Since the start of their attempted merger in 1996, BA had wasted thousands of man-hours, not to mention tens of millions of pounds, on a hopeless scheme, more in tune with the 1970s view of the airline business than the modern world of deregulation, competition and low-cost airlines. Rod Eddington wisely bit the bullet and, instead of trying to create a monopoly to get out of difficulties, announced the ‘Future Size and Shape’ project to restructure BA.
One of the things I’ve learned over my years in business is that, once you have a great product, it is essential to protect its reputation with vigilance. It’s not just a question of getting it into the marketplace. As a result, every day I receive a bundle of press cuttings – everything that mentions Virgin. These – and staff letters – are the first things I read in the morning. When I launched the airline, I realised that I would have to use myself to raise the profile of Virgin Atlantic and build the value of the brand. Most companies don’t acknowledge the press and have a tiny press office tucked away out of sight. If an inaccurate story appears in the press and is allowed to run for more than one issue of the paper, it becomes fact. Then, every time your product is mentioned, this same story will be repeated.
My reputation has been threatened on two major occasions – first by British Airways, which I’ve covered in detail, and second by Guy Snowden and his company GTECH, the driving force behind the creation of Camelot, which won the franchise to run the British National Lottery. For both companies I was a spanner in the works, costing them millions of pounds in lost earnings.
The GTECH incident was a particularly crucial one in terms of reputation. I met Guy Snowden in 1993 when the British Government had finally agreed to go ahead with the National Lottery. Various commercial consortia were beginning to form, but I felt strongly that the Lottery should be run by a company that would donate all the profits to charity. This would be possible because it would be a monopoly with no risk involved at all. I had asked John Jackson, with whom I had worked on the Healthcare Foundation when he was chief executive of Body Shop, and with whom I had launched Mates condoms, to pull together our charitable bid. GTECH was the leading supplier of lottery equipment, so we thought that we should meet them to see whether they would be interested in supplying us in the event that their consortium failed to win the contract.
John Jackson and I met with Guy Snowden for lunch on 24 September. The conversation we had has since become the stuff of legal legend. After we reached a stalemate, in that Guy Snowden didn’t want to quote for supplying equipment to us and I didn’t want to join his consortium, there was a pause. Then Snowden pointed out to us that if we went ahead with our bid it would cost the GTECH consortium millions of pounds, since they would have to reduce the percentage they were going to charge as the operators from the 15 per cent of turnover mentioned in the government guidelines to 13 per cent and possibly lower. Assuming that the annual sales of Lottery tickets reached £4 billion (which they did), each percentage reduction of the operators’ slice was worth £40 million a year. There was a great deal of money at stake.
We were sitting in the conservatory in the garden at 11 Holland Park, and I noticed that Snowden began to sweat. He shifted in his seat and looked at me.
‘I do not quite know how to phrase this, Richard.’
I looked across at him, wondering what he was going to say.
‘There’s always a bottom line. I will get to the point. In what way can we help you, Richard?’
I didn’t know what to say. Snowden clarified his intentions.
‘I mean, how can we help you personally?’
My mind reeled at the question. I was being offered a bribe.
‘What on earth do you mean?’ I said, astonished and angry and trying to give him the chance to stop. But he didn’t.
‘Everybody needs something in life,’ Snowden said.
‘Thank you,’ I answered. ‘I’m quite successful. I only need one breakfast, one lunch and one dinner a day. The only way you could have helped was by providing technical services for our bid.’
And with that I stood up and left the conservatory. I wanted no further part in this man’s world. While John and I were trying to pull together a bid for the National Lottery that was intended to give many millions of pounds to charity, this man was trying to bribe me to stand aside and enable his bid to go through, which, as well as giving less money to charity, would simultaneously enrich him and his company.
I bounded down the stairs and into the loo. There I scribbled the words he had used on to a piece of paper. I had never been offered a bribe before. Then I went back upstairs, and John and I ushered Snowden out of the house.
‘I wasn’t mistaken, was I?’ I asked John. ‘That was a bribe, wasn’t it?’
‘It most certainly was,’ John told me.
Later, John told me how he nearly fell off his chair when Guy Snowden said those words. To cut a long story short, in the court case that ensued, the jury found in my favour against Guy Snowden and GTECH. In his summing-up, the late George Carman QC pointed out to the court that, above any commercial success one might enjoy, one’s reputation for honesty is the most important thing. Guy Snowden had ‘picked the wrong man, said the wrong thing, in the wrong place at the wrong time’.
I decided in 1999 when the licence for the National Lottery again came up for tender that I would bid once more with a not-for-profit consortium to take over the Lottery. I was convinced that New Labour’s commitment to the not-for-profit approach we had taken in 1993 would ultimately be honoured. As before, most of my close Virgin advisers tried to persuade me not to bid because of the risk to the brand that a fight with Camelot – which few of them believed we could win – could do. Nonetheless, I felt so passionately about this that I decided to go ahead, and kicked things off by picking up the phone to my old friend Simon Burridge. He had spent the intervening years at the J Walter Thompson advertising agency as managing director, but had lost none of his enthusiasm for either the principle of a People’s Lottery or the inevitable fight with Camelot that would follow the decision. Simon was not a man to mince words: ‘I’ve been following things at Camelot very closely, Richard, and all our predictions in the 1993 bid are coming true. Sales are falling like a stone, the GTECH technology is crap, their games are unexciting and with the right suppliers I think we can do it!’
