3
Delivery

Special Delivery

Right now, I'm sitting in my daughter's home in London and the house has been busy all morning with visitors coming in to see me and talk about Virgin. I've already had several meetings with financiers, our bankers and a Swedish television crew making a programme about Britain. I've also taken phone calls from many of our managing directors and business partners. I've asked Nicola, my personal assistant, and other Virgin Management Limited people to fire off a volley of emails. There's been a list of invitations approved for a media launch. And last night, after flying in from Necker Island, I had a late-night supper with the singer Christina Aguilera, who told me how baby Max is doing and her latest music plans. I'm flying off to see the French president later this afternoon. Tomorrow we're heading to Mumbai to meet some Indian business figures from Tata, the industrial group, and then on to Japan where I'm speaking at an investment conference. We never sit around for long — unless we're on holiday. We thrive on ideas, but our day-to-day business is about delivery.

Good delivery depends upon many things. Two of the most important elements are good communication, and attention to detail. Neither of these essentials is difficult to understand or implement, so, naturally, they're often the first things we forget.

In the early days of Virgin Atlantic, I used to write regularly to all our people, telling them what was happening in the business. I'd jot down my thoughts in my notebook, make a few corrections, get someone to sort out my spelling mistakes and send it out to everyone. I thought letter writing was an important way of communicating.

This wasn't so easy as we grew larger, and because of Virgin's success and my subsequent fame, anything I wrote inevitably hit the press as a news story. So it became difficult to pen the unrestrained letters of the early days. Nevertheless, it is important for people running companies to write a regular letter to keep their staff in touch. And a personal letter sent to someone's home is, I think, still very much more appreciated than an email. Be brave: hand out your email address and your phone number. People aren't stupid, they know not to misuse it or badger you – and by doing so, you will be giving the people who work for you a massive psychological boost. In any event, regular communication by the leadership team is a must in any service business. So keep talking and keep explaining.

I now have a team of people who meet once a week to go through every Virgin company, looking at figures, projections and income. They have a list of priorities, and a list of new projects. They make sure that the Virgin Group is running efficiently. This frees me up to dive in and out when necessary. They know if there is something urgent, they can phone me and I can then focus on the things that really need my personal input.

Don't waste your precious time. Phone calls and emails can eat your day. Don't let them. No one will think less of you for getting to the point. Because there are so many calls to make every day, I generally keep them very brief. And a short note to somebody is often quicker than a phone call. As the business has got bigger and spread across the globe, a lot is dealt with by short notes. However, I'm always willing to pick up the phone and talk directly to people if an issue needs resolving that way. There's no question that if you are trying to persuade someone to join you, invest with you, or make some changes, then it's important to speak to them directly and take the time so that they know what they must do. Face-to-face conversations are more efficient, and videoconferencing will always come a poor second to a shared pot of tea.

Recently I had lunch with Raymond Blanc. He's the owner and renowned chef of Le Manoir aux Quat'Saisons in Oxfordshire. The reason Le Manoir is so successful is that Raymond makes sure that every tiny bit of detail is carefully thought through. If you're running an airline, a restaurant or any other kind of company, it's the attention to detail that really defines great business delivery.

I'd advise every owner of a company to keep a notebook and jot down the things that need doing. If you're listening to staff or customers, then write down the main points. If you're visiting a factory or touring a new site or partying with your staff, use the notebook. When you're busy with a lot going on around you, if you don't write things down, I doubt you'll be able to remember one out of twenty items the next day.

Let me give you an example. The main reason why staff become frustrated is that the same problems and complaints keep cropping up and never seem to get properly sorted. On a recent Virgin Atlantic flight someone told me that the sugar had run out, not once, but on two or three occasions. Why were we not stocking more sugar? And why were we overstocking vegetarian dishes, so that people who didn't want this had no other option? These weren't major problems, and they were easily fixed, but someone somewhere has to make the call, the very next day, to sort them out. Otherwise we become the no-sugar airline. The healthy-option airline. Worst of all, we're the not-really-listening airline. And there are enough of them out there already.

I carry a notebook everywhere I go. Every blue moon I wax philosophical. But most of my entries are like this one, and these are the sort of dull, dreary, absolutely essential entries that everyone should be capable of writing, but so few do: 'Dirty carpets. Fluff. Areas around bow dirty. Equipment: stainless steel, grotty. Choice of menu disappointing – back from Miami, prawns then lobster (as a main course) in Upper Class. Chicken curry very bland. Chicken should be cut in chunks. Rice pretty dry. No Stilton available on cheeseboard.'

I also noted that the duty-free trolley was going up and down the aisles without making any sales. I looked at the in-flight service report. Sure enough: no sales. Something had to be done either to encourage the passengers or to improve the sales opportunities (more likely, both), or get rid of the trolley altogether and save the weight.

But what's most revealing now – and most useful to you if you really are reading this for business lessons – is this note: 'Staff desperate for someone to listen.'

Under this I jotted down an idea: 'Make sure flight staff reports are actioned IMMEDIATELY,' and I'm pleased to say that they now are, and onboard staff get the action and feedback they need.

When we launched our routes to Japan, I knew that we needed Virgin Atlantic to pay particular attention to cultural differences and to the Japanese sense of respect and formality, without spoiling our offering. It's a fine balancing act. On the inaugural flight I added some more thoughts: 'Need slippers in Upper Class, not socks. Need Japanese beers. Only one kind of newspaper from London: English. Need Japanese too. Japanese tea from London, not good. Japanese food from London. Tastes good but must be better presented. Looks like fish and chips. Saucers for Japanese teacups.'

I think company owners and chairmen should get out from behind their desks and go and sample their own products as often as possible. I do see many bosses doing their rounds speaking to staff, but they never write the details down. They will never, ever get anything sorted. And month by month, year by year, they will suffer the consequences.

*

Imagine trying to do a good job in the teeth of official opposition. Imagine being told constantly to cut corners. Imagine being rewarded for good delivery by having your business taken away from you and redistributed. Imagine winning market share and then being prevented from delivering more of your product.

In short, imagine the British government's railway regulatory system!

Communication and attention to detail can make your business run more smoothly, but saying this doesn't nearly convey their importance. As I think you'll see from the following account, good communications and attention to detail were what enabled us to do business at all, in what has to be one of the toughest sectors we've ever entered.

In January 1997, when we took over the first of our two railway franchises, we made a public promise to usher in new trains and lead a 'red revolution' for the travelling public – on the busiest train lines in Europe. It was my personal commitment to deliver on this. It has taken some time. Eventually, we were voted the UK's best train company in January 2008 by the Institute of Customer Service. This, in my opinion, was rather overdue, but gratefully received, nonetheless! Virgin Trains also topped the 'Passenger Focus' National Passenger Survey with a score of 86 per cent for customer satisfaction. And Travel Week, a trade magazine, declared Virgin Trains the best railway company, as voted for by the travel trade and travel agents. This string of tributes is principally down to all the Virgin Trains people who work day in, day out, often in fairly arduous conditions. It's also a great accolade for Tony Collins, the CEO of Virgin Trains, who has been a champion for the customer and staff, but a pragmatist about how difficult it is to run a railway.

