Richard Branson on Building an Empire

Sir Richard Branson is in a reflective mood. Almost 40 years after the launch of the Virgin Recordslabel vaulted him into the global consciousness, Branson is in Los Angeles to collect a special Grammy Award celebrating his contributions to the music business, and the honor finds him looking back on his transformation from industry interloper to institution.

With his black leather jacket, manicured goatee and signature long hair, the roguish Branson still looks uncannily like the London-born hippie kid who gate-crashed the music biz four decades ago, and he retains the energy and intensity that fueled the Virgin Group empire as it expanded its reach to embrace air travel, broadcasting, publishing and mobile communications. But Branson has changed: Now 61, he devotes much of his time to personal passions like The Elders, the international human rights group chaired by Archbishop Desmond Tutu.

"A lot of my entrepreneurial skills now are spent in setting up not-for-profit organizations," he says. "We're a little more secure now, so we do things a bit differently."

Of course Branson has always done things a bit differently. It's a philosophy that is central to the Virgin brand and ethos, and it's the catalyst behind the project he calls "the most exciting thing" the company has ever pursued: Virgin Galactic, the commercial aerospace business devoted to providing spaceflights to everyday (albeit deep-pocketed) citizens. Slated to begin suborbital test flights later this year and passenger service by year's end, Virgin Galactic has already signed up nearly 500 customers willing to fork over $200,000 each to reach an altitude of about 68 miles above the Earth's surface.

Like all Virgin efforts, the Galactic unit emerged out of Branson's deep dissatisfaction with the status quo.

However, unlike other Virgin initiatives, Galactic is not an alternative to slow-footed, self-satisfied legacy corporations that have lost their way; it's the vanguard of a nascent industry, with no rules to break and no establishment to topple. For Branson, this is a new frontier.

Photo Courtesy of Virgin Galactic

"First we're taking people to suborbital space travel, then orbital, and then we'll be able to put satellites into space at a fraction of the price it currently costs. One day, maybe even hotels in space--who's to know?" Branson asks. "Whatever happens, it's going to be ridiculously exciting. It's the start of a whole new era."

The roots of Virgin Galactic lie in Virgin Atlantic Airways and Virgin America, the latter of which began flying out of San Francisco five years ago. Renowned among travelers for their candy-colored onboard mood lighting, plush leather seats, expansive in-flight entertainment systems and passenger-to-passenger messaging tools, Virgin America aircraft now serve 18 locations across the U.S. and Mexico.

"If you're going to launch an airline in America, you need to make sure it's far and away the best airline, and make sure you do it with panache and style and fun and flair, and really shake up the industry," Branson says. "Your brand needs to make its mark, and making that mark means that when you go offer space travel or something, people will say they'd like you to be successful at that as well. So one thing leads on to another."

Branson built the Virgin Group brand by targeting business verticals "where things are not being run well by other people," and he remains driven by a compulsive desire to do things the way he believes they should be done. Seemingly all of Branson's stories of entrepreneurial success begin as tales of consumer discontent. In the case of Virgin Records, he formed his own label because no established company would agree to release multi-instrumentalist Mike Oldfield's hypnotic Tubular Bells; the album inaugurated the Virgin imprint in 1973 and went on to sell more than 16 million copies worldwide.

In the case of Virgin Atlantic, Branson and 50 other passengers found themselves stranded in Puerto Rico when American Airlines canceled a flight to the Virgin Islands; he chartered a 50-seat plane, sold all the tickets for $39 apiece and not long after acquired a secondhand 747 to launch an airline in earnest.

"I did a blog the other day saying, 'If you didn't know how old you are, how old do you think you would be?'" Branson says, sipping tea over brunch at the Sunset Marquis, the legendary West Hollywood hotel favored by rock 'n' roll royals. "I feel like I'm still in my 20s, although I'm obviously not. I still enjoy life enormously. I throw myself into it as much as I did when I was in my 20s."

"There is no point in going into a business unless you can make a radical difference in other people's lives," Branson says. "To me, it's like painting a picture: You have to get all the colors right and all the little nuances right to create the perfect picture, or the perfect company. I know that there's need for Virgin to come in and attack a marketplace, because I know that I'm frustrated by having to experience bad service in that particular marketplace.