He set to work immediately and brought together everybody from Anne Leach and John Jackson right the way through to Colin Howes at Harbottle & Lewis. The only exception to the previous team was Will Whitehorn, who again felt strongly that there should be a clear demarcation between Virgin and what was to become known this time round as the People’s Lottery. We were in the middle of investing in a whole new range of businesses, which, with the exception of the airline, might not see profits for the first couple of years. Will told me that he thought they would really go for the jugular and try to destroy my business reputation. He wanted to concentrate on fighting that bigger picture – the PR for the group and the brand – and suggested instead using an outside PR agency for the People’s Lottery.
And so we assembled a new team of suppliers, agencies and people, built around the core team from the 1993 bid. In all, we ended up with more than twenty suppliers, from Energis and Microsoft to J Walter Thompson, JP Morgan and our previous rivals, AWI. Camelot, for its part, had brought in the Post Office as a shareholder to replace the now disgraced GTECH, although it still intended to bid with its equipment. Camelot had managed to improve one thing during their otherwise lacklustre six years: they had brought in the formidable Diane Thompson as chief executive. Diane was a good example of the new generation of senior female executives who began to make an impact on Britain’s staid boardrooms in the 1990s. I relished the idea of a fight with her but, having heard her on BBC Radio 4’s highly respected Today programme several times, giving John Humphrys and Jim Naughtie a run for their money, I knew she would not be a pushover.
At the time, I was freshly back from our fin
al, failed, round-the-world balloon attempt of Christmas 1998, and I didn’t appreciate one crucial difference between the Camelot of 1993 and that of 1999. Having won the bid to run the Lottery and run it for six years, they were prepared to do anything to keep it. More importantly, because most people thought they would win it again, we ended up being the only rival bidder, which meant they (and their friends) could concentrate all their firepower against us – and me personally.
The end game played itself out in the summer of 2000, while we were on our family holiday on Necker. A fax arrived from the boss of the Lottery Commission, Dame Helena Shovelton, telling us that we had not won, but we had sort of won. We were given a period of exclusivity to negotiate a deal. If we could guarantee enough money to cover any potential downside and clear up a few points, then the Lottery would be ours.
If only it had been that simple. Simon and John saw the danger signs fairly early on in the process and were right in predicting that Camelot could take a judicial review against her decision. They did. And, what’s more, they won it, which then threw the entire process into chaos that autumn, with the danger of there being no time to hand over the Lottery to us. A very bitter Dame Helena resigned and was replaced by Terry Burns, a former Whitehall mandarin. In a few short weeks Burns reversed Dame Helena’s entire approach to the Lottery, and came to the (I felt) ludicrous conclusion that the licence should go to Camelot.
None of us could believe it and, as the weeks went on into 2001, it became clear that the British public could not believe it either: they began to desert Camelot in their thousands. By the time 11 September shook the world, sales were falling at a rate of 20 per cent per year. I took no satisfaction from this, because, of course, it was not Camelot that suffered, but rather the many good causes – sport, the arts, charities and other organisations – that simply got less money.
Camelot’s new licence to run Britain’s National Lottery came into effect in January 2002, amid falling numbers of people playing. Diane Thompson, the chief executive, said that this was because people found it boring – how sad, that someone who has the job of making many millionaires a week can’t make it exciting.
It also emerged that Camelot had managed to win the renewal of their licence by pledging to raise £15 billion for good causes, but the government hadn’t asked them to guarantee this. Within a week of winning, Camelot were publicly looking for excuses as to why they wouldn’t raise anything like £15 billion. ‘We were distracted by the bidding process’ etc. etc. But it was too late. They had their licence. It was a staggering outcome and one for which I think the government should hang their heads in shame: they had pledged at the election that the Lottery would be run with all the profits going to good causes – and they’d reneged on that pledge.
* * *
The restructuring of Virgin Atlantic after the tragedy of 11 September really began to pay off in the years that followed and the confidence of the management was if anything enhanced by the ability of the airline to withstand the shocks that followed – the after-effects of the war in Afghanistan and the double whammy the following year of SARS in Asia and a second war in the Gulf. Virgin Atlantic truly came of age during these events and managed to return to profitability after April 2002, despite having lost nearly £100 million in the months that followed the Twin Towers tragedy.
We also launched our secret weapon in the so-called ‘battle of the beds’ with British Airways. In the summer of 2003, Virgin Atlantic unveiled its Upper Class Suite, which is the world’s only first class-style truly flat bed in a business class. It took off in every sense of the word and the summer of 2004 we were making significant in-roads into our rivals’ market share.