I'm the kind of person – as most people will know from my ballooning escapades – who is willing to stick my neck out and take risks. When we launched the West Coast Main Line franchise on 9 March 1997, we said we would replace the whole fleet, and improve services and connections. We also promised new diesel Voyager trains on the CrossCountry networks which criss-crossed Britain. But it would take a number of years before we could deliver this. We had inherited the worst part of the system and to start with we had to make do with a lot of 40-year-old rolling stock and clapped-out engines inherited from British Rail. Some of the rolling stock was in a terrible state. My first action as proud owner of a new railway set was to sign a £10 million cheque so that we could get some spare parts to run the trains.

We steam-cleaned them, painted them and tarted them up as best we could. More than that, we kept them running, while promising our passengers a better service in future. It took time and a lot of pain and disruption. And we got a great deal of abuse from people who still didn't like the idea of the railways being deregulated and privatised after half a century of nationalisation.

The 401 miles of the West Coast Main Line from London Euston to Glasgow is one of the world's great railway journeys. As it heads north, the constant twists and turns of its gentle bends make it difficult for a train driver to build up a decent speed. Only tilting trains can counteract the terrain. It's really a misnomer to call it the West Coast Main Line because it touches the coastline only once, briefly, at a small strand near Morecambe Bay. It is an inland route, taking in concrete-encased Birmingham with its landscape of canals, factories and occasional dereliction, busy Midlands towns such as Crewe and Wolverhampton, and Border Uplands. In the 1920s, the opulent steam trains chugged out of King's Cross and Euston at 10 a.m. each day to race to the north. Virgin Trains was ambitious enough to try to re-create some of that lost glamour for the twenty-first century.

We felt we could transform Britain's rail network from the worst in Europe to one of the best. But for the Virgin brand not to be too damaged in the process, we would have to bring the public along with us. Innovation had to be the difference for Virgin Rail.

For the first few months of our franchise we examined all the technological possibilities. In May 1998 I flew out to Italy from London City airport to the Fiat Ferroviaria site in Turin, which is the train-making arm of Italy's largest private conglomerate. I saw the kind of stylish, well-constructed trains that we needed on the UK's dilapidated system. The innovation of tilting trains was explained to me, along with the complex relationship between tilt, speed and stability. Next day the journey from Turin to Rome was my first on a tilting Pendolino ETR 460. It was fast and smooth as it hit 150mph through the Piedmont countryside. When we returned from that trip I sat down with Will Whitehorn and the rest of the Virgin Trains team. I was wildly impressed, but I kept my head. I said: 'I want these trains to be the best there are – and the safest. I'd like us to look at what's available across Europe and elsewhere.'

As it turned out, I was right to be impressed: the Pendolino proved to be the best electric train anywhere, bar none. Its tilting system allows a skilled driver to control the train at speed with a huge element of safety. The trains can tilt by eight degrees on rail bends – you'll notice it, but it won't spill your coffee. An automatic warning system rings a bell in the driver's cab as he passes each trackside transponder. This sends a message to the driver saying it's safe to tilt, allowing him to increase the train speed from 85mph to 110mph. On straight stretches the permissible speed is 125mph – soon to be 135mph, and we built the trains to be capable of over 140mph, ready for the future if the track is further improved. It is the driver who has the feel of the train and learns its limits – but if the driver ignores any warnings the computer automatically applies the brakes.

We signed a deal worth £1.85 billion – at that time, my greatest ever financial gamble. The bogies of Fiat's Pendolinos would be adapted in Birmingham by GEC-Alsthom for Britain's narrower-gauge railway lines. (Alstom – the merged company dropped the 'h' – took over Fiat's train-making in 2002.)

Stagecoach transport group chairman Brian Souter is one of the UK's leading business figures and a 'transport entrepreneur' through to the bone. He and his sister, Ann Gloag, are a formidable pair: they started out in the bus and coach wars after deregulation before moving into trains. From their base in Perth – with Ann selling the tickets and cleaning the buses, and Brian driving some of the routes, they have transformed the company into one of the UK's corporate success stories. The business was sidetracked when it tried to expand into the United States by buying Coach USA, but through their own determination and drive, Stagecoach bounced back from this setback. As I write this in 2008, Stagecoach is one of the UK's most successful transport companies and Brian is still in the driving seat.

When it was announced I was thinking of a flotation for Virgin Trains, Brian rang me up and said: 'I share your vision for the railway system.' And nine days later we'd done a deal. Stagecoach held 49 per cent of Virgin Trains to couple with its South West Trains, the UK's largest commuter network, and the Isle of Wight's Island Line, a mini-railway company. I admired that kind of decisive action and it cemented a friendship and working relationship that has lasted over a decade. At a time when transport – and railways in particular – was never out of the headlines, we wanted to make a positive statement after years of expectation. It was all about creating a feel-good news event to assure the frazzled travelling public that something was indeed being done.

Brian shared our view that innovation – leading to a better experience – was the best way to encourage more people to go by train. And while he admitted to having reservations about the Pendolino, he said: 'My mother used to say to me that a fool and a bairn should never see a job half done. I think when people eventually see what's being created here they will understand we're really doing our best to improve the railway system.'

In 2003 the Christmas panto season came early. On 4 December I arrived at one of Alstom's vast Birmingham workshops to deliver a massive present.

I was dressed as Santa Claus and sat next to two scantily clad women on a tinsel-bedecked trap pulled by a reindeer. Brian, wearing a Glenalmond school blazer, shorts, an old-fashioned leather satchel over his shoulder and with a blue cap worn at a jaunty angle, was the lucky schoolboy unwrapping his giant train set.

Faced with a gallery of UK media, I called out to Brian asking if he had been a good boy and what did he want for Christmas. 'Some nice, shiny, new trains which go very fast, please.'

I couldn't resist a quip in front of the TV cameras: 'And how about a higher share price?' (The Stagecoach share price was in the doldrums since its mega bus deal with Coach USA. Brian and I have both been through the mill together, so I can get away with jokes like that.)

As the dry ice swirled around, amid sparkling fireworks and the booming strains of the Mission: Impossible theme tune, the nose of a new train burst through the satin wrapping. Nationalised British Rail never generated this much excitement. And although it was only the shell of the first Pendolino, shipped from Italy to Bristol and then Birmingham, we were a step nearer.

Virgin West Coast invested £1.2 billion in fifty-three Pendolinos. Each train cost £11.5 million – which we were told by government railway officials was £1.5 million too expensive. The extra safety features I had asked for had increased the price. Passenger numbers began to rise – although they stumbled at times after engineering setbacks on the tracks.

Angel Trains, then a subsidiary of the Royal Bank of Scotland, stepped in to become the train owners; they then leased the rolling stock the way planes have been leased to airlines for many decades. It's a lucrative business because Angel Trains was sold in June 2008 to a consortium led by Babcock & Brown, an Australian infrastructure business, that includes Deutsche Bank and AMP Capital, for £3.6 billion. The train-building work was also a massive boost for Birmingham and kept highly skilled engineering jobs in this industrial heartland.