So I'll throw all the paint up and get all the best people in. By the time it sticks on the canvas, we'll try to start getting some order into it. Every little single detail has to be right."

Branson embodies Virgin's target demographic across all its endeavors, says Chip Conley, founder and CEO of the Joie de Vivre Hotels, international speaker and author of books includingEmotional Equations: Simple Truths for Creating Happiness + Success.

"[Branson] once said to me that his mantra when starting a new business is, 'I am the market,'" Conley says. "He won't jump in unless he's thrilled with the product. As a customer, if it doesn't float his boat, he won't do it. Focus groups and marketing consultants are only worth so much--it's your gut that tells you what to do. He doesn't pursue things unless he feels passion for them."

Entrepreneurs can make a mint by making a difference, Branson maintains. "All startups should be thinking, What frustrates me and how can I make it better?" he says. "It might be a small thing or it might be a big thing, but that's the best way for them to think. If they think like that, they're likely to build a very successful business."

About five miles south of San Francisco International Airport sits Virgin America's corporate headquarters. Located in an otherwise nondescript business park in Burlingame, Calif., the offices mirror the postmodern aesthetics of the company's aircraft: The walls are painted iPhone white, complete with industrial accents that evoke the rivet heads protruding from a fuselage skin. A photo timeline of Virgin Group milestones stretches throughout the space, commemorating Branson's greatest entrepreneurial achievements and his most outrageous public relations stunts.

Every January through April, Virgin America mounts "Refresh," a series of daylong training and team-building exercises that are mandatory for all the airline's employees, regardless of rank or position. Close to 100 staffers are attending Refresh on this Thursday morning in early February; over the course of the session, they learn the subtleties of body language from a San Francisco Police Department detective, hone their salsa dancing moves, do their best to imitate IndyCar pit crew tire changes and prepare their own lunches in silent tag-team relays, a process that yields unholy mélanges of tofu, Nutella spread, Tabasco sauce and Pop Rocks candy.

The Refresh program is essential to maintaining Virgin America's youthful, anti-establishment identity as its business grows and matures, Branson says. "The challenge as you get bigger is not to become so big that you become just like another one of the big carriers," he explains. "Trying to stay small while getting bigger is very important. Any company that has more than 250 people in a building is in danger of starting to become impersonal. In an ideal world, 150 people are the most that should be working in one building and in one organization, so that everyone knows each other and knows their Christian names."

With Virgin America turning 5 years old in August and profitability finally within its grasp, the airline is at an inflection point in its evolution, says president and CEO David Cush. A two-decade veteran of the air travel business who joined Virgin after serving as senior vice president of global sales at American Airlines, Cush acknowledges that the structure of the industry mandates that Virgin America begin serving a larger number of locations to remain competitive with its legacy rivals. At the same time, however, he recognizes that too much growth too fast can strangle the company's upstart spirit and culture of innovation.

"What is the delicate balance between the scale you need to be profitable and to earn enough money to continue to reinvest in your product, vs. being small enough where we still feel like a small airline?" Cush muses. "A lot of what we think about is how to replicate this [business model] for 4,000 employees instead of 2,400. That's why we feel we have to bring them back in every year to reconnect."

Virgin America is not the first Virgin Group unit to face this crossroad. "In our record companies, when the business got slightly too big, I would get the deputy managing director and the deputy sales manager and the deputy marketing manager and say, 'You are now the managing director, sales manager and marketing manager of a new company,'" Branson says. "We'd split the company in two, and then when that company got to a certain size, I'd do the same thing again. That is something that can be done within an airline--you can break departments in two, and that may be a way for Virgin America to go in the future."

Branson expresses deep admiration for what Cush and his staff have built at Virgin America. "With every Virgin company, I make sure we have the best people running them and make sure that if I'm run over tomorrow or if my balloon goes down or whatever, the company is going to run absolutely fine without me," Branson says. "In the case of Virgin America, all the hard work has been done by David and the team there. I will jump in when asked--I'll come in and sprinkle some magic dust on every new route we do to give it the best chance of success. Whatever else needs to be done, I'm happy to oblige. But I'm a great believer in finding great people, not second-guessing them, and letting them get on and do their job."

Words of Wisdom Branson on building a business
Don't bother doing something unless you're radically different from the competition.

