Negotiation, Decision-Making and Leadership to Corporate Success - Based on the example of Richard Branson and the Virgin Company

Content

(I) A Virgin Everywhere!

(II) Richard’s Three Pillars
(1) The Power of Negotiation
(2) The Power of Experience
(3) The Power of Difference
(4) Branson’s’ Philosophy to Life and People
(5) Virgin: a self-fulfilling success story

(III) Richard Branson: Virgin’s greatest strength and weakness

Appendix

When making a decision of minor importance, I have always found it advantageous to consider all the pros and cons. In vital matters however, the decision should come from the unconscious, from somewhere within ourselves.

— Sigmund Freud

(I) A Virgin Everywhere!

Washington D.C., Friday morning, 7am. My radio, purchased from Virgin Electronics which is tuned-in on Virgin 1214 via satellite, starts playing Phil Collins, a famous artist discovered by Virgin Records (Jackson 1998, 80). As I wake up, I pick up my Virgin Mobile and phone my girlfriend Jessica who lives in London. She is happy to hear my voice and tells me that she is right now at Virgin Active to keep up her good shape. Moreover, she thanks me for recommending Virgin’s “Roof Gardens’ and Babylon” restaurant to take out one of her clients for dinner.

Later on during the day, I make my way to Dulles airport and take Virgin Atlantic VS022 non-stop to London to ask my girlfriend to marry me. Arriving at London the next morning, I pick up my rental car from Virgin Cars and drive straight to Virgin Vie where I pick-up an engagement ring I had chosen for Jessica a long time ago. On my way, I also check-in with Virgin Holidays to confirm the arrangements I had made for a spontaneous adventure vacation for Jessica and I after having asked her to marry me.

As I arrive at her place, I surprise her by taking her out for one of Virgin’s Balloon Flights.

As we are enjoying a bottle of Virgin Wine over London, I ask Jessica to marry me. She is more than happy. As we later on land safely on the ground, Bob, the captain of the balloon ride, hands us a business card stating “Virgin Bridal Services”. He smiles and says that we might need this. It is getting dark very fast and the first stars can be seen in the sky. Jessica looks at them as she wishfully whispers to me: “Although you are fulfilling all my desires and dreams, unfortunately you cannot take me to the stars!”

A chauffeur from Virgin Limousines picks us up. In the limousine, Jessica finds the tickets for the trip I had arranged for us. As she reads “Virgin Galactic: taking you to the stars” she falls into my arms and smiles.

This is what the Virgin Group and its founder, Richard Branson, are all about: presenting customers a life experience and not simply a product (Virgin Group 2006). No matter if economic up- or downturns, Richard¹ continuously developed this organization into a global player starting out with a small student magazine in 1966 (Dearlove 1999, 10). Today, it is a conglomerate composed of more than 350 companies employing 35.000 people in over 30 countries (Business Week Online, 8/30/2005) and making a yearly turnover (2004) of eight billion US-Dollars (Hopkins 2005, 101).

This paper aims at exploring the underlying decision-making processes that take place in order to successfully develop and run this organization even in the most competitive markets such as in entertainment or air travel (Dearlove 1999, 12). However, to understand the power and culture this organization is driven by to achieve this success, one has literally to get a grip on its key player, Richard Branson. My analysis of the Virgin Group is therefore closely tied to Richard’s way of doing business and making decisions.

(II) Richard’s Three Pillars

How do you start out establishing a multi-billion-dollar business with only a few dollars in your wallet, just one partner and literally no connections to anybody who could support you (Dearlove 1999, 10)? It all comes down to convincing people about your idea and vision: for example persuading banks of financially supporting an idea with literally no back-up (Jackson 1998, 48) or not only finding exceptional employees but also ones who are willing to work significantly below industry average in the start-up stage (Jackson 1998, 33). For the most of us, this seems to be difficult to achieve, to Richard Branson, these achievements come natural. In defining his three core competencies (The Three Pillars) and presenting his fundamental philosophy towards life and people (the fundament), I will point out how his decision-making style made the Virgin Group a self-fulfilling success story.

