converting existing companies. However, in the case of Virgin Active, we have been able to do both. It is a credit to the management team that we have been able to buy clubs in Spain and the UK, and rebrand them and re-energise staff to do things the Virgin way.
The takeover of Holmes Place in the UK — for so long one of the leading health-club brands — is a great example. Matthew and Patrick McCall saw an opportunity to reinvigorate the business and give it the Virgin treatment. Conscious that we would want to spend money rebranding and updating the clubs, Patrick persuaded the investors in Holmes Place to take shares in Virgin Active and come along with us for the ride.
One of these was Bridgepoint, who had been our partners in the earlier development of Virgin Active and had sold out once but were now happy to reinvest at a higher price. I think they would have been pleased — today the company is one of the top three health-club chains in the world and it is currently expanding in Italy, Spain, Portugal and Dubai.
Virgin Active still retains that spirit of entrepreneurship, independent thinking and commitment that first attracted us, and has built up a strong brand in its own right. To me, it is proof of how if one picks the right management — and gives them autonomy and resources — they will create a world-class business.
We’ve never let a Virgin company go bankrupt even though we’ve had one or two companies that we’d like to have seen the back of. Because our reputation is everything, we’ve always paid off the debts of any company we own that has had problems. And we move on.
We move on. Easy to say: harder to do. And that’s why you need honest people around you.
A few blunt ones don’t hurt, either. In 1996, Gordon McCallum put my nose right out of joint. I’d asked him for an honest assessment about the Virgin Group. He told me Virgin was fundamentally a parochial British brand and needed to be stronger in other, international markets in order to be truly global. I felt like a schoolboy being handed a ‘must try harder’ term report.
Today, while we retain our footprint in the UK, we are looking further afield for our opportunities. We’ve chosen twelve countries which we believe are ripe for development, based on their population, the income of their consumers, the awareness of our brand and the ease of doing business.
So far we’ve enjoyed success in the United States, Canada, Brazil, France, Italy, Spain, China, India, Japan, Russia, Australia and South Africa. Now, like so many other businesses, we’re turning our attention even more to China and India. I’ll round off this chapter, then, with a few thoughts about how we hope to leverage the Virgin brand in these culturally complex territories.
For the Virgin Group, expansion into India was always going to be an easier option than China because of our shared culture, the English language and the Indian legal system’s mature approach to business. This has all made a massive difference to us.
We took our time in India, making small investments in radio and comics before launching Virgin Mobile with Tata in 2008. Statutory regulations prevent us from being able to use the successful MVNO (Mobile Virtual Network Operators) model — which I’ll explain in detail a bit later — so instead we’ve set up a marketing partnership with one of the country’s biggest blue-chip corporations. This is a mouthwatering prospect for Virgin Mobile: Indian phone networks are adding five million new customers a month. This is a massive rising tide.
Our long flirtation with the Indian aviation market didn’t turn out quite so successfully. We spent a lot of time talking to Air Deccan, the first of India’s emerging low-cost carriers, which had been set up out of a private charter helicopter company in 2003. I met Captain Gopi — G R Gopinath, its founder — and we tried for over a year to take a stake in this growing market. Somehow — and despite the arrival of SpiceJet and Kingfisher and others to compete with Deccan — every time we talked, the price jumped up a bit more. Ultimately we correctly concluded that the industry was expanding too quickly and after some huge losses, Deccan merged with Kingfisher Airlines — a part of the UB Group, owned by the Indian entrepreneur Vijay Mallya. We wished them well and stood aside.
The things that make India an ideal territory for us are the very things that make it difficult. Our impatience with bad service may as well be the national anthem right now, and everybody, but everybody, is seeking to address this national mood. It’s hard to be the consumer’s champion in a nation of businesses that, rightly or wrongly, claim value for money above all other values. Have we worked out the best way to leverage our brand here? To be honest, I think this will take time.
