure they would handle it a lot more effectively.

Touching wood as I write this, for someone who has been in the transportation business for the last three decades with companies moving millions of passengers a year I am extremely fortunate to have been faced with only one serious accident resulting in a fatality. That came back in early 2007 when a Virgin train came off the tracks in the north-east of England. When it happened I was on a ski vacation in Zermatt, Switzerland with my family; a little after nine in the evening a text came in telling me there had been a ‘code black’ rail accident, which indicated it was serious. After a few hurried phone calls had established that the derailed carriages had plunged down a ravine, I was merely told to ‘prepare myself for the worst’. I decided on the spot that there was only one thing for me to do and all I think I said was ‘I’m on my way’ – something I was about to discover was easier said than done. It was snowing heavily at the time, which meant that what would have been my first choice of transportation, a helicopter, was not an option. The snow had already closed our closest airport at Sion and Geneva was about to shut down as well. With no other alternatives, other than staying put, I rented a car and set off on a gruelling five-hour drive through the snowy night to the airport at Zurich – which I prayed would still be open. It was, and I managed to catch the first flight out at 6.30 a.m. to Manchester, where I was met by Tony Collins and our head of public affairs Will Whitehorn, who jointly updated me on the accident’s status as we drove to the crash site.

I was greatly saddened to hear that Margaret Masson, an elderly female passenger, was confirmed as dead at the scene, and yet when I got to see the mangled wreckage I was also relieved that there had not been more fatalities. My decision to come without delay was certainly borne out as the right one when I made my way to the hospital where injured passengers were being treated. I met with as many of them as possible and then spent time with the clearly devastated Masson family, with whom I expressed my deep sorrow over their loss.

We learned a lot from the accident, which was quickly determined to have been down to a maintenance problem with the track – something completely outside of our control. Without knowing who or what was responsible, I never gave a moment’s thought to anything other than getting myself to the scene as quickly as possible. Faced with such an unenviable situation, any senior corporate officer who decides to delay their arrival at a crisis scene can usually take credit for making a ‘just in time’ decision, as in when they eventually get there it will be just in time for the media to castigate them for not showing up earlier.

In the course of our lifetimes we will all make a multitude of decisions big and small, good and bad. In some cases they will be hailed as brilliant and in others condemned as wrong or questionable. When the going gets tough, though, as in the case of a major accident involving your company, as the leader your job is to gather as much reliable up-to-the minute information as is available, step up and take the bull by the horns. Whatever the situation, indecision is not an option, and as I believe Micky Arison might now agree, in most cases ninety per cent of life is just showing up.

 . . . is good for business

As you will know by now, when I was sixteen, I dropped out of school to start up a small magazine called
Student
. It was the height of the turbulent 1960s when students were perpetually up in arms or having sit-ins over all kinds of stuff – from Vietnam to ‘banning the bomb’ to apartheid to . . . well, just about anything that was worthy of a demonstration. By creating
Student
my friends and I wanted to give our generation a stronger voice than they had on the placards they were shouldering around Hyde Park Corner on what seemed like every other weekend.

We didn’t stop with the magazine. Following on from its reasonable success, we started a not-for-profit student advisory centre with a 24/7 hotline on which young people could get guidance on issues ranging from sexually transmitted diseases to birth control to mental health and anything else that was causing them strife. Looking back, it now seems clear that I’ve always believed that businesses – whether small or large – have the opportunity and the responsibility to do good things in their communities and beyond. While it came naturally to us back then and we have continued down the same path at Virgin ever since, unfortunately not everyone sees life and business in the same light.

Sadly, abuses of ‘the system’ are all too common, by individual, government and private sectors. Readers of my various newspaper and magazine articles as well as bloggers frequently send me questions, or in some cases desperate pleas for advice on how to deal with corruption and demands for kickbacks as they try to launch or keep small businesses afloat in countries where such practices are commonplace – as well as in a few places where you would not expect such problems. Over more than four decades of doing business
all around the world, I have seen what happens when companies and corrupt officials conspire to serve their own selfish interests. They wreak havoc on our planet and its fragile ecosystems, destroy communities and perpetuate the cycle of poverty and despair. As a result, many people simply refuse to trust business and public institutions. And why wouldn’t they?

Wherever you come across these abuses, whether a long-accepted way of doing business or not, such self-serving corrupt practices aren’t only morally wrong, they are bad for business. Commerce should be a champion of good governance, taking a strong stand against corruption and lobbying for a better world. We should be fighting to build and support strong and healthy communities because the people who live in them are our employees and our customers, our suppliers and investors; with few exceptions, businesses and the communities they serve are one hundred per cent interdependent.

These days, Virgin has become a sizable operation – we have launched more than 400 enterprises over the years – and building on our small business roots and the lessons learned, we have also developed a strong understanding of the numerous ways that businesses big and small can lead in order to make a difference.

