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  It's easy – too easy, in fact – to relinquish your responsibility for your idea to experts. This is almost always a mistake, because experts are only experts in their field. They're not experts in your idea. At this stage, the only person qualified to assess your idea is you.

  Your initial business ideas may lack detail. That's fine – but it doesn't give experts anything to work with. Ask them for their opinion, and they'll give you something back that's generic, predictable and fairly useless. I know that if I present an unready idea to experts such as Ernst & Young or McKinsey, they will advise me how much money I stand to lose. If, on the other hand, I go to PricewaterhouseCoopers or KPMG with the same idea, they could well tell me how much I'm going to make. In neither case do I learn anything useful about my idea.

  You need to flesh out your own ideas. You need to do your own research. You need to take responsibility for how you plan to turn an idea into action. That way, when you approach the experts – the accountants, the legal brains – they have something to get their teeth into.

  Virgin's move into the finance sector astonished many, and still raises an incredulous eyebrow among some politicians and heads of industry. Finance, surely, is sacrosanct: an impossibly arcane and rarefied practice – the province of experts?

  Our success in the financial sector has come from asking very clear questions of ourselves, and then (and only then) surrounding ourselves with experts who are demons at cutting through the verbiage to the relevant details. An expert who makes things more complicated isn't doing their job right – and frankly, this is probably your fault. An expert should make things simpler. An expert should give you twenty-twenty vision. Given the right tools to do her job, she is a marvel to behold.

  Enter Jayne-Anne Gadhia.

  Jayne-Anne qualified as a chartered accountant with Ernst & Young and went to work with Norwich Union, the insurance and pensions giant. She became one of their rising stars, working in unit trusts and PEPs, a tax-efficient personal savings product. Now she was looking for her next move.

  One day in 1994 she took the train to London, in time for lunch with Alastair Gornall, a PR agent who ran Consolidated Communications. On the train, she flicked through a copy of Hello!. There was an article and colour photographs featuring a bearded and grinning Richard Branson talking about the Virgin Group.

  'I read that article and I thought, Gosh, it's so different from Norwich Union; it must be fantastic to work for a guy like that,' she later told me.

  She mentioned the article to Alastair. Alastair was a friend of Rowan Gormley, who had just joined Virgin and was the brains behind a joint venture project between Norwich Union and Virgin. It was called Virgin Direct.

  Jayne-Anne came to see me for a meeting at Holland Park. There was a lot of commotion because we'd just set up Virgin Cola. She recalls ringing the doorbell at Holland Park and having to find her own way around. She wandered up the stairs and found me working in one of the bedrooms. I led her into the snooker room where her boss Philip Scott had brought along all the papers to review. We worked on the plans to launch Virgin Direct in the snooker room, then we went back downstairs. Philip had a quick gin and tonic and left to catch his train.

  I shook my head and said to Jayne-Anne: 'How life moves. One day we're dealing with the Sex Pistols, the next day we're dealing with pensions.' I pointed to the chair Philip had been sitting in. 'Sid Vicious was sitting there not so long ago.'

  'Really?'

  'Yeah. You see that corner there?'

  'Yes?'

  'That's where he threw up.'

  We signed the deal to set up Virgin Direct on 19 December 1994, with Norwich Union and Virgin both putting in £2 million.

  We worked hard to get the deal done, the business launched and all the regulatory approvals in place, but we still managed to have some proper fun. I think that's what Jayne-Anne liked about Virgin.

  Virgin Direct in December 1994 was a new player because it was one of the first financial service companies to sell products over the telephone. Jayne-Anne said to me that approval from LAUTRO (the Life Assurance and Unit Trust Regulatory Organisation) and IMRO (the Investment Management Regulatory Organisation) would take months and months. I thought at first she was talking about her Italian cousins. I said: 'I can't understand this, Jayne-Anne. This is a relatively small company – we launched an airline in ninety days.'

  But we pushed on and the combination of Norwich Union, Jayne-Anne and Virgin gave us enough clout to get the job done on time.

  We needed a new computer system and we approached the big players. IBM estimated it would cost £7 million and would take many months to build. We didn't have that kind of money and we didn't have that amount of time. So one of Jayne-Anne's colleagues, Kevin Revell, and a computing friend, set up the first system for Virgin Direct in his attic in Norwich. In all, it cost us £17,000. On Sunday 5 March 1995, Virgin Direct was launched on that system, with sixty people taking the telephone calls at Discovery House, Whiting Road, which is still the office of Virgin Money. I went up to Norwich for the launch. The office looked pristine, it sported the new signage, and all the computers were working. The boss, Rowan Gormley, wasn't there as he was due to appear on the BBC's Money Programme to explain our arrival on the marketplace. So I took the lead: I jumped on a desk and shook open a bottle of bubbly – like they do on the Formula One rostrum. It fizzed up brilliantly into the air, over all the cheering staff and over four of the PCs. The computers started fizzling. Then they blew up.