The new trains give off 76 per cent less carbon dioxide per seat than domestic airlines and are the most emissions-efficient rolling stock in Europe. They're very reliable. They spend less time in the workshop, more time carrying passengers. Every time the train slows down, the brakes heat up and the regenerative braking system pumps electricity back into the overhead cables – another innovative feature that government transport officials didn't want. With oil at $48 a barrel, they didn't see the point in putting electricity back in the grid. By 2008, with oil prices nearing $150 a barrel, perhaps it's clear even to them that it was a good decision.

The new trains went into service along the West Coast Main Line on Monday 27 September 2004. And on the first day there was a glitch. One that (Sod's Law being what it is) coincided with the announcement in London of Virgin Galactic, the world's first commercial space launch system for both scientific and human space flight. The Royal Scot train leaving Glasgow ground to a halt outside Carlisle. Passengers had to be switched to another train and were two hours late arriving in London. The press put the breakdown and Virgin Galactic stories together and the Daily Mail had full-page fun at our expense: 'Euston, we have a problem . . .' It was an absolutely brilliant headline and it put me in an irritable mood all day.

If I needed comfort, though, I only had to look at the situation by the end of the first week. The news was very encouraging: I wrote in my notebook:

'First week – Pendolinos. 27 September–2 October. 82 per cent punctuality. Promised 72 per cent. Cancellations 4 out of 210 trains run daily. Pendolino tilting in traffic 32, two more than estimated on Monday 27th. Only two trains to fail. Got masses publicity due to space launch. Jack Straw travelled and said PM enjoyed reception – also that he'd had amazing feedback from our staff parties.'

To this I added: 'Delivered exactly what we promised a year ago and general mood of passengers is that it worked well and will steadily improve.'

In the early days, mind you, we had to weather constant criticism about Virgin's two franchises. Virgin Trains had to take over the worst record for timekeeping in the country. Our West Coast Main Line services achieved a punctuality figure of only 84 per cent in the year to 16 October 1999. And the performance of Virgin CrossCountry, a higgledy-piggledy criss-crossing of routes, was worse, recording a figure of 80 per cent. But this was unfair on our team. We were now operating more services and carrying more passengers on the antiquated track and rolling stock which we had to nurse along until the new trains arrived.

I felt for all of our people. It was demoralising to be constantly criticised. We had worked very hard to get things better and the service had improved. The privatisation of the network brought some real benefits, but it imposed an institutional and political structure that was seriously flawed from the beginning, something which was exposed by the Hatfield accident, after a broken rail went undetected.

The Hatfield rail crash, on 17 October 2000, left four people dead and seventy injured. It was a nadir for the rail industry, and some questioned whether it would ever recover. Railtrack slapped speed restrictions on the whole of the rail network and our passengers suffered misery, delays, late arrivals and cancellations. There were recriminations and blame. I remember long discussions with Stephen Byers, then Secretary of State for Transport, about what needed to be done. Privately I wondered if it would ever be properly sorted. In 2001, following Hatfield, Railtrack, a publicly listed company, went into administration, and the company's shareholders lost their investments. In 2002, the Rail Regulator presented taxpayers with a massive bill for an additional £1.25 billion a year of increased infrastructure costs, largely due to historic underinvestment and Railtrack's loss of control. It was a deep and complex mess.

Since Hatfield, however, the rail industry has slowly begun to turn the corner. The UK government established Network Rail as a not-for-dividend private company to manage the railway infrastructure – that is, the track and the signalling. These changes were implemented in the Railways Act 2005, with the Secretary of State for Transport now responsible for setting the strategy and budget for the railways in England and Wales.

Increasingly, Virgin Rail has developed better partnerships with the government, Network Rail, and suppliers like Alstom and Bombardier, to bring in huge improvements. We've got our trains running every twenty minutes between Manchester and London – the highest frequency for that sort of route anywhere in the world. For business people, trains are now a much better alternative to short-haul flying. Virgin's own delivery has improved, too. In 1997, 13.6 million passengers used the West Coast Main Line. In 2003, this was 14.1 million; 2004, it was 15.1 million; 2005, 18.7 million, and by 2007, it was more than 20 million. Our punctuality was over 90 per cent. What had seemed like Mission Impossible became more than doable. It became surpassable. Network Rail still have big issues to deal with in the way they upgrade the last sections of track and inconvenience the public. But one way or another, 2009 will see another leap in service, speed and punctuality on the West Coast line, which will make it truly a world-class railway. It has been a tough journey but thanks to the leadership of Tony Collins and the support of Stagecoach's top management we have made it through the really tough times.

You must never forget that every change ushers in unforeseen consequences. This applies as much to welcome changes as unwelcome ones. It always tickles me when a spokesperson comes on the television to explain, with an earnest frown, that an ailing company is 'a victim of its own success' – as though it had undergone something rare and freakish and hard-to-credit; some sort of business equivalent of alien abduction.

Success one day does not give you a free lunch every day thereafter. Obviously, you can't plan for the unexpected. All you can really do is never let your guard down. Delivery is not just hard work: it's endless.

We had invested more than £2 billion replacing all the trains on our CrossCountry routes with Voyager diesel trains. The trains were popular and extremely reliable. There was a 50 per cent increase in passenger numbers – and suddenly people were finding it difficult to get a seat on the busier routes. We were a victim of our own success!

Altogether more troubling was the thought that our passengers were victims. I received one letter in particular from a couple travelling from Preston to London. They had been planning a treat in London and didn't realise that they now had to book a seat. When they arrived, they found the staff unhelpful. Given the husband was disabled and used a wheelchair, this was pretty terrible of us. I personally sorted this one out, and encouraged my Virgin Rail team to improve. I was concerned that we might have taken our eye off the ball when it came to customer service. I penned a letter to Ashley Stockwell, the brand and customer service guardian for Virgin Group.

Dear Ashley,

I am worried about Virgin Trains and the service we are delivering to the customer. We have a board of directors who have understandably got tied down in franchise negotiations and the bigger picture issues. When we first got involved we put people in from Virgin Atlantic who really cared about staff and customers. Somehow, things seem to have slipped. Tony Collins realises this – he told me very frankly yesterday that we had 'lost that customer service'. I'm sure he'll do everything he can to address the problem. Any help your department can give I'm sure would be welcome.

We got better. Increasingly, we picked up plaudits. By April 2006, when we announced our decision to reapply for the CrossCountry franchise, I was beginning to believe we had achieved something extra special in Britain. Paraphrasing slightly, I used the old Magnus Magnusson line from Mastermind to allow us to continue: 'We've started, so we'll finish.'

But there was opposition to our franchise inside the Department of Transport. Before a crucial meeting with officials, I got a phone call from a well-informed transport journalist. He knew the exact time of the meeting and what was going to happen and who would be attending. He was right in every respect. He also told me that the government's endgame was to destroy Virgin's CrossCountry franchise and they were looking for an excuse to stop it. I wrote in my notebook: 'If this guy is right on everything else, is he right on this?'

We argued that we'd worked hard and that punctuality was the best since we took over, revenues were up 40 per cent and passenger numbers up 50 per cent – and the government were now getting 87p in every £1 of extra revenue.

In my notebook I wrote: 'We've been told that certain elements of the Department of Transport want CrossCountry back so it can be remapped and absorbed by other networks. I hope that's untrue. I'm confident that the Virgin Group's bid will not be bettered by another operator in a competitive tender. I find this all a little bizarre to say the least. But that's the rail business.'

