Business Stripped Bare

by Richard Branson

  Burt Rutan is an engineering genius, years ahead of his time. Do you remember Voyager, a plane that looked like a flying catamaran and flew around the world on a single tank of fuel in 1986? That was Burt's design. It was the largest all-composite aeroplane ever built, and the father of much of Scaled Composites' later work and of SpaceShipTwo. That plane was woven from glass, graphite and aramid, and bonded with epoxies and resins. Once heated in an autoclave, the compound became immensely strong and far lighter than pressed aluminium.

  SpaceShipOne was constructed from equally exotic materials. In fact, there was very little about its design, fabric, execution and flight behaviour that wasn't exotic. Take the engine: a revolutionary rocket-motor design that will be used in SpaceShipTwo, and one without which commercial space tourism simply wouldn't be possible for us.

  It was Burt's unique take on an old idea, of course: a dual-propellant system with a liquid oxidiser and a solid fuel. The solid fuel lines the case of the rocket. The liquid oxidizer is injected at the head of the motor and then ignited. The surface of the solid fuel reacts, combusts and turns to gas. And because the propellants are separated they cannot mix in the event of a leak. Consequently, they cannot explode. Most serious systems failures on rockets over the years have been fatal. Not so here: Burt's spaceships are very failure-tolerant.

  And they're cheap. Once all the engineering and design has been done, cranking them out on a production line is a relatively simple business. The solid fuel is rubber. Once the igniter motor starts the rubber burning, nitrous oxide is added under pressure, producing a flame. The gas expands through the nozzle and provides instant thrust.

  The rocket motor will give us just enough push to tip the craft into suborbit. After this the motor shuts down, and the spaceship coasts into space for a few minutes. It reaches the top of its arc and then starts to fall back down again. Just like tossing your keys in the air, once they reach the top, they start to come down.

  And another lovely thing about this engine. It's green. Well green compared to any other form of rocketry from the ground. Fly into space with Virgin Galactic and we'll be releasing less CO2 than the equivalent of a person flying from London to New York and back on an upper-class ticket. NASA's Space Shuttle has the same environmental output as the population of New York over the average weekend!

  Mike Melvill, a long-time friend and associate of Burt, was the pilot as SpaceShipOne, tethered to its mother ship White Knight, took off from Mojave Airport's Civilian Aerospace Test Center on 29 September 2004. It was a shaky ride, which required brilliant skills from the pilot. SS1 reached its apogee of 337,600 feet, or 103km. This was space.

  On 4 October 2004, SS1, with test pilot Brian Binnie at the controls, was launched from its mother ship and soared into suborbit, reaching 367,442 feet above the Earth. For Binnie, it was a flight and a day to remember for the rest of his life. He had become an astronaut.

  For Burt Rutan, it was the culmination of his life's work. SS1 had won the Ansari X Prize.

  At Virgin, we believed the success of this tiny spacecraft revealed commercial possibilities, and so we decided to license the technology of SS1 and its mother ship, White Knight.

  On 27 July 2005, at Oshkosh, Wisconsin, Burt and I announced the signing of an agreement to form a new business. It was agreed that the new company would own all the designs of SS2 and the White Knight Two launch systems that were being developed at Scaled Composites. The new business, the Spaceship Company, would be jointly owned by Virgin and Scaled. Burt's company would undertake all the research, development, testing and certification of the two craft, with Burt heading up the technical development team.

  I believe Virgin's work with Paul Allen and with Scaled Composites is a great example of capital and inventiveness working together. From day one, we have, every one of us, been singing from the same song sheet. Our symbiosis is nigh on perfect. Burt's genius is being challenged and stretched and will be well rewarded, even as our investment of capital produces a fantastic return. I think – setting aside the huge financial risks involved in doing anything new – the relative ease of doing business in this sector is due partly to the environment; the enthusiasm is tremendous. I also think it has to do with the fact that Virgin considers everyone involved, regardless of their capitalisation, as an entrepreneur. We're all, in our own way, moving into unknown territory, and so we're all sharing the same experience.

  The commercial success of White Knight Two and SS2 will open doors for our business. A single shuttle mission can carry 23,000kg into orbit at a cost of around $450 million. We are working towards the day when White Knight Two will be able to take 12,500kg of payload to 50,000ft, and then blast it into low Earth orbit. This will give it the highest drop capability in the world, and opens up a whole array of commercial possibilities for localised weather satellites, carbon-emission measurement and cheaper zero-gravity training for tomorrow's astronauts. In the future, SpaceShipTwo and its successors may be able to take payloads further out into space. While Virgin Galactic must concentrate on its original plan, these are all options for our business to grow its revenues and technology base.

  While I want to take nothing at all away from the importance of prizes, I'm glad that in this instance, we chose to develop a company, rather than sponsor a cup. I think this emerging market benefits from Virgin's spirit of branded market capitalism. Virgin brings the public on board, it brings serious capital into play, and it keeps the field inclined towards small entrepreneurial ideas. We stand to make money by doing good, and in business, things don't get much better. And believe me, cheap access to space matters enormously if humankind is to have any hope of solving its problems here on Earth.