  It was clear from day one that the Virgin brand was going to succeed in financial services. The staff were brilliant and worked their socks off. The £17,000 attic computer system became the prototype as we launched life insurance and pensions too.

  Norwich Union didn't have the appetite for building a bigger business, but Virgin Direct needed the capital to grow. So in 1997 Norwich Union sold its 50 per cent stake in Virgin Direct to AMP, the Australian life assurance business and owner of Pearl Assurance. AMP and Virgin became fifty–fifty joint venture partners. In November 1996 I wrote to George Turnbull of AMP, proposing 'a business plan to launch a basic mortgage first (together with a card) followed by a mass-market card'.

  The question was: how? Almost all of the UK's high street branches had approached me to talk about banking and financial services. They wanted to shelter under the umbrella of the Virgin brand. As simple as that. But Virgin wanted to do much more than stick their logo on someone else's product. Then, in 1997, I was contacted by the Royal Bank of Scotland, at the time being run by George Mathewson and Fred Goodwin. Finally, here was a company that wanted to innovate.

  The idea around the Virgin One account was revolutionary and simple – even I could get my head around it. It had originated in Australia where it was increasingly popular. It was about putting all of a customer's products together. At the end of each evening your net balance is charged interest. Most people have a separate mortgage, current account and savings, and you're paying interest on the whole mortgage. If you roll everything together, you'd have a lower negative balance and you could pay off your home loan more quickly.

  George Mathewson, a shrewd and canny Scot, went to see Jayne-Anne Gadhia in Norwich. He was enthusiastic but, at the same time, seemed reluctant to make a fuss about this great product.

  'You don't seem to want to shout about this,' Jayne-Anne observed.

  He replied that if it were successful, he would take half the profits; if not, nobody would know he had anything to do with it.

  But in fact George and his team were brilliant and our relationship is a long one that has lasted to this day (he advised us on our bid for Northern Rock). He said to the Virgin One team that he wanted us to build a business around what worked for customers. He admitted that if RBS could have done it themselves as a mainstream bank they would have, but they liked Virgin's culture of innovation and our history of delivering on our promises. In October 1997, the Virgin One account was launched internally to Virgin Grou
p staff, and then rolled out in 1998. I admit it was a difficult start because the UK public weren't used to the idea of putting all their eggs in one basket, however safe it might be. By October 1998, we had opened 2,000 Virgin One accounts. The following year we opened 9,000, and 15,000 the year after that. We were up and running.

  The dinner-party brigade became our best promoters. Doctors, lawyers and professional people were converting to its merits; they told their friends, and the idea began to spread through recommendation. We heard that people would take their Virgin One cards out at meals with friends and sell the idea. In business terms, this is pure gold. You can't buy this kind of advocacy. In Norwich, Virgin One recruited people who wanted to help the customer and make a difference – it was a huge part of the training. There were no stifling scripts to follow, or average talk-times to listen to. We just answered the questions. We hired people who believed – like we did – that Virgin was on a revolutionary crusade to change banking in the UK. One theme was 'uncommon people' – that those who worked with us and our customers were special because they were 'uncommon people'. We had baseball caps, T-shirts and jackets made for 1,500 staff and for customers, to trumpet our attitude of going the extra mile.

  In 2001, RBS could see this was a great business. They decided they wanted to buy 100 per cent of Virgin One. They already had 50 per cent, but the remaining part was held by Virgin Direct, which was a fifty–fifty joint venture between Virgin and AMP. I owned a quarter of this and there was a lot of discussion about the shareholding. I had lunch with Fred Goodwin and Fred was quite clear with me: he didn't have a huge amount of time for AMP.

  I wrote in one of my notebooks: 'Fred Goodwin. "Don't want to come into three-way venture. Try to buy out other 50 per cent of Virgin One. Come up with basis to take out 50 per cent. Somehow chemistry: us and AMP don't get on. Have relationship with CGNU."'

  On a nearby page I added: 'A game of Monopoly. I used to enjoy playing Monopoly as a child. Recently I began to realise that I've never stopped. Mortgaging my hotels to keep Euston Station. Mortgaging my houses to acquire the Utilities. Borrowing from the bank to pay for everything! Selling everything to pay the bank!'

  We eventually sorted out a deal with AMP. Once it was announced I phoned Jayne-Anne.

  'I'm really sorry.'

  'About what?'

  'About losing you. I'm phoning to say how sad I am today.'

  'Sorry? Why?' she said. 'I've just got a very decent cheque and so have my team.'

  'Well, I feel as if I'm selling you and the guys along with all of the furniture. I've signed a clause with the Royal Bank saying we can't go into mortgages in the UK for the next two years. Look: if you don't like corporate life in two years' time, come back to us.'

  Two years to the day later, I phoned. 'Are you happy?'

  My call had surprised her, and pleased her, but – yes – she was happy. She was doing extremely well with Sir Fred, helping develop the One account, and the First Active account. She was now responsible for all of RBS's consumer finance in the direct market – and later the whole mortgage business in the UK. She was such a fit and capable person: it occurred to me that she should be running a bank.