It certainly was. Having done all the donkey work, taken all the flak and increased passenger numbers by 50 per cent in ten years – Virgin Trains lost the CrossCountry franchise. But that's life in twenty-first century Britain. There are (he says, through gritted teeth) no regrets. And even if there were, in business, as in life, you're better off just moving on. After all, we still had the West Coast Main Line.

Virgin Trains is criticised in some quarters for the supposedly easy money we've racked up in the form of government subsidy. I think those people should consider the time and effort we spent for very little financial return. Out of that subsidy money we had to pay Network Rail for running on their tracks, and as their problems increased, so did our access charges. When we signed off the first deal we never envisaged the increases. So, between 1996 and 2006, we did indeed receive £2 billion in subsidy – and promptly waved it goodbye again, paying £2.4 billion in track access charges, first to Railtrack, then to Network Rail; in other words, back to the UK government. Plus Virgin Trains paid higher charges to Network Rail than any other train operators – this when the subsidy was reduced by half from £526 million to £268 million at the end of March 2006!

Not long ago we put together a proposal to increase the size of each train from nine to eleven carriages so that the business could continue to meet the soaring demand. I explained to Douglas Alexander, then the Secretary of State for Transport, that while we could deliver on our franchise agreement, from February 2012 our passenger numbers would be pushing our current seating capacity to its limit. Our proposal was to increase delivery to ten and eleven cars at optimum time from around 2010. The total investment required would be around £260 million, all to be funded by the private sector. We also proposed additional car parking and smart-card ticketing and in return we would like an extension of our franchise for a couple of years, please. I felt that our track record – excuse the pun – was enough to give us some chance of the government accepting this. But later in the year they rejected our bid to increase the number of cars. At the time of writing this book we are back in discussions over extending the trains again. I hope sense will prevail. But come 2010, if you ever find yourself standing all the way to Birmingham, remember who to thank. It drives me to distraction to think that the increasing popularity of our trains is being threatened by the government's mean-fistedness and lack of vision.

At the same time we are hampered by the poor state of the line which has been undergoing a massive upgrade in the last four years. Our wonderful team – led so ably by Chris Green for many years and now by Tony Collins – has remained focused on delivering a great service in the face of these incredible hurdles. Despite these issues I'm proud to say that Virgin Trains has delivered on its promises – and it hasn't been easy. First and foremost, we knew from the start what it was we wanted to deliver, and we stuck to our guns in the teeth of official discouragement and a negative press. We wanted the best-looking, most comfortable trains because we knew anything less wouldn't wash with a public that had had to put up with a declining service for far too long. Our trains had to be efficient – as green as possible – because we had no idea what would happen to the price of energy, and there was no hint or sign that energy costs were going to come down in the long term. (How right we were!) Finally, we wanted the safest trains possible, because in the travel business, this is the bottom line: people are putting their lives in your hands. Nothing short of an act of God should ever put your customers at risk.

Our proposition, then, was fully considered in the light of our core business values, our medium-term strategic considerations and our long-term feelings about where our industry was headed. However overblown this sounds, this is what you should be doing all the time as you consider how to deliver on your business proposition. Never imagine that you are immune from big events. Make your small decisions in the light of the bigger picture, and you are at least pointing your craft in the right direction to ride out any storm.

Remember, also, that the world is full of people who want to put you right, who want to play the realist to your wide-eyed innocent. Governments are notorious for this sort of thing. Ministers are like mayflies. No sooner do they get to grips with what they're supposed to be doing than they're gone. Keystone of our liberties it may be – in business terms, it's a disaster. In the UK in particular people who have no real tenure over the issues they're handling let long-term considerations fly out the window. It's not that they don't understand them, or even agree with them; it's that they despair of ever getting them past the Treasury quickly enough.

You can spot negative people and stultifying institutions a mile off. Have the courage of your convictions, and ignore them. Instead, gather together people you can trust – get them to play devil's advocate; get them to point out the problems you may inadvertently be steering towards.

If you're lucky enough to become an agent of change, it's incredibly frustrating when other people fail to grasp your ideas – even worse when they reject them out of hand. But you can see why it happens. Change can be dangerous. Often, the bigger you are, the slower you move, the more dangerous change becomes. Of course governments are afraid of change: they know they'll never be able to get out the way of it quickly enough. Neither can many big companies.

It's no good saying 'Prepare for change' or 'Embrace change' or whatever other cliché the business books are peddling this season. The bald fact is, change, most of the time, is a threat. It's the thing that wants to kill you. And let's face it: one day it will.

In business, change always happens more quickly than you want – it steals up on you fast, when you are least prepared. This was certainly true for Virgin Records in the music industry.

For the multinational consumer electronic giants, survival depends on finding the next disruptive technology and getting it into the marketplace. Being the first to do so is admirable. But being the best is what really counts. I've always followed my nose; it's never occurred to me to wait for others to make mistakes, just so I can learn from them. I can't see the fun in it. Beyond that, though, I can't really criticise: the ones in the vanguard are generally the ones who get shot.

During the 1980s and 90s, as the Philipses, Sonys, Panasonics and Hitachis of this world headed down blind alleys with products that failed to bite, the music industry was moving logically and unstoppably towards digital, downloadable music – a process that reached its apogee (at least, from the point of view of where I'm sitting now) in Apple's iPod.

The digital music revolution was heralded by the arrival of the compact disc. The progression from analogue to digital recording was a revolution for the eardrums. In the mid-1970s, the seven-inch single was the gold standard for the pop music industry. All the pop bands (though not all the progressive rockers) wanted a number-one hit in Britain, America and then the rest of the world. To have a number-one hit was to arrive as a band or solo performer.

By the early 1980s our domination of the charts had helped Virgin Records become the world's top independent music company. There was tremendous excitement about seeing a new record breaking into the charts, and the band's virtually compulsory appearance on the BBC's Top of the Pops the following Thursday. All this hoopla had a positive effect on the band's album sales; the two went hand in glove.

It's easy to get nostalgic about old formats, but there's no historical justification for it. Since the nineteenth century, most recording technology has turned over on a thirty-year cycle. Thirty years after the wax cylinder carried music to wow the opinion shapers of the 1880s, brittle, shellac 78rpm recording discs revolutionised the listening habits of the masses. After the Second World War, the vinyl LP, the single and the EP (the extended play, containing two or three tracks on each side) made music listening considerably less fraught. Why, you could even send these sturdy, flexible discs through the post!

Those pundits talking now about how digital downloading is killing the major companies should remember that the last time the industry was in meltdown was – surprise, surprise – just less than thirty years ago, in 1982. The economic recession was having a deep impact. At the time, Virgin Retail had over a hundred record stores, in every town across the country – and during weekdays they were deserted.

More people were home-taping off the radio, too, or from a friend who had bought the original LP – a forerunner to the illegal downloading that led to Napster and all the other sites which offered the punters music for free.

The digital revolution had arrived in the recording studio some time before, and computer software was already employed to mix albums and soundtracks. Now, though, digital music was about to take the public by storm.