The project to create the beds had the usual Virgin characteristics. We took the brave move to design the unique product ourselves and the task fell to Joe Ferry, Virgin Atlantic’s head of design. He achieved the holy grail of airline seat manufacturers, which is to make a comfortable seat into a genuine bed through its unique flipping mechanism. The risk paid off, and Joe’s design won six of the world’s biggest industrial design awards during 2004 and had the effect of moving thousands of British Airways regular travellers to Virgin Atlantic.
As Virgin Atlantic continued to recover, I felt a great deal of unease about the ‘war on terror’. It had long been the desire of the so-called neo-conservatives in America to conduct a more interventionist role in the Middle East to ‘stabilise’ that region. By the autumn of 2002, it was clear that the Bush administration had taken a decision to intervene in Iraq regardless of what world opinion thought of the matter and, by early 2003, it was clear they would do it even if the UN did not back their decision.
I found the whole episode deeply depressing and had a real foreboding about what I believe was an unjustified invasion. Apart from the obvious human cost of a conflict, I was sceptical about the weapons of mass destruction and could not fathom why the US government would possibly find Iraq so easy to democratise when so many others had failed before. George Bush continued to state on television, and at press conferences, that ‘War was a necessary evil’ – it is my belief that most ‘necessary evils’ are far more evil than necessary. Though, after 11 September, Will Whitehorn had counselled us against public opposition to the Bush administration over the issue of Iraq on the basis that it was inevitable. By February 2003 I’d hatched a personal plan to try and persuade Saddam Hussein to stand down before the dogs of war were unleashed. With a heavy heart I called Nelson Mandela and followed this with this simple letter.
Dear Madiba
As always it was very good to talk to you. I thought I’d send you a very brief note setting out our discussion.
America and Britain have definitely decided to go to war. Inevitably there will be many civilian casualties.
I believe there may be only one way to stop a war in Iraq and I believe you may be the only person in the world to achieve it.
If Saddam Hussein could be persuaded to retire to Libya (or somewhere else), with full immunity, I do not believe it would be possible for America to press ahead with war. If he were to make this sacrifice to avoid his people going through yet more suffering he would enhance his reputation considerably. The personal alternative will be the fate of Noriega, Milosevic or worse.
Knowing your close relationship with President Qaddafi and the respect you are held in in Iraq you are perhaps the only person who could organise this.
I believe that you would have the credibility to persuade Saddam Hussein to step down. By flying out with you – to, say, Libya – he could leave with his head held high. It would be the best thing he could ever do for his people.
If it helps you I would be happy to send you a plane to take you there and back (hopefully via Libya!).
I’ll talk to you once you’ve spoken with Thabo.
Kind regards as always
Richard
It was a bold plan that might just have worked. But time was running out.
Nelson Mandela wanted me to get the approval of Kofi Annan, the United Nations Secretary General, and the blessing of his own President Thabo Mbeki. I wrote to Kofi Annan and followed up with a phone call. He gave the idea his full support. On 17 March we positioned two pilots and a Lear Jet in Johannesburg to take Mandela to Baghdad. We had managed to get the hostages out of Iraq some years before by sending Edward Heath. This time Nelson Mandela – the world’s most respected person – had spoken out strongly against the upcoming US invasion. If anybody could persuade Saddam it would be him. Enormous numbers of lives could be saved and injuries avoided.
Sadly time ran out and two days later events overtook us. On 19 March 2003 the US bombed Baghdad and the rest is history. There is nothing in my life that I regret more.
But what I realised from this experience – and from friends with vision, like Peter Gabriel – is that the world needed a group of elders – such as Nelson Mandela – who could step in on behalf of the world community in situations like this. I decided that,
over the next couple of years, I wanted to help bring together a group of individuals who could serve as global ‘Elders’ to deliver a voice to the people of the world.
In late 2003 Joan, Holly, I and some of the team from Virgin also had the wonderful opportunity to attend and help organise Madiba’s ‘46664’ concert in South Africa. Madiba was generous enough to use his prison number, 46664, as a symbol for hope in the fight against HIV/AIDS. Sitting next to him and his wonderful wife while listening to Peter Gabriel sing ‘Biko’ for the first time in South Africa was one of the most moving experiences of my life.
Before this concert, but not long after the war was over, I saw a microcosm of Iraq first hand when we took the first relief flight into Basra. Appropriately, it was piloted by Mike Abunalla, an Iraqi exile whose family had fled Iraq twenty-two years earlier. Our mission was to deliver over 60 tons of generously donated medical supplies to the hospitals of Basra which Saddam’s army had stripped bare in their rush northwards. During the flight we were all struck by the devastation of any infrastructure on the ground and the sheer emptiness and enormity of the country.
The whole project had been a remarkable co-operation between an Iraqi exile, Luay Shakarchy, who was based in the Midlands, in Birmingham, our own Jackie McQuillan and Air Marshal Brian Burridge. The spirit of co-operation between the British forces on the ground in Basra and a small team of operational staff from Virgin Atlantic was remarkable; in a matter of weeks they managed to open Basra Airport for a 747, getting this much needed aid into the country. I spent a lot of time talking to the servicemen and women in Basra and I could tell that many of the British forces had a strong sense of foreboding regarding the situation unfolding with their American counterparts in the north of the country. How true that sense of foreboding turned out to be.
Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way Page 41