  She kept in touch and on 19 December 2006 – the anniversary of launching Virgin Direct – she left RBS, departing on good terms. We were keen to get her back to Virgin to take hold of our money business. Luckily Gordon managed to persuade her to return after a short rest, and she rejoined in March 2007. I phoned her from Necker: 'Jayne-Anne – welcome home.'

  By then Virgin Direct had evolved into Virgin Money – a joint venture model offering products with several different partners, whilst the business is owned by our group. Virgin Money undertakes the marketing and designs the products – credit cards, savings and investments, life and general insurance – while our partners provide the rest. (Bank of America operate our credit cards, which means the cards are on Bank of America's balance sheets, not Virgin's!) But (possibly fortunately given the unfurling of the mortgage crisis) we hadn't been able to get back into the mortgage business since selling the One account. I asked Jayne-Anne and the team she brought with her to re-establish the One account on another level to fill the gap left by all the struggling mortgage lenders. It was this springboard that gave us the ability to make a proposal for Northern Rock – which I'll talk about in the next section.

  In this chapter I've tried to demonstrate how Virgin has delivered on some of its best ideas. I've tried to illustrate the importance of good communications and attention to detail. I've stressed how vital it is to think clearly, reducing a business to its essentials. Do not underestimate the effort required to do this. It is very hard to look outside your own industry, and think the way a customer thinks, particularly if, as is likely, your life's efforts are devoted to one operation, in one sector.

  Virgin's brand values of informality and plain speaking are incredibly useful to us in our day-to-day delivery of business, because they keep us grounded. They stop us from losing touch. They prevent us from ever, in our wildest nightmares, contemplating anything as self-defeating as 'confusion marketing'.

  Remember: complexity is your enemy. Any fool can make something complicated. It is hard to make something simple. Use experts wisely. Direct them. Give them work to do. They're not there to hold your hand. Ignore flak. Remember, everyone has an agenda, so the advice you receive from outside your trusted circle is not just to benefit you. Almost all of it will be well meant, but even the best of such advice needs interpreting.

  Keep a cool head. You're in business to deliver change, and if you succeed, the chances that no one will get hurt are virtually zero. This is the rough and tumble of business. Be sportsmanlike, play to win, and stay friends with people wherever possible. If you do fall out with someone, ring them a year later and take them out to dinner. Befriend your enemies.

  Engage your emotions at work. Your instincts and emotions are there to help you. They are there to make things easier. For me, business is a 'gut feeling', and if it ever ceased to be so, I think I would give it up tomorrow. By 'gut feeling', I mean that I believe I've developed a natural aptitude, tempered by huge amounts of experience, that tends to point me in the right direction rather than the wrong one. As a result, it also gives me the confidence to make better decisions.

  My plans acquire detail as I test them against questions that on the face of it are really quite simple – and more to do with emotions than figures. If we create the best health club in town, will existing gym users go to all the bother of transferring their membership to us? If the answer is 'Yes', then we will give it a go and see if it works.

  This is the point where being a well-funded company puts you at a tremendous advantage. Big businesses can afford to do this sort of thing. The good news for small businesses is that the big ones rarely bother to use their advantage to its maximum. Why? Because they've forgotten how to think like entrepreneurs. Worse still: many of them have forgotten how entrepreneurs feel.

  4

  Learning from Mistakes and Setbacks

  Damage Report

  In 1969 I made the biggest mistake of my life. It was an event referred to as recently as late 2007 by the Liberal Democrat MP Vince Cable in the House of Commons during Virgin Money's bid for the Northern Rock bank. He said, when speaking under UK parliamentary privilege, that I was not a fit person to run a bank. In the UK, nearly forty years after a lapse in judgement, I was still being pilloried.

  I was nineteen years old and driving a shipment of records to Belgium when I stumbled on the fact that records bought in Great Britain that were intended for export were not subject to purchase tax. So I bought the records I needed, pretended they were for export, and then sold them to British customers. The whole ploy involved driving four Transit vans loaded with records to Dover, taking them to France, then returning on the next ferry with the records still on board. It was not only illegal, it was really pretty stupid. In May 1969, I was caught red-handed by HM Customs & Ex
cise, put in a cell overnight and charged under Section 301 of the Customs & Excise Act 1952. It nearly killed off my entrepreneurial dreams; thankfully it didn't – but it did teach me a hard lesson about never doing anything illegal or unethical ever again. I hadn't fully appreciated the seriousness of what we were doing or the potential damage it could do to my reputation. It was my mum and dad who bailed me out, putting up their home as security. In the end, customs agreed not to press charges as long as I paid back three times the tax that had not been paid – around £60,000 – and I was spared a criminal record. What I didn't know at the time was that the big record retailers were pulling the same stunt in a more systematic way, and they too soon ran into the same problem.