Dire Straits were the format's first big seller. Vinyl fought a valiant rearguard action, and the aficionados said they still preferred the analogue sound. Many a music snob with a Quad system turned his nose up at Dire Straits on a plastic beer mat. Many, many more went ahead and bought it. Philips, the Dutch electronics giant, predicted at the major Paris music fair that the compact disc would become 'the new world audio standard'.

There was fierce debate in our office between the hi-fi buffs. Could vinyl ever be surpassed by a shallow digital sound system? At the time there was genuine doubt – even today I hear people say that vinyl is much better. An LP's record cover and the sleeve notes, meanwhile, had become a contemporary art form.

But the shiny CD was on the march. It was more convenient, it was easier to use and it protected the furniture from your beer glass.

Philips, who had developed the system, announced plans for software to be manufactured and released by PolyGram and sold through record retail outlets, separately from the hardware. The CD also had a competitor in the LaserVision disc which was ready for the spring of 1983. JVC, the Japanese electronics giant, was promoting its VHD system. There were about thirty companies looking at manufacturing special CD players, and I was very keen not to be left behind if this was going to be the new standard.

Only PolyGram and Ariola had made agreements with Philips for the release of products for the new CD system. (At that time, I thought the royalties being demanded by Philips were too high.) Philips began delivering the first CD players in Belgium. They could be attached to a hi-fi system, as a separate, just like the record deck, and were expected to sell for around £300–£400. This was a lot of money for the young record-buying public – and in the early days the CD owner was usually the richest guy in the street.

From launch, around 200 titles would be available, retailing at between £7.50 and £8.50. PolyGram were preparing a disc-pressing plant in Hanover in West Germany, which could produce 500,000 in 1982, and a staggering four million the following year. In June 1982, Sony ran some full-colour adverts in the music press. They showed a full-size twelve-inch LP, alongside a compact disc, depicted in actual size. The advertising campaign was slick and it impressed me: 'Six months from now the industry will expand dramatically.'

The CD was the answer to many a music lover's prayer: no wow, no flutter, no wear, virtually immeasurable distortion, wide dynamic range and no surface noise.

My notebooks are full of the questions I had about the impact on our business and what we should be doing to counter any threats. I wrote: 'What happens to the record collection around the country – do people replace their vinyl with CDs?'

The arrival of the compact disc was a shot in the arm for our industry but, as with most medicines, in the wrong dose it could quite easily kill the patient. The CD was a game-changing technology – and we had to adapt or die. The arrival of the CD and, later, the DVD would eventually give retail a lease of life, but at first the only way for our business to survive the CD menace was to cut the cost of vinyl. And that's what we did. We needed to start shifting stock and clear the decks for the new. The era of selling vinyl LPs by the truckload was coming to an end.

Meanwhile, in March 1982, Virgin Records shuffled the pricing structure for dealers. Price changes were being forced on all of the industry by high inflation rates in the early years of Mrs Thatcher's government in Britain. We had to put up the price of our chart-topping bands, so Dare by Human League was selling for £3.40. We made an 18p increase to £2.92 from £2.74 to dealers for our back catalogue albums. But we reduced a certain number of titles to £1.82 on a purely experimental basis, to see if this could shift material that had been overlooked, such as the Skids and Magazine.

Some of the smaller independent retailers protested. Alan Davison, the vice chairman of RAVRO, the association of record dealers, who ran a small record shop, joked at the time in Music Week: 'Trying to think of everything that would be nice for this year, I found the really big thing I would like to see would be for Our Price and Virgin to close down. They can open up again, if they want to, provided they sell records for the right price. Records are a specialist product. Discounting them, like groceries, was the worst thing that ever happened.'

Poor Alan: the only way you can get away with charging high prices in a deflating market is to downsize and specialise. That means you're firefighting and innovating at the same time – a difficult double somersault, and one Alan simply didn't have the will for. He simply put his prices up to the full recommended retail price in order to ensure his business mark-up of 33 per cent. This made no business sense to me. The margin on records and tapes was dropping from 32 per cent in 1978, down to 23 per cent in 1981, and cut-throat discounting had it as tight as 16 per cent. According to the BPI, the notional price of an average LP was £5.22 in 1981 – while the actual price paid by the record buyer was £4.39. Margins were so tight that a record company without hit artists that season was unlikely to weather the storm.

Meanwhile, another new retailing phenomenon was dawning (or looming – it depended on your point of view). In 1980 the British inventor and entrepreneur Clive Sinclair broke the £100 barrier with his Sinclair ZX80 computer. If you were brave you could buy a kit for £79.95 and solder it together yourself. A year later, he brought out the ZX81, and in 1982 he brought out the Sinclair ZX Spectrum. By the middle of 1982, there were nearly 500,000 video-game machines in use in the UK. I was surprised at how rapidly it spread across into our business – and again we had to be prepared for its impact.

One day one of the reps came in to see me. 'Richard, the kids are really getting into this Pac-Man video gaming. Perhaps we should be selling some games, too.'

We started to order computer games directly from Atari – a subsidiary of Warner Communications. The arrival of Pac-Man, a maze-chasing alien who munched up fruit, helped bring in excellent business for years, outselling every other arcade game including the hugely successful Space Invaders, the staple of every single student-union bar in the country. With Tetris, Pac-Man became a starter game for Nintendo's Game Boy, introduced in 1989. In the early 1990s Sega's Game Gear introduced us to Sonic the Hedgehog. Popular games for young people allowed home computer games to lift off, especially in the UK, and introduced a whole generation to computing. The hardware multiplied and diversified at a dizzying rate: the Atari ST, the Commodore 64, the Amiga, the Apple Mac . . . The computer-gaming industry was about to go into overdrive.

Pac-Man was, indisputably, the first computer game icon. We didn't get into our stride until the arrival of Nintendo's Super Mario at Christmas in 1985. It was to become a worthwhile sideline for our stores as they expanded around the UK and into Europe. Software cartridges selling at £15 to £45 offered us a much greater mark-up than music, so computer games and then films – on video, then on DVD – became an increasing part of our range.

The truth is that even from the start our smaller Virgin Records shops made very little money. The stores kept our name in the public eye, and represented our youthful, irreverent brand, but they were unsustainable in the long run. One of my biggest business mistakes – indeed, regrets – was not selling all of our stores sooner.

By 1986, even the Megastores were under threat. Our biggest rivals, HMV, had taken up the cudgels against us and were launching a new store on Oxford Street in June which would stock every record currently available, while Tower Records was opening at a prime site in Piccadilly Circus.

Undeterred, in March we launched our Dublin store, the biggest in the world, at Aston's Quay. We spent £1 million on converting the five-floor 50,000 square foot McBirney's store – and it would be similar to our Megastore on Oxford Street.

The press thought we were mad. Stanley Simmons, a director of Music Makers, pitched into the debate in the Counterpoint section of Music Week. 'In my opinion the whole concept of the megastore in UK record retailing is seriously flawed and based on false assumptions.' He pointed out that in the US large retailers were able to negotiate better credit terms and returns that were not available in the UK. And he was right to point an admonishing finger at our fixed overheads – the rent and rates – and our obligation to carry a large amount of stock.