illustration not visible in this excerpt

idea by Thomas Lagner 2006

(1) The Power of Negotiation

“Richard Branson is a brilliant and ruthless negotiator” (Jackson 1998, 16) as “he has a street trader’s aptitude for negotiation, knowing exactly when to talk and when to stay silent, when to press his counterpart on a point and when simply to walk away” (Dearlove 1999, 53). In consequence, Richard has a talent in knowing where the real value and power of a deal is (Dearlove 1999, 56, 61). To give an example: when establishing Virgin Atlantic, Richard managed to purchase slightly (almost new) used Boing 747 for 27.8 million US-$. The price for such an aircraft would have been under normal circumstances about 100 million US-$. However, this deal was yet not good enough as he got Boing’s commitment to buy aircraft back after a year or two for a minimum of 25 million US-$ or the market price in case that prices should increase (Dearlove 1999, 62-64)! It were these favourable deals that equipped Virgin with a competitive advantage as it could very often access resources for way below the market price.

Richard Branson’s talent to develop such deals is mainly build on his gift to “listen” to those around him (Dearlove 1999, 149) as well as his “Karma Chameleon” aptitude (Dearlove 1999, 153). This means that he has the gift to mix his business instincts and charisma with the ability to be “different things to different people” (Dearlove 1999, 153). Bazerman identifies the source for such a proficiency in the skilfulness to take different perspectives when negotiating (Bazerman 1985, 50). Consequently, Richard’s excellent listening skills and empathy give him the ability to be an “everybody’s man”, somebody one wants to make deals with.

Moreover, as Howard Raiffa points out in his book “The Art and Science of Negotiation” (1982), Richard does not simply create win-or-loose situations but actually generates an outcome (creating non-zero-sum games) in which each party comes out with a mutual gain (Raiffa 1982, 310). In Richard Branson’s case, this is due to his belief that business is about people and not just money (Branson 1998, 84; Dearlove 1999, 81). In this context, applying a study by Hallowell (1996), Richard has the particular talent to convert his charisma and vision into value itself for his contracting partners in the negotiation process (Hallowell 1996, 514).

In addition, Richard developed a reputation of not accepting “no”, “never”, and “impossible” (Dearlove 1999, 58) due to his deeply routed passion to haggle (Dearlove 1999, 56). Accompanied by his generally well accepted reputation to be a man of honesty and integrity (Jackson 1998, 418), his reputation is not just an asset but in consequence the secret to Richard’s success in doing business (Hoch et al. 2001, 185).

To sum up, Richard’s powerful negotiation skills explain why Virgin was able to establish partnerships and arrangements which were generally favourable to the company.

(2) The Power of Experience

To become a successful musician, such as Phil Collins, it is common understanding that one does not only have to have the skill but also needs to develop this talent from a very early age on as it will be impossible to catch up the experience collected during these years later on in life. With starting a business, it is just the same.

Imagine, you started your first own business at age 15 and kept continuing to establish new businesses in your life resulting in 350 further companies in a time frame of 30 years (11 new business per year). This is what Richard did. Just as Phil Collins learned to play the guitar, Richard tuned his entrepreneurial talent to do business, making him the most experienced businessman in the world - who else could claim having started that many businesses?! Most strikingly, it can be stated that Richard was born with this talent. For example, although he failed the math(!) exam in elementary school, it is said, that he could have run the school better than the powers in place those days (Dearlove 1999, 9).

Moreover, Richard did not only focus on establishing businesses in a singular industry and developed consequently a cross-industrial entrepreneurial expertise. Branson refers to the foundation for this skill as follows: "If you can run one business well you can run any business“ (Branson in Hopkins 2005, 102). Still, one might wonder how Richard Branson can continuously separate the good business opportunities from the bad ones (Jackson 1998, 7) in making investment decisions?!

Richard’s first secret is the number of business proposals he screens. In general, he skims through more than fifty proposals per week of which most are rejected out of hand. Still, when he accepts one, very often it develops into success story (Dearlove 1999, 115). In applying joint statements by Raiffa, Hammond and Keeney (1998) on decision-making, it can be concluded that the underlying principles behind a perfect decision are to choose from many alternatives,

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¹ In the following I am addressing Richard Branson by his first name as he is generally addressed this way by employees and the public (Dearlove 1999, 72)