One is through sheer scale. Many large corporations control vast supply chains that involve thousands of smaller businesses operating in dozens of countries. It’s known as ‘clout’. Choices made by the management team at the top of the chain – anything from using more sustainable raw materials to improving gender diversity – trickle down through the entire system, and can often bring about change much faster than governments can. ‘Change your ways or we will change our supplier’ is a very straightforward demonstration of how money can talk – without it having to be passed below the counter.

Question – How many Wal-Marts does it take to change a light bulb?

Answer – 3,230

I was intrigued to read the story of what focused Wal-Mart’s attention on their ability to fast forward one segment of the energy savings evolution while simultaneously doing their customers, the environment and themselves a huge favour.

Some time around 2008 a conversation started in Wal-Mart around the potential for the newest light bulb technology, CFL or Compact Fluorescent ‘swirls’, to save their customers money on utility bills. Somebody casually asked, ‘Just out of interest, what difference would it make if we were to change the bulbs in all our ceiling-fan displays from incandescent to swirls?’ It seems a typical US Wal-Mart has ten ceiling fan models on display, each of which has four bulbs – that made for a total of forty bulbs per store spread over their 3,230 stores. So someone did the maths on the back of an envelope and came up with the staggering sum of $6 million in electric bill savings – just by changing the incandescent bulbs to ‘swirls’ on ten ceiling fans in each of Wal-Mart’s more than 3,000 stores. In a
Fast Company
magazine interview, Chuck Kerby, Wal-Mart’s VP for hardware (which includes ceiling fans), stated, ‘I couldn’t believe we were paying $6 million more than we had to in order to light those fixtures. That, for me, was an “I got it” moment.’

So having seen what changing a few bulbs could do for their own energy bills, in the name of conservation and good corporate citizenship Wal-Mart embarked on a mission. In the next twelve months Wal-Mart decided it wanted to sell at least one swirl light bulb to every one of its regular customers – that would be 110 million in all. They calculated that if every one of these customers took a ‘swirl’ home and used it to replace an ordinary 60-watt bulb, the energy saved would be enough to power a city of 1.5 million people. Or even more incredibly, in terms of oil not burned, or greenhouse gases not exhausted into the atmosphere, that one bulb per person is equivalent to taking 1.3 million cars off the road.

In the process of reducing energy consumption and increasing public awareness of the benefits of something as simple as changing a light bulb, Wal-Mart also aimed to improve its own less than stellar reputation by showing how seriously it is taking its new positioning as an environmental activist.

As is almost always the story, one environmental improvement usually spawns a host of others. In this case, since every CFL bulb has a life span equivalent to that of between six and ten incandescent bulbs, if Wal-Mart alone sells 110 million swirls those eliminate the need for 110 million old-fashioned bulbs to be manufactured, packaged, shipped, bought and discarded next year and for the next six to eight years going forward. According to Wal-Mart those 110 million bulbs would fill almost 300 of their huge tractor trailer trucks per year and that’s not counting the fleet of garbage trucks needed to cart 110 million burned-out incandescent bulbs to the dump and the fuel they burn in the process!

Of course over time Wal-Mart would appear to be shooting itself in the foot here as with swirl bulbs on a six-to-eight-year replacement cycle their revenue from light bulb sales is clearly going to plummet. Executives at Wal-Mart, however, claim to be looking forward to the day when the shelf space for light bulbs is cut by half. While this has the appearance of a negative commercial tactic, think again: Wal-Mart didn’t get to be the world’s largest retailer by getting such numbers wrong! CFL bulbs put out the same amount of light as classic incandescent bulbs but use up to eighty per cent less electricity and Wal-Mart is confident that the money their customers will save on their electric bills will eventually flow back in their direction – where there will be more well-priced things to buy on the shelves where there used to be light bulbs.

But don’t get too used to using those fancy new CFL bulbs just yet! The same kind of fast-paced evolution we saw in the music business when we went from vinyl records to digital via cassette tapes and CDs seems to be happening in the long-stagnant world of light bulbs. The ten-year CFL’s days as the market leader are already being threatened by LED technology – an LED bulb is much more expensive but can last as long as twenty-five years and their price is already dropping dramatically. So watch out, the decision to change a light bulb is nearly not as straightforward as it used to be!

THE LAW OF LARGE NUMBERS

This incredible light-bulb saga serves to ably demonstrate several arguments that others and I have been making for years.

First is the ‘law of large numbers’. When told that by changing a single light bulb they can help the planet, the typical individual’s reaction is one of, ‘Come on! Get real – my doing that isn’t going to change anything, except a light bulb!’ But as Wal-Mart is very much aware, one small action, multiplied by tens or hundreds of millions can have some pretty astounding results. As the old saying goes, ‘It takes lots of little things to make big things’. For example, if one person doesn’t leave the tap running while brushing their teeth twice a day, it will save an astounding 7,000 litres of water per year – which is about the same amount of water that a resident of sub-Saharan Africa uses in a year for all purposes including drinking, bathing and cooking. So ‘screw it in and let’s do it’ – with a few CFL bulbs and turning off that tap while brushing, you can become a one-person ecological tour de force!