But he was missing the point. Our Dublin store not only stocked specialist classical and jazz, folk and rock music, it also sold music videos, games and computer software. This was where I could see the future of our business. We were now giving the old-fashioned retailers, such as Woolworths, Dixons and Currys, a real run for their money.

Our shop windows and our interiors were dynamic and exciting. If Selfridges could do stunning window design, then we would do it better. When Depeche Mode launched their new album, Black Celebration, we had a twelve-foot-high mirror-tiled tower in the window of the Oxford Street shop. It was eye-catching stuff. Inside we began to bring the bands in to perform and play a few songs. They became events in themselves which drove more sales and better publicity.

Our Virgin staff were the key. They were usually music buffs not much older than the customers coming in with their weekly pocket money or cash from part-time jobs. We'd created a cool place to work – and that made it the place to hang out on a Saturday afternoon, too.

Dixons chairman Stanley Kalms was increasingly impressed by what Virgin was able to achieve. We also began discussions with Debenhams to open Virgin outlets in their regional department stores.

The days of the small, please-everybody record shop were numbered, and you can't build a business empire on nostalgia alone. In June 1988 we were approached by WH Smith, and we decided to sell sixty-seven of the smaller shops to them for £23 million, and concentrate on a few Virgin Megastores, including a new one in Paris on the Champs-Elysées. A larger retail experience had some future. But the glory days of our involvement in the music industry were now behind us.

By 2008, the CD as a retail item was terminally ill. Its zenith had been 1999, when the worldwide market for consumer spending on music had been $17 billion a year. By 2005 that figure had dropped to around $10 billion, with digital downloading emerging strongly. (By 2012, the projected revenues are just over $9 billion, with half of this downloaded via the Internet.) The corporate music industry – some owned by private equity houses – became more interested in selling millions of plastic discs rather than supporting their actual artists and talent.

When we set up Virgin Records we funded the recording sessions, manufactured the product, distributed it to the shops and then marketed the band and the music. We would give loans and advances for touring, for making promotional videos, for equipment, props and lighting. We would also advise and look after the careers of our musicians and handle the accounts and the sales.

Did all this work make us future-proof? Of course not. The value of these services has disappeared, thanks mainly to digital technology, the Internet and the arrival of YouTube and social networking.

Digital downloading is killing music? You could have fooled me. The music scene is changing, but it's certainly not dying. The economics of music production today are far healthier than they ever were in Virgin's heyday as a music company. When we built the Manor recording studio in Oxford (where we gave Mike Oldfield his big opportunity) and the Monster Mobile recording truck, it was a massive undertaking. It cost thousands of pounds each day to rent a professional studio, pay for a top-notch engineer and a producer, plus all the wine you could drink and dope you might smoke. Virgin Records' job was to bankroll this upfront – and take the risks. Now a top-quality album can be made on a decent laptop – and then you can send it as a music file over the Net to a myriad of different places.

The cost of manufacturing and distributing is minimal compared to when Virgin Records was promoting Phil Collins, the Sex Pistols, Human League or even the Stereophonics. To make money, we had to sell LPs and then CDs in large numbers, just to cover the manufacturing, printing, shipping and retail costs and the royalties. That business model no longer exists – gone, I think, for ever. Digital distribution is almost cost-free and it's as cheap per album to distribute a million copies over the Internet as it is to send out fifty by FedEx. Economies of scale don't matter to young emerging bands – although they still matter a great deal to the record companies and their shareholders.

If I was a happening band on the cusp of success today, I wouldn't go through a conventional record company. I'd gather a small team of people around me and release it myself. I would consider getting together and sharing distribution, advertising and marketing with like-minded musicians and marketing people. Promotion is as easy as setting up a page on MySpace, Facebook or other social networking sites. Smaller and newer bands will earn less, because record companies will only be able to promote lesser known bands on the back of major artists. But there will be more new music to choose from, and more people will get themselves heard.

Record companies will survive – but they will have to be much leaner, much closer to my 'small is beautiful' business model. They will have to discover genuine talent. If you want to know what the future of digital download really looks like, think of artists like Brian Eno, the producer of Coldplay's most recent album Viva la Vida, David Byrne, of Talking Heads fame and – above all – Radiohead.

In 2007, when the Oxford-based band said that they were going to release their album In Rainbows as a pay-what-you-like digital download, they were branded as barmy, throwing away their intellectual musical property. For fifteen years, Thom Yorke and Radiohead have been major-selling rock artists. They were out of a record contract, had their own studio and their own server, and so the costs of distribution were minimal. It was a gamble – but it worked out, and 40 per cent of fans paid an average of £3 each for the album, making the band nearly £1.5 million. Not only that, but they have licensed the music and it went on sale as a CD too. Yorke said that as artists the band had made more money out of downloading than all their other Radiohead albums put together.

This kind of economics is smothering the big labels. Madonna is another artist who has taken control of her music in a recent deal with Live Nation which connects her reputation for fantastic live concerts with the promotion and download of her music by a website.

While recorded music has cycled through different formats and various paths to making money have been explored, music will always be something personal and meaningful, resulting in a deeply emotional connection point for people of all ages. As records have been pressed into vinyl, discs and now ripped online, we at Virgin have been heading to the fields each summer with hundreds of thousands of other fans in an annual communal celebration of music and people.

In 1995 Jackie McQuillan and James Kydd called me. 'Richard, we've got a great idea. It'll be a world first, truly cutting edge and will give Virgin Cola, and naturally (by association) all the other Virgin brands, great music credibility, whether they're in music or not. Oh, and we've met some fantastic, professional people who can help make it happen.'

OK, I was beginning to guess where this was going when James added (tongue in cheek, I have to say): 'Richard, we'll be doing it for the kids,' and Jackie threw in: 'Richard, I swear it'll be fucking huge!' I realised that no matter what this great idea was, they'd talk me in to it.

Within a matter of minutes, after they'd filled me in on the details, I found myself saying: 'If I've got this right – V Festival would be the first ever music festival anywhere in the world to be held on two days, on two sites, on the same weekend by swapping international A-list bands overnight on buses – from one end of Britain to another? What a brilliant idea. I'm in …'To others, the logistics of this plan might have sounded impossible to pull off – I decided to put my trust in the team and back their gut instincts on this one.

By working with the most experienced concert promoters in the UK – Bob Angus of Metropolis Music, Denis Desmond of MCD Concerts, Simon Moran of SJM Concerts and Stuart Clumpas of DF Concerts – Jackie and James knew they were talking to the best in the business. None of the parties involved had ever produced a festival like V before but they formed a good rapport, and sometimes that's all you need.

The promoters recognised that the Virgin brand could bring something different: a truly punter-focused festival. A brand that believed everything appearing on site should add value to the whole weekend experience – well-lit campsites, directional signage that actually directed you somewhere, longer bars to make sure there were shorter queues and food that people might, for once, want to eat, and the introduction of Virgin Angels to help anyone out if they needed information or assistance. The attention to detail even got down to bringing in ten times the amount of toilet rolls available on site compared to any other festival. I doubt the promoters had ever had such long, or heated, conversations about toilet rolls before, especially not toilet roll printed with the words 'Poopsie and Cack'– a nice little tribute to Virgin Cola's main two competitors!