For anybody who builds a company without financial backing, there's only one word that really matters, and that'ssurvival. That word loomed quite large in the early days. Now Virgin is quite well-established ... We have to worry more about making sure what we do doesn't damage the brand, and that the brand is enhanced by any move we make.

It's very rare to get an entrepreneur and a manager all rolled into one.

You definitely need to be good with people to help bring out the best in people. You need to be good at praising, and you need to be great at building a team and not trying to do everything yourself. You need to be able to not take all the credit for yourself, and you need to be able to take the knocks when things go wrong.

There's no point in going into business unless you do it out of frustration. I'm sure Steve Jobs must have felt, I can do that better.

Although Branson calls himself "a hands-off parent," Cush says his philosophies exert a profound impact on Virgin America's momentum and direction. "Richard preaches, 'Don't manage by incrementalism,' for lack of a better term--to keep the bigger picture in mind, and recognize that sometimes it is a slippery slope," Cush says. "That's what we've done here. The key thing is to stay focused on the company's values, and not to stray from them."

Which is not to suggest that Branson has always played it safe--or that he has always come up a winner. Not all Virgin efforts have disrupted their target markets: Virgin Cola failed to quench consumers' thirst for Coca-Cola and Pepsi, for example, and apparel brand Virgin Ware quickly fell out of fashion. Critics also question Branson's daredevil proclivities, like his attempts to circumnavigate the globe via balloon or his record-setting English Channel crossing in an amphibious vehicle.

"Virgin is an adventurous company because I am an adventurer as well as an entrepreneur," Branson says. "We were the first to cross the Atlantic in a balloon, and we've broken lots of other world records. That's been part of the spirit of building the brand and building the company, and set it apart from the more staid companies we compete with. On the other hand, one could analyze it and say it's very irresponsible. But we like to break the rules occasionally."

Asked to describe the differences between Branson's entrepreneurial philosophies and his own, hotelier Conley says: "He's got bigger balls," adding, "He's willing to roll the dice over and over again. In the past, he showed willingness to maybe experiment too much at times. But I think he's learned his lessons."

Time will tell whether Virgin Galactic falls on the positive side of the ledger. That company "again came out of personal frustration," Branson says. "I thought when I saw the moon landing all those years ago that one day NASA would be able to fly me into space. I waited and waited and waited, and soon it became apparent that government-run companies don't have any interest in worrying about you or me going to space. They have other things on their minds."

Virgin Galactic will launch commercial services on the wings of SpaceShipTwo, a six-passenger, two-pilot spacecraft designed and trialed by Scaled Composites, the aerospace firm founded by famed engineer Burt Rutan (designer of the Rutan Voyager, the first aircraft to circle the globe without stopping or refueling) and now owned by Northrop Grumman. As of February, SpaceShipTwo, the first vehicle in the company's proposed five-ship fleet, had completed 31 atmospheric test flights in all, 15 attached to its carrier aircraft White Knight II and 16 glide tests.

"From December of this year, Virgin Galactic will be offering people trips into space," Branson says. "Virgin is already one of the top 20 most respected brands in the world, and I suspect this could propel us into the top five and will be a wonderful sort of halo effect for everything else Virgin does."

It is unclear what the suborbital spaceflight market might be worth, but Virgin Galactic competitor Xcor Aerospace estimates a potential value of $3 billion within the next few years. Xcor is just one startup battling Virgin Galactic to dominate the space tourism market; other rivals include Armadillo Aerospace, Space Adventures, Orbital Sciences Corporation and RocketShip Tours. There is no incumbent.

Branson welcomes the challenge.

"Every single person in a company has to be empowered to be open to new ideas all the time," he says. "You've got to have a yes mentality, rather than a no mentality. You've got to be willing to take risks and allow people to fall flat on their face on occasion. Don't criticize them when they do, or else they won't take risks the next time around. Screw it, just do it--get on and try things."

In other words, Grammy Awards and lifetime achievement honors are all well and good, but Branson isn't calling it a career anytime soon.

"I enjoy life too much to become complacent," he says. "I was on the phone this morning with the president of the Maldives--there's been a coup there, and I'm trying to see if I can help him not get arrested. I'm in a position where I can make a difference and think I shouldn't waste that. Life is far too much fun and interesting not to throw myself wholeheartedly into it, and I suspect I'll keep doing so until I drop. Hopefully we'll make a little bit of difference in the process."