Secondly, Wal-Mart’s ‘clout’ demonstrates the ability of private enterprise and big business in particular to move mountains. Wal-Mart is by far and away General Electric’s biggest customer for light bulbs. Consequently GE, which makes sixty per cent of the light bulbs in the US, agreed to work with Wal-Mart on keeping the cost of the new swirls as affordable as possible. The two companies also rolled out light bulb education centres in every Wal-Mart store to educate customers on the energy savings they can reap from switching to the new technology. By comparison, it took European legislators years to reach consensus on phasing out inefficient bulbs. While effective environmental regulations are necessary for sure, big business can lead the way and grease a lot of very creaky inefficient wheels.

As a postscript to this story I should perhaps note that in May 2013 Wal-Mart was fined $110 million for six counts of violating the US’s federal Clean Water Act by illegally disposing of hazardous materials at its stores across the US, so while they are clearly making serious efforts in many areas, it would appear that in others they are not exactly a paragon of environmental virtue just yet!

GE WHIZZ

And last but by
no
means least, companies that commit to doing good for the planet almost always find it to be good for business as well. In 2005, long before they started to collaborate with Wal-Mart on the CFL drive, GE’s CEO Jeffrey Immelt launched their ‘Ecomagination’ business push, which was neatly encapsulated by the slogan ‘Green Can Be Green’ (as in the ‘greenback’ dollar). Among a multitude of projects ‘Ecomagination’ has spawned programmes like ‘Ecomagination Nation’ a global power and water initiative designed to reduce GE’s carbon footprint, energy and water use. To date eighteen global sites are participating, reducing water use in 2012 by 669 million gallons, the equivalent to shutting down Niagara Falls for seventy-seven minutes. Another GE programme has produced the natural gas-powered ‘Flex Efficiency’ power plant – the emissions reduction in a year from operating just one of these instead of a coal-powered unit is the equivalent to eliminating the annual CO2 emissions of nearly three million cars in Japan.

Taking a stand on something you know to be right can lead to innovation and further business opportunities. Consider the leadership demonstrated by Safaricom and Vodafone in Kenya and Tanzania with ‘M-Pesa’. This first of its kind mobile-phone-based ‘branchless’ banking service allows users with a national ID card or passport to deposit, withdraw and transfer money easily with a mobile device. Within four years of its launch in Kenya alone, M-Pesa had attracted seventeen million subscribers, many of whom had previously had little or no access to financial institutions. The system has provided millions with new opportunities, which is driving economic growth and reducing poverty.

Closer to home, a few years ago Virgin Unite and some great partners were instrumental in launching the Carbon War Room, an initiative to identify and scale up market-based solutions to climate change. The CWR team’s research showed, for instance, that the global shipping industry could save up to $70 billion per year and reduce carbon emissions and other pollutants by up to thirty per cent if it shifted to more energy-efficient technologies and shipping vessels. Consequently, in cooperation with University College London, the Carbon War Room team started the ShIFT project (Shipping Innovation Fast Tracker) and is partnering with companies like Bermuda-based Magnuss Ltd that has developed a mechanical sail for cargo ships. Their VOSS (Vertically variable Ocean Sail System – don’t you just love these acronyms!) saves fuel and reduces emissions by enabling a ship’s main engines to be throttled back while maintaining cruise speed thereby achieving twenty to thirty-five per cent in fuel savings: all courtesy of Mother Nature!

Shipping is just one sector. The Carbon War Room’s research team is constantly working to identify opportunities that have cost-negative, billion ton per annum carbon reduction potential over the next ten years and has to date found seven of them: industry, forestry, agriculture, waste management, transport, energy and construction. Across seventeen sub-sectors these seven sectors combined could account for a fourteen per cent reduction in the world’s CO
2
annual emissions! If these numbers sound ambitious, they are. But Christopher Columbus was told the same thing when, with nothing but the courage of his own convictions, he went in search of the East Indies. And just look at what happened there – without any carbon footprint whatsoever!

All these huge numbers are very grand, I know, and a common question is what does all this mean for existing small businesses and entrepreneurs looking to start one? The simple answer is – a lot. In the long term, value or purpose-driven entrepreneurs stand a much better chance of succeeding in a global marketplace in which regulators everywhere are steadily tightening the compliance rules. In conjunction with this, consumers are beginning to rightfully demand more sustainable products and services, leaving global brands with no alternative but to attempt to find suppliers and partners who can demonstrate that they value people and the planet as much as they do profits and have a track record to prove it. I must confess that I am hugely encouraged to see that this is already starting to happen on so many fronts, which is great news for entrepreneurs determined to be a force for good in the world, and even better news for our society and the planet.