Jackie and James, in return, respected the expertise of these experienced promoters. After all, they know how to get tens of thousands of people through multiple gates at the same time without riots breaking out, they know about staging, lighting, the temperaments of artists, and how to ensure the safety and security of running a massive music event while at the same time putting on a great show. Although, in true Virgin style, the team insisted on hiring the friendliest security guards in the business, ones who would be helpful and smile. Now that really was a world first!

I am delighted to say the rapport formed thirteen years ago is still as strong as ever. The UK V Festival takes place every summer during the third weekend in August on two beautiful sites, Hylands Park in Chelmsford and Weston Park in Staffordshire. It is one of the largest and most popular in the UK – attracting over 175,000 music fans in 2007 – and plays host to more than a hundred bands. It's an industry favourite, with the live-music business voting V European Festival of the Year for the past seven years at the annual Live Magazine Awards. Good thing I trusted their instincts!

Fast forward to spring 2006 in the US. It's year two in our fight to launch our newest airline, Virgin America, and there is no clear end date in sight.

While the US Department of Transportation took its time making a decision, the design team kept its head down and continued to create a revolutionary new travelling experience for US consumers. But our patience was frayed. We thought we'd have launched a new company by now.

One day that spring, Virgin USA's Dan Porter, who came to Virgin with extensive expertise in technology and music, rang me up and said: 'Richard, Virgin businesses are all inherently social, whether it's health clubs, mobile phones or airlines. So is music. You've been building incredible communities every summer with V Festivals in the UK, so while America waits for the airline to launch, what do you say to throwing the largest music and art festival on the East Coast? Give Americans a taste of the Virgin brand?'

'How quickly can you get it going?' I asked. A big splash could be just the thing, I thought, and it wouldn't have to take as long as starting an airline. I do like live music and believe in the rejuvenating powers of parties. And I certainly enjoyed camping.

'Give us seven months,' Dan said with a gulp.

Now, we'd never put a festival together in the largest music market in the world, and what did the Virgin USA team know about festival logistics, finding the right campsite, locking down the best date and convincing 50,000 people to give it a go? It took the right kind of magic and chemistry to create something like the UK's V Festival. Could it be replicated in America?

The US team decided to launch two festivals, one on the East Coast in the US and one in Canada. Both would be called Virgin Festival – we were lucky enough to have a brand name that didn't sound like a corporation or a cleaning product. We then had to find concert partners who shared our vision; while the festival was a business, it wasn't just something to make money but an extension of the brand and the Virgin lifestyle, so every detail had to be perfect.

Two independent promoters with a strong aesthetic sense and vision joined up: Seth Hurwitz, the last great independent rock promoter in a cut-throat market of giant corporations that were swallowing concert venues and record labels whole; and Andrew Dreskin, promoter and trusted partner who had started Ticketweb with Dan. They felt as strongly as we did about putting on an incredible experience so they didn't hesitate to spend an extra bit of money for the best line-up, the best production, the best food, the best drinks. It was important to stay true to the original values behind setting up V Festival back in 1996 – a truly punter-focused festival. They identified Baltimore as a site in the north-east that was under-penetrated and in close proximity to hundreds of colleges and several key mid-sized to large US cities. Virgin Mobile US joined up as a sponsor and offered their expertise in marketing to a youthful target audience.

Meanwhile, in Toronto, the Virgin Mobile Canada team – including marketing gurus Nathan Rosenberg (recruited from Virgin Mobile Australia to start Virgin Mobile Canada) and Andrew Bridge – began to transform the lush Toronto Island Park into Virgin Festival grounds.

Without a fantastic headliner, there is no festival. In a stroke of luck and genius, the Who decided to tour that summer and Seth signed them up to open for the Red Hot Chili Peppers in Baltimore. It was to be their only mid-Atlantic stop. Once the Who joined us, we knew the festival was going to make a strong first impression.

Dan even convinced my son Sam to get in on the excitement. In June, less than three months before the festival date, Sam kicked off ticket sales at the Union Square Megastore in New York City. He was flanked by a row of lads wearing nothing but socks in a tribute to the Red Hot Chili Peppers. Afterwards, Sam rang Jackie up in the UK and convinced her that he did the media event in nothing more than a sock – thankfully, my son has more modesty than his father and was only winding her up!

I had a busy September that year. On 9 September I helped kick off Toronto's Virgin Festival and then went down to New York to announce during the Clinton Global Initiative that 100 per cent of profits from Virgin Group's transportation interests would be invested in clean energy. Days later, my wife Joan and Sam and I travelled to Baltimore for the US festival. As I walked across the grounds and shook hands with thousands of festival-goers, I was struck by the number of people who thanked me for bringing Virgin and the festival to the US. Many jokily thanked me for saving the Earth but I reminded them that it is just as much their responsibility as it is mine!

While the North America market is very different from the UK market, one thing was clear: we all love a brilliant party. So we responded to each individual market but also gave them signature Virgin touches, most of which were inspired by the UK's V Festival. We wanted to be remembered for unsurpassed production quality, Virgin Angels who helped people in charming and unexpected ways, chill-out areas, delicious food and beverages. We partnered with sub-sponsors who agreed to contribute to the overall consumer experience, not just their logos, and our stages weren't named after athletic shoes or radio stations. Because we took it seriously as a business, people got to enjoy it as a party. In 2007 we launched V Festival Australia (Sydney, Gold Coast, Melbourne and Perth) and the Aussies definitely know how to party!

In an era of digital downloads and headphones that tune out the rest of the world, the live-music experience offers something different, authentic and communal. It provides a rare chance to gather with people to catch favourite acts and also make unexpected discoveries. Little did we know that thirteen years ago when Jackie and James came to me with the idea of starting V Festival in the UK, we would be in the vanguard of new music festivals in North America.

Just as competition is a great thing for airline passengers, competition will be a great thing for music fans. Many new festivals have sprouted up since that summer, and eventually the best will last.

So, the milliner says to his son: 'Don't worry, lad. People will always need hats.'

What he means is: 'I will always need hats.' Hats are his life, and he is proud of what he does.

Is his attitude a healthy one?

Of course it is. No business lasts for ever, and being true to your life's work carries with it the risk that you may lose your future. This is the deal we make with the world: that we exercise our free will and accept the consequences. (I love ballooning, and it's almost killed me on several occasions.) Every risk is worth taking as long as it's in a good cause, and contributes to a good life.

Of course, if your business involves the investment of other people's money, you are under certain legal and moral obligations. You may have to adapt your business to meet those obligations.

But I have every sympathy – especially in the light of changes in the music business – with those companies who delivered a thing well, with care and pride, long after the thing being delivered had lost its currency. It's a classic case of doing the right thing at the wrong time. Sometimes it's a mistake. Sometimes – and there's not a business book on the shelves will admit this sorry fact – it's not a mistake at all. It's just something dying.

Virgin is not especially aggressive in the marketplace. (We fight hard and long when we have to, but we don't do dirty tricks and we don't go looking for punch-ups.) And heaven knows, Virgin's success is not down to its crystal-clear vision of the future. If it were, you'd be Virgining our company valuations on the Internet rather than Googling them – and our Megastores would have been sold off in the eighties.