  Even the most rarefied and exotic-sounding business environment works to familiar principles. Once our systems are proven, and our first space travellers are talking enthusiastically about their experiences, I believe the floodgates will open. A major reduction in costs will come when the insurance industry sees how safe space travel is becoming. More venture capitalists will sense that there is a buck or two to be made; their funds will, in turn, support further expansion. We might even see some commercial space companies listed on the New York Stock Exchange or in London.

  Frankly, space – outer space – is there for the taking. The risks of failure are high and you will need to churn ideas at high speed to attract funding. On the other hand, there are plenty of ideas to explore. Materials science and biotechnology are both throwing up possibilities faster than businesses can find applications for them, so an appetite for learning is vital if you are to take advantage of new opportunities in these areas. That, in turn, requires you to take a real interest in people, and what they're up to, and how you might be able to help. You are not going to strike gold in this sector on your own.

  Reality shows about business are becoming much more popular. Dragons' Den, in particular, makes excellent viewing, not least because it focuses on the more exciting side of business – coming up with, assessing and testing new ideas. The business panel is comprised of successful millionaires, and while the programme makes some token gestures towards how scary these people are, I think it's pretty clear to everyone that they're a courteous, lively bunch who bring a sense of adventure to their work. Some contestants are well prepared and have worked out their pitches; others are thrown to the Dragons, gobbled up and spat out. But it's a wonderfully positive show: it's amazing the number of interesting ideas and schemes that people come up with.

  At a meeting in Downing Street a while ago, I was asked by some emerging Russian business leaders if I could help with some informal education about the practical aspects of capitalism. I scribbled on a bit of paper: 'Russian Dragons' Den: Must Launch'. As I walked along Downing Street after the meeting, a Times newspaper photographer about sixty to seventy feet away snapped the bit of paper and then blew it up. This ended up headlined 'BRANSON TO CONSIDER LAUNCHING DRAGONS' DEN IN RUSSIA'. I still think it's a good idea – but I'm sure the BBC, wh
o commission the show, are on to it.

  Everywhere I go, I'm deluged with business ideas. A few years ago I would sit with a pile of business ideas in front of me and work my way through them. For example, there was a charming offer from a Spanish gentleman, written in perfect English. He told me that he would like to work with me to create Virgin White – a washing powder. He reckoned this would be a wonderful product and, of course, he might have been right.

  Some of the proposals we get are brilliantly thought-out, down to the last detail, and offer us a good share of the market. Others are simply handwritten scribbles, often marked 'Private and Confidential', saying basically, 'Dear Mr Branson. I have had this idea for a great product which you might like to launch – it is Virgin Tomato Soup in a tin can. I think it would be a very popular product. I look forward to hearing from you.' What can you say about that? That Mr Heinz and Mr Campbell already have perfectly good products? I never like to be rude. I've looked back and discovered that we've had about a hundred proposals to set up – yes – Virgin White. So you might think your idea is original, but there are other people out there who might have been there before you.

  I never want to blunt anyone's passion or enthusiasm but over the last thirty-five years we have run the rule over almost every single idea you can think of. We are bombarded with ideas: some half baked – like Virgin Beans – some plain crusty – like Virgin Breadsticks – and, among them, some real ringing successes – such as Virgin Mobile.

  I've come to think of our search for ideas as 'Showgirls to Stem Cells'. Indeed, we have always looked at sex and health as being pretty fundamental parts of the Virgin brand.

  The ageing of the 'baby boomer' generation in a number of wealthier nations means that people can no longer expect their own national welfare systems to prop them up in terms of pensions and healthcare. In the UK, the National Health Service can only come under increasing strain. In the future, there's going to be a need for supplementary and supportive health services, which might deliver the extras and the non-life-threatening services that would give people a better quality of life. This isn't a political view, or even a business pitch. It's stark reality. The NHS can no longer be expected to do everything. There are too many of us, and it is simply unreasonable to expect a single organisation – however visionary – to adopt every single new procedure, however expensive, however rarefied, and roll it out to everyone. It's just not doable.

  This, anyway, is the big picture. Virgin's supportive role is quite modest but, we hope, targeted in a way that will support and sustain current public services. We want to offer non-urgent complementary services that combine physiotherapy, dentistry, optometry, diagnostic testing and scans. Given the surge in the number of fit and active people in their forties, fifties and sixties with a lot of disposable income who want to travel and see the world, it seems crazy not to offer them the opportunity to invest in their own well-being. It is an evolutionary step for us, too – to consider the healthcare of the first Virgin generation!

  In addition, and with the awareness that there are many regulatory issues and ethical ones to look into, we are exploring the highly contentious field of stem cell research. Stem cells could open up breakthroughs in treatment in years to come. As I jotted in my notebook: 'Stem cells are the essence of life. They have potential to develop into any other cells. Given the right conditions they can create not just a heart – a heart for you.'

