Like a Virgin

THE OPPORTUNITY OF RISK

To many people, the number and variety of businesses that the Virgin Group operates is unusual: we’re involved in everything from music to railways to alternative fuel and even space and sub-oceanic travel. People often ask me to explain the rationale for our group’s approach, especially how we decide which sectors and countries to invest in. The answer comes down to our distinct approach to risk.

In life, I have always believed it’s better to stick to a few simple values and aims; the same holds true for business. One guideline that we rely on is that if a new business has the potential to damage your brand in any way, you should not invest in it.

At Virgin, when we assess a new business opportunity, our first step is to submit it to our ‘brand test’. We are constantly bombarded with new and exciting ideas that ‘might’ make a lot of money, but if they fail the brand test we will politely decline and move on. For example, we wouldn’t start a cigarette company or a ‘defence’ contracting business. After all, life is short and we all want to enjoy the ride.

Two related guidelines are deeply linked. We feel strongly that there is little point in entering a new market unless it gives us the chance to really shake up an industry. Almost all Virgin’s new ventures come from our thinking up a product or service that we believe people really want. Then, if our entry has the potential to make waves, we’re going to look at it very closely.

You’ll notice that making a profit hasn’t entered the picture yet. It’s rare for me or the team to consider only the money that can be made. I feel it’s pointless to approach investing with the question ‘How can I make lots of money?’ No one will ever agree on exactly how to make money. The consultants will perhaps say your idea will work, while the numbers guys (aka accountants) can always find a bunch of reasons why it will not.

When it’s time to decide whether or not to go ahead, I have always found that the best decisions come from your instinct or experience. If you pursue your passions, your visions will be more likely to become successful realities.

I learned to follow my passions at the beginning of my career, when I created Student magazine to give a voice to young people who were campaigning to stop the Vietnam War. As for the actual business aspects, such as paying the bills…well, we had to sort that out later. We just hoped that we would sell enough copies to stay afloat and learn the business side as we went along.

With almost every venture we’ve entered since then, we made the move because we spied a gap in the market. Our airline business is a classic case in point: before we entered that industry, I had been travelling a lot because of Virgin Music and often found the whole experience to be lacking, if not downright distressing. I felt we could improve it by focusing on service, on the quality of the flight experience and by adding some fun touches. It worked.

Over the years, my colleagues and I have developed quite a reputation for risk-taking. It’s true that we have been fearless about taking on new businesses, sectors and challenges even when the self-proclaimed experts told us that we didn’t know what we were about and would be lambs to the slaughter.

But while, to all appearances, we do have an unusually high tolerance for risk, our actions always spring from another principle: always protect the downside. Something I think should be a guideline for every entrepreneur – or for anyone involved in business ventures.

For example, when we made our move on the airline business, I set myself one condition: in our negotiations with Boeing, I stipulated that we could hand the plane back at the end of the first twelve months if the business wasn’t working. I was prepared to take the risk but, if it didn’t work out, I wasn’t going to let it bring everything else crashing down. My colleagues at Virgin Records would still have their jobs and a company to run!

We’ve made other bold moves into (for us) uncharted territory – mobile telecommunications, financial services and health clubs, in countries all over the world. We just make sure we always have a way out if things go wrong. You have to protect your people. It’s your people who make a company exceptional or average.

So, if things don’t work out, don’t hesitate: take that escape hatch. That way, when all’s said and done, you will be able to gather your team, discuss what did or did not happen and then embark on your next venture together. Not much older but a lot wiser.