ABCD of expansion and acquisitions4 min read . Updated: 13 Dec 2011, 12:39 PM IST
ABCD of expansion and acquisitions
ABCD of expansion and acquisitions
I am often asked about what appears to be a fairly high level of vertical integration within the Virgin Group’s dozens of businesses—a situation in which many ventures are united under a common owner. My customary, half-joking, response is usually that we prefer to see it as “vertical disintegration".
Don’t get me wrong: I don’t mean to imply that our group is falling apart—quite the opposite! We continue to grow and enter new business sectors at a healthy clip. While a lot of these new ventures may appear to observers to be utterly tangential—when we were a private record label, we started an international airline; later we got into mobile phone services and health clubs—over time the synergies usually become apparent. A better way to describe our philosophy of growth is the ABCD process: Always Be Connecting Dots.
It’s rather like those puzzles where kids connect sequentially numbered dots, eventually drawing a picture that wasn’t at all obvious at first glance. Connecting the first few dots is usually more difficult, and then, as in business, when the big picture starts to emerge, finishing the puzzle usually gets a lot easier.
When we launched Virgin Atlantic in the 1980s, there wasn’t any obvious connection between our company, which was then Virgin Records, and the airline industry. At the time, the level of service being offered by the world’s airlines was just so awful that we felt there was a huge opportunity for a company ready to put some effort into doing things better. It just so happened that as we were already in the entertainment business, we naturally brought what we knew best—how to entertain our customers—to an industry that was desperately in need of precisely that tweak.
When we first ventured into cellphone services, we really didn’t know much about the business, but saw an opportunity to disrupt the market, particularly by focusing on the needs of young people. At the time, most of the big carriers were focused on selling monthly contracts to adults. Parents of teenagers and college students were usually loath to let their kids have cellphones because they so often exceeded their talk and text limits, racking up big charges on their parents’ accounts.
Through Virgin Mobile, we returned the focus to the customer, instead of only competing on minutes and rates. We offered parents the ability to set a credit limit on a phone and keep it topped up to that level, which meant that none of our customers had the experience of opening a phone bill at the end of the month and discovering unanticipated charges in the hundreds of dollars. As with the airline, we had seen an opportunity to take advantage of our strengths in customer service and simply connected the dots—as well as a lot of phone calls and texts.
Diversification is often a terrifying concept for executives at other companies and they usually have a story or three to tell about “here’s why we stick to our knitting". If you listen to those stories, there’s usually a common denominator: even if you are the best knitters in the industry, when you enter a new sector that has no relationship to balls of yarn, you shouldn’t march in brandishing your knitting needles and declare, “This is the way we do things around here."
When we boldly venture into new businesses about which we know next to nothing, we always hire people who know the sector well, but who, like us, also understand that it is ready to be shaken up. The right people will be capable of connecting the dots in such innovative ways that a wholly different, quite distinctive, picture will emerge.
So there’s no great secret to our launching or partnering with what seem to be unconnected businesses. That’s not to say it’s easy, but by sticking to our core brand values of delivering superb customer service, bringing together terrific people and engaging in unbridled innovation, we have found that there are very few businesses with which a connection cannot be made and learnt from. And these experiences strengthen the group as a whole, allowing us to make new connections.
Looking back, I am always flabbergasted at just how well all the Virgin dots line up with each other. We now have brand loyalists who fly with us, work out with us, use our cellphone and broadband services, ride our trains, drink our wines, and will soon be able to bank with us.
We also once had a knitting company at Virgin. It was called Black Sheep and run by my Aunt Clare, but, as you may have surmised, we simply didn’t stick with it.
ABCD! You will end up in the most amazing places.
BY NYT SYNDICATE
Richard Branson is the founder of the Virgin Group and companies such as Virgin Atlantic, Virgin America, Virgin Mobile and Virgin Active. He maintains a blog atwww.virgin.com/richard-branson/blog