  We've researched the harvesting of stem cells from the blood stem cells of human umbilical cords. We've set up a Virgin cell bank storing stem cells for forthcoming generations, and we've invested in a genetic testing service which might be able to predict certain conditions and diseases. I've spoken to several scientists at the cutting edge of this field, including the head of a company called ViaCell, a clinical-stage biotechnology company whose raft of experimental cellular medicines might one day beat cancer, neurological diseases, diabetes and muscular dystrophy. My view is that difficult ethical questions are there to be answered – again and again, if necessary, as the years go by and morals and fashions change – and that anything that can save lives in the future is certainly worth studying.

  Virgin – like all the best entrepreneurial businesses – is really looking for something fresh. If you think we're going to make millions together launching a washing powder, tomato soup or even three-legged women's tights (yes, we've had that: you tuck the spare leg into your underwear and use it if you ladder one of the other legs) then perhaps you need a different entrepreneur.

  The other thing you'll need – in spades – is luck. The business-school gurus tend to underplay this commodity, presumably because the power of chance undermines every other business rule they teach you. But trust me on this: luck is essential. There aren't many chief executives who admit to simply being in the right place at the right time. Yet the business world is littered with the broken careers of those who were in the right place at the wrong time and screwed up. Certainly Virgin Mobile – the fastest growing company in history to reach a billion-dollar turnover – was propelled by a huge slice of good fortune.

  But then, chance favours the prepared mind. Gary Player, the South African golfing master, used to say that the more he practised, the luckier he became. Yes, the rub of the green (or should that be the red?) played a significant part in Virgin Mobile's success. But never forget we doggedly stuck with our interest in mobile phones, and were constantly searching for the gap in the market. When a gaping canyon revealed itself, we were ready.

  Right now, the world could do with some luck. Climate change will be a serious business challenge for our lifetimes and well beyond. Companies are already starting to make major changes, but things aren't progressing nearly fast enough. We need advanced control technologies and clean energy alternatives to start delivering much sooner than we ever anticipated – and we haven't even developed a fraction of what we need: ultra-efficient water heaters, improved refrigeration and freezers, advanced building materials, heating, ventilation, insulation, cooling, rainwater harvesting . . .

  Some terrific products have already emerged. Smart windows that adapt and maintain comfortable temperatures. Super-efficient LED lighting. Energy-saving improvements in building design. Sensor technology to help us use scarce resources more wisely. Even a new breed of super-smart robots. (Bill Gates tells me this technology is as exciting as the nascent personal-computer industry was in the mid-1970s.) According to a Scientific American report in 2008, by 2055 a $1,000 personal computer will have as much processing power as all human brain power combined. By then we could probably do with the help.

  Then there are next-generation hybrid cars (the latest being encouraged by Peter Diamandis, the founder of the X Prize and now the Automotive X Prize) that emit less pollution. There are colonies of wind farms, on- and offshore, sea barrages and solar panels. There are technologies emerging to capture carbon from power stations. Parabolic mirrors, deployed in Africa's deserts, provide green electricity. There are huge investment programmes looking at biofuels such as cellulosic-based butanol that don't eat away at our vital food supplies. And many of these excellent schemes have been evaluated by Virgin's Investment Advisory Committee.

  In business, as in life, you can't afford to be afraid of doing the wrong thing. This book is littered with accounts of my and my colleagues' successes and mistakes. Virgin Fuel's first biofuel investment was in manufacturing plants that make ethanol from corn. Given what's happening to world food investment at the moment, we can all agree that that was going to be a non-starter! But as we saw, from that not-so-good idea, good ideas have grown. Remember: success in business never comes from inaction. Have I been lucky in business? You bet. But most people, most of the time, have the same amount of luck. It's what you do with it that counts.

  Innovation is what you get when you capitalise on luck, when you get up from behind your desk and go and see where ideas and people lead you.

  'It's idyllic here – would you mind passing me th
e sunblock?' I asked my wife, as we both lay sprawled out on our sunloungers. Joan and I were having a romantic anniversary break in the Maldives, and the Indian Ocean was a shimmering mirror of turquoise. It was wonderfully warm, with a gentle sea breeze, and the only sound was the lapping of the waves on the pure white lagoon sand.

  'There you go. You'll smell gorgeous with this one on,' she laughed as she handed me the bottle.

  It was a factor 30 organic coconut-based lotion and my arms, legs and tummy glistened after I applied it. Joan was right, I had acquired the aroma of a molten king-size Bounty bar.

  My novel wasn't very exciting – so I replaced my sunglasses to read the ingredients on the bottle instead. I'm always on the lookout for ideas and almost anything can kick-start your thinking. I began contemplating the irony of our globe. Here was one of the most beautiful places in the world – and over 80 per cent of it is less that one metre above mean sea level. Global warming and rising sea levels meant catastrophe for this piece of heaven on Earth. Was there a solution? Perhaps part of the answer lay in the bottle I was holding . . .