has had the guts to innovate its way out of trouble. As the poet Robert Frost said: ‘The best way out is always through.’
Dan knew that, and really bit the bullet. He knew that if a company needs reinvigorating, it needs a complete shake-up from top to tail. He knew not to confuse the intense physical retune of a company relaunch with the corporate comb-over of a mere rebranding exercise. He knew to address the basics — to clear the company’s debts and settle its legal issues. And he knew to keep his staff onside with full, honest, direct corporate communications.
Virgin Mobile USA deserves to succeed. And if you follow its example in difficult times, so do you.
On the evening of Sunday 17 February 2008 I took the ribbed motor launch from Necker Island across to Biras Creek in the North Sound of Virgin Gorda. The daylight was fading and there was a brisk breeze, so I was wearing a cashmere jersey; not my normal attire in the Caribbean. But I felt a chill — a chill of despondency.
With me was Ryan West (known to everyone on Necker as Westy), Nicola Duguid, my then personal assistant, and Professor Dan Kammen. Dan and Westy had come to tell me how our sustainable tourism project on neighbouring Mosquito Island was progressing. Dan’s energy lab at Berkeley, University of California, was undertaking some computer modelling for us to create a low-carbon island holiday resort: all windmills and solar panels.
But my mind was elsewhere, and I was terribly disappointed. Five months of hard work by dozens of people across the Virgin Group had just come to nought, and I was mourning one of the most audacious deals we had ever concocted. The numbers were big, and the risk to the brand created over forty years was huge. There could have been serious repercussions for the brand if we failed to turn the business around. But I knew we had done our preparation. I knew success had been within our grasp. And I knew we could have done a good job. Now, of course, nobody will ever see the results.
We had lost our bid to rescue the embattled Northern Rock bank.
As we gathered on the jetty I said: ‘Right, chaps, I’ve just heard that they’re nationalising Northern Rock. So if it’s all right with you, I think I’m going to get drunk.’
This story illustrates so many of the positive points I’ve tried to make in this chapter and throughout the book. Nevertheless, when the stars are set against you, there really may be nothing you can do. Blame and recriminations offer a spiteful sort of short-term comfort, but they’re toxic, and can only only stunt your future enterprises.
The opportunity emerged in August 2007 as the international credit crunch began to bite. For many months I had been watching closely as the situation tightened, and I eventually decided to sell all my non-Virgin personal shareholdings in the stock market for cash. It turned out to be a wise move: I was luckier than many with equity in Northern Rock. Over the next few weeks, problems began to unfold as the mortgage banks were unable to get loans. But we didn’t expect one of the biggest collapses in British banking history.
Jayne-Anne Gadhia, meanwhile, was up to her eyes in mud — though in a good way. On Sunday 16 September she was with her friends, Susan and Rosemary, being pampered at the Stobo Castle health spa near Peebles, outside Edinburgh. The Sunday papers were talking about the collapse of Northern Rock, and Jayne-Anne pondered that Virgin could do something with this…
She sat up, dropped the paper on the floor and cast around for a phone.
She called Gordon McCallum.
‘Don’t be daft,’ was his initial response. ‘It’s a step too far.’
That evening she blasted off a follow-up email to Gordon and Stephen Murphy.
Hi there
Call me insane, but I have been thinking hard about how we might take some advantage from the current situation at Northern Rock — and help out at the same time. I think there are a number of opportunities — ranging from the possible to the outrageous.
1. Accept that the big balance sheet providers will take the assets and look to take the systems etc. for a decent price.
2. Do a deal with a Citi or BOA [Bank of America] where they buy the company but we put in the brand so they get a Virgin-branded retail presence in the UK.
3. Talk to Northern Rock and the Bank of England direct. Richard could be used as frontman to make some sense of the crisis. Northern Rock could be rebranded Virgin and the Bank of England stand behind the current loan facility. We could withdraw from mortgages for the time being and focus on savings to rebalance the balance sheet — and with Richard fronting a saving campaign — Branson making sense of the current crisis — it’s all now about increasing savings and reducing debts etc.
4. Whatever happens, I think we should do some research into who people would trust with financial services now. I bet the answer will be — Richard Branson.
On the one hand I know that this all sounds pretty batty, but on the other hand — discontinuities in the system make it right for change — and I think we could do something, if Richard was able to speak to Darling or Brown to ask how we can help.
What do you think? I’ve restrained myself from copying this to Richard until I got your views.
Gordon’s reply was his usual mix of caution and common sense. ‘I think 1. is interesting and the rest is batty! Let’s talk tomorrow morning.’ Stephen was equally cautious.
Jayne-Anne decided to phone me directly. She asked me if I’d seen the queues outside Northern Rock’s branches on the news.
I certainly had.
‘Well? Do you think we should give it a go?’
‘Screw it,’ I said, ‘let’s go for it.’
You can only get into pole position by giving something a try. Over many years, Virgin’s business aim has been to find a strong position in a game-changing market. We’ve done this in the record business, media, telecoms, health clubs and the airline industry and will soon do it in space travel. We put ourselves out there, searching for new opportunities. And we know that they are more likely to come our way if we get ahead of ourselves and prepare the ground first.
Next day Jayne-Anne talked through her ‘batty’ ideas with Peter Norris, one of our long-term advisers, and a man who had run Barings. Peter said straight away that Virgin should start to look at the idea seriously. By now Gordon and Stephen had got their breath back and were over the shock — it was time to think how best to assemble a team to take on this enormous task. Our Northern Rock adventure had begun.
The following day I phoned Matt Ridley, the chairman of Northern Rock. I told him we would love to see how we could help save the bank. Matt is a charming man. He appeared delighted to take the call: ‘This is great news, Richard. The Virgin brand is just what the bank needs,’ he said. ‘Of course, you do realise you’re going to need literally billions of pounds?’
‘Ohh, yes,’ I said. And I thought to myself:
‘I’m confident that can be arranged,’ I said. Well, of course he said billions. He was a bank.
‘I fully understand,’ I said, and by then, with sweat beading my brow, I really did.
The bank’s position had become public at 8.30 p.m. on Thursday 13 September 2007, when the BBC reported that Northern Rock had asked for and been given emergency financial support from the Bank of England. The funding facility was finalised in the early hours and announced to the London Stock Exchange at 7 a.m. Within hours of opening, long queues began to form outside Northern Rock branches across the UK. The website collapsed and its phone lines were jammed. This was shocking news: the first run on a bank in the United Kingdom since Victorian times.
There was a great deal to admire in Northern Rock, and I wanted to protect and save what was good about it. When the run on the bank began I watched the television pictures of the queues along with everybody else. Now, the queues were undeniably disturbing, they were the story. But being in the businesses I’m in, it won’t come as any surprise that I also had my eye on the front of those queues, where Northern Rock spokespeople were trying to reassure some very worried customers. I admired the way the staff turned out at the branches and dealt with