For me, though, the bigger prize lies to the east. And so it was with no small thrill that I phoned David Baxby. After all, it’s not often in life you get to call someone up and say, ‘I want you to run China.’
David, who’d been running Virgin Asia-Pacific from Sydney to Shanghai, took it remarkably well. Now that he had anchored our successful businesses in Australia, we wanted him to spearhead our operations in the most populous nation on Earth. Today, we’re talking to an exciting new generation of Chinese entrepreneurs. They are intensely keen to retain their Chinese identities and traditions but also to bring in best practices from around the world.
I have been in China several times recently, meeting young business people. The visit that everyone talks about, of course, is the one I made in January 2008, because it coincided with our bid for Northern Rock. It’s a pity that the bid overshadowed the substance of our trip, because — unusually for an official mission, a huge amount of very solid work got done.
I’d been invited along to promote goodwill and cement business ties between Britain and China, and I had asked specifically to meet with some of China’s entrepreneurs so I could swap notes about their experiences and opportunities.
It was minus ten degrees in Beijing when our flight touched down. I had been asked to say a few words, via an interpreter, about what it was like to be an entrepreneur. Ours was an important visit, diplomatically speaking, and so the size of the audience — several thousand people — was not too much of a surprise. Still, I was surprised and encouraged by the crowd’s response: entrepreneurism has been central to Chinese culture for many centuries, and clearly the excesses of China’s Cultural Revolution in the 1960s have done little to stifle the Chinese people’s belief in themselves as a nation of supremely ambitious shopkeepers.
Indeed, trade and commerce are becoming, once again, a natural part of life there, and the entrepreneurial spirit is much more highly valued in China than it is, say, in Britain. This was very clear when I attended an entrepreneurs’ round table in Shanghai.
Novelty explains some of the enthusiasm I encountered. I got talking to Zhang Xin, a fascinating Chinese businesswoman who runs one of the largest real estate businesses in China. She told me that the property boom in China is a continuing opportunity. There are already more than 400 million people who can be vaguely classified as ‘middle or professional class’ and this category is increasing by 30 to 40 million every year.
Zhang Xin has a passion for art and design and she has won several international awards for her visionary architecture. Born in Beijing in 1965, she moved to Hong Kong at fourteen, came to England and studied at the University of Sussex and then Cambridge. In 1992 she went to work on Wall Street with Goldman Sachs before returning to Beijing to start her own property business in 1995. The rapid rise of small Internet-based companies gave her and her husband an idea for combined living and working spaces. Zhang Xin initiated the concept of SOHO (Small Office Home Office) for young urban professionals and their companies. It’s a business now worth billions.
China’s own version of Google is an incredible business story, too. On our trip I met Charles Zhang, the CEO of Sohu, the leading Chinese-language Internet business, now listed on NASDAQ in New York. Sohu is a massive branded portal and its related Internet search engine, Sogou.com, has over 10 billion retrieved web pages. Charles told me that Sohu’s strong brand had been achieved largely through its online role-playing game Tian Long Ba Bu, which has a massive following among the young Chinese.
For all that, David Baxby and I sensed an atmosphere of anxiety among young business people. The Chinese authorities have opened a door of opportunity for their people, but a tradition of hefty state regulation and interference might yet curtail the record growth of this amazing nation. I hope not.
The catastrophe of the Sichuan earthquake on 12 May 2008 was on a scale to stretch and break China’s considerable disaster-relief plans. It was hugely encouraging to see this proud and often secretive nation acknowledging the scale of the plight facing its own people, and welcoming foreign help and support. Managing the Olympics, too, is already proving to the Chinese authorities that they can bend to the rough and tumble of international opinion and still remain true to themselves.
Much has been written about how China’s liberalisation of business will lead inevitably to a more liberal political culture. I think that’s true, though I suspect it will take a lot longer than the optimists would have us believe. I predict that free speech and open debate will be helped by the development of Chinese brands. Brands,
