Like a Virgin: Secrets They Won't Teach You at Business School

A SHOCKING REVELATION!

Okay, I admit it-I am not always right. There, I said it-in print no less! That just won me several bets.

Seriously, however, I can admit this without embarrassment, because it is true of all business leaders and entrepreneurs. It can be a difficult thing for an executive or manager to acknowledge to employees but errors of judgement (aka mistakes) do happen and anyone who accepts a leadership position should be prepared to own up to them.

As a leader, your decisions will be carried out, but that doesn’t mean they will always be the best ones-or that changing circumstances can’t turn a good call into a bad one overnight.

As years go, 2003 wasn’t exactly a vintage year for our group. Around the time Apple introduced its iPod personal music player in 2001, a couple of very bright people from Palm sold me on their own funky version of the MP3 player and a range of accessories. Virgin’s management team strongly argued the financial analysis did not stack up and that we would have to sell a very high number of units to make it work. I insisted we push on and launch our very own MP3 player, Virgin Pulse! I felt the product fitted well with our brand, our music business and our heritage. And I suppose I wanted to turn my original April Fool’s joke into a reality.

We spent $20 million designing our MP3 player and bringing it to market. Though that product and its successors were critically acclaimed in the United States, the Virgin Pulse bombed and we had to write off our investment.

Why didn’t our product work? Because, simply stated, Apple had a brilliant and unbeatable strategy.

For Apple 2003 was notable because it launched its iTunes store that year-as the company simultaneously pushed down iPod prices very quickly. If a company drives down the retail price of an innovative new product fast enough when it is still the dominant player in the new market, no one else can catch up because they can’t make enough money from their new products. When Apple introduced the cheaper, smaller iPod ‘nano’, it slammed the door on anyone else trying to build a significant market share in the digital music business. And, yes, I did freely admit that I was wrong; which helped us beat a hasty retreat from the marketplace before we lost even more money.

It can be very hard to own up to your mistakes when a big investment is not salvageable-and especially when it is a cause you alone have championed. This fear of embarrassment prevents many chairmen and senior executives from doing their jobs properly and addressing the situation when it is most urgent. If the business is disappearing, you must face your team and start looking into what is going on-and the sooner the better. Only by leaving the safety of your office and sampling the product or service yourself, studying the competition’s offerings and generally turning your operation upside down will you get to the bottom of where and why things have gone awry.

When you have uncovered the problem, get the right people working on fixing it. In this situation, honesty is the only policy. If you speak openly and bluntly about why you had hoped a strategy would work, why this proved to be wrong, and how you and your team arrived at the solution you want to put in place, then your people will be better able to implement it. This is not the time to hold back information or delegate the blame. This may be one of the more difficult moments of your career, but you will not lose people’s trust and respect by taking responsibility for the problem and admitting to your mistakes. People look for leaders to make informed decisions, not to be infallible.

If you discover that the problem was in the implementation of a service or product, do not make the beginner’s mistake of firing those responsible. Blame and recriminations may offer a spiteful form of short-term comfort, but they will be toxic to your company and will stunt your recovery or the launch of future enterprises. It’s unlikely that you will even need to talk to those employees about where they went wrong; if you provide all the information necessary, they will know what they did and be very eager to prove that they can get it right. If you keep your team together, you will close the door on rivals who might benefit from your mistakes by hiring the very people who have just learned the lesson the hard way.

Real innovation is about change-and when your plans to introduce a new product or service don’t work out, sometimes you have to adapt to changing circumstances instead of forcing your competitors to play catch-up. As I’ve written before: get over it and move on. If that means taking a hit, then take it on the chin. Don’t even think about it again. Just move forward.

But come on now: let’s be fair about the Virgin Pulse. This wasn’t just any old competitive response-it was the iPod! I mean, how was I supposed to know?