Virgin's success is primarily down to the consistent way it's delivered on its brand proposition. Closing the book on Virgin Music was pretty painful, whichever way you spin it. But because the central proposition of the Virgin brand is about customer experience, Virgin has overall found it less painful than most to innovate products or services to satisfy changing consumer demands. For us – and we may be unique in this – a change of industry, and a move into a new sector, does not entail a wholesale change in our philosophy or life's purpose.

What astonishes people is less our ability to move into new sectors – after all, venture capitalists do this all the time – than the speed with which we deliver. Willingness to change jobs is one thing, but how do we sometimes manage to hit the ground running so fast?

Delivery is never rocket science. When we move from sector to sector, I'd say about 90 per cent of our core delivery strategy comes with us and slots straight in, without adjustment, without fuss, without trouble. Getting to grips with an unfamiliar infrastructure is simply a question of workload – of mastering detail. I haven't yet had to be initiated into the mysteries of a cabal, and neither have the people I work with.

However complex the business is, you should be able to boil it down to a proposition that ordinary people can understand. When an industry delivers its proposition in a way that's totally loopy and counter-intuitive, either you've made an elementary mistake and need to go back to your research, or the entire industry is pulling a fast one and is out to rip off the customer. And if that's the case, then you, the wide-eyed innocent, are like the boy who declared that the emperor wasn't wearing any clothes. You are about to change everything.

This can happen. In fact, it happens all the time. In fact, here at Virgin, we could write a book on how often this happens.

Welcome – for starters – to the airline industry.

There are a few contenders for Virgin's greatest ever business deal. But the epitome of our spirit was the way we hired a jumbo jet to start up Virgin Atlantic in 1984. Of all our enterprises, it's the classic case of snatching an opportunity when it appears and making it happen. The creation of Virgin Atlantic is the perfect case study of how we have gone about our business since then. Even today, many years on, it shows our pure audacity and it still defies all business-school logic.

I was interested in an airline as a business idea, but it was really my frustration as a frequent flyer that crystallised the idea for me. I was spending more and more of my time in the air and, along with everybody else, I was having a thoroughly horrible time of it. There were no redeeming factors about flying with British Airways, PanAm or TWA. The quality of service was dire and the staff looked bored and morose. Then, at the turn of the eighties, came the straw that broke the camel's back.

Joan and I were supposed to be flying from the Virgin Islands to Puerto Rico, when the scheduled American Airlines flight was cancelled. The terminal was full of stranded passengers. I'd had enough. I called a few charter companies and agreed to charter a plane for $2,000 to Puerto Rico. I borrowed a blackboard, divided the charter cost by the number of people stranded, and wrote down the number. We got everyone to Puerto Rico for $39 a head.

The utter frustration I had been feeling while flying on other people's airlines convinced me that Virgin Atlantic should be a fun airline with a ring of quality and one that got all the little details right from the start. But our big break had to wait till February 1984, when an American lawyer called Randolph Fields came to me with news that there were landing slots available for a British-based carrier from Gatwick airport, outside London, to Newark, New Jersey. Randolph had been hawking the idea of a budget business airline around all the usual airlines, but they were too close to the realities of the market and remembered the harsh lessons of Freddie Laker and Florida-based People's Express – airlines that had both collapsed under pressure from the four transatlantic flyers, British Airways, British Caledonian, PanAm and TWA. The established airlines had conspired to put Freddie out of business by putting pressure on McDonnell Douglas not to supply him with planes; they persuaded the banks not to lend to him when he needed it; and they slashed fares to undercut him. It was a good old-fashioned mugging, and it succeeded. The British public never forgave them, but what did they care?

Randolph had obviously drawn a blank and I must have been on a list of his last-gasp record-label mavericks. In any normal business an unsolicited caller might get through to the chief executive's PA, then be told to drop a letter in (or these days, send an email) to arrange a meeting on another day. Back in 1984, however, we were based on the canal boat and I made a point of answering my own phone. Randolph got straight through to me. He had a very persuasive pitch: he told me there were lucrative landing slots up for grabs but they had to go to a British carrier. Not only this, but nobody else would be able to get in on these slots once they were assigned. It was a genuine opportunity. Was I interested? I asked him to send me a proposal and I took it with me to the country to read over the weekend.

Randolph was proposing a business-class-only airline, but I thought a mix of business and economy would be better so that we could fill the planes at Easter, Christmas and bank holidays. I agreed to put £1 million into the project to get it going. In the meantime, I needed to become an airline expert overnight.

I phoned Freddie Laker and he told me I didn't need to buy a plane – that wasn't the way it was done. He explained that the banks bought the plane in a deal with either Airbus, Boeing, Lockheed or McDonnell Douglas, and then the airlines leased the planes, guaranteeing to pay monthly fees.

I put in a lot of the legwork to find out all I could about starting an airline. We registered the name Virgin Atlantic and submitted our application for the slots. Then I found the Boeing telephone number through international directory enquiries. The actual conversation still makes me laugh. I remember calling Seattle and asking to be put through to the senior vice president for sales. 'Hello, this is Richard Branson from Virgin here and I'm interested in acquiring a secondhand 747,' I said in my politest English accent.

The guy at the other end said: 'What does your company actually do?'

'Well,' I said, 'we put out bands like the Sex Pistols, Boy George and the Rolling Stones.'

'Oh. Really? What did you say your company is called? "Virgin"?'

At the time, worldwide aircraft sales were in the doldrums and Boeing was having problems shifting its fleet of second-hand 747s, with many parked up and decommissioned in the Arizona Desert. So he didn't put the phone down on me. I think perhaps he was intrigued by my chutzpah. He took my details. And he jokingly said at the end of our conversation: 'With a name like Virgin, as long as your airline goes the whole way, we'll consider selling you a plane!'

Boeing sent a salesperson over to meet me. He was a lovely old guy who stayed in a hotel for four months while we tried to get the deal sorted. Boeing finally agreed that if the airline didn't work out, they would take the plane back at the end of the first year.

This meant that we could start our airline knowing that, if I screwed up completely, I had hedged my bets. Looking back, it was one of the best decisions I ever made.

What's the most critical factor in any business decision you'll ever have to make? Basically, it boils down to this question: If this all crashes, will it bring the whole house tumbling down like a pack of cards?

One business mantra remains embedded in my brain – protect the downside. By having the option of giving Boeing their plane back after a year, Virgin's total exposure was £5 million – half what we were making at Virgin Records. So we were gambling an acceptable six months' loss, for an enormous potential upside. If disaster struck, it would hurt us, but it wouldn't bring the whole pack of cards crashing down. 'Protecting the downside' is one of the very few business tenets that we try to adhere to at Virgin. Yes, there have been occasions when we have broken our own rule, times where I've said, 'Screw it, let's do it,' mortgaged my home and really stuck my neck out. But that's something I don't recommend.

It was soon very clear that there was no way we could launch a new transatlantic airline unless we had working capital of at least £3 million. We had to raise more cash.

While all this was going on, I knew that we needed to run Virgin's other businesses on a more professional footing. So I approached Don Cruickshank about joining as chief executive to sort us out. Don's arrival freed me up from the record business to learn more about the airline industry.

I phoned Freddie Laker (again) and invited him to lunch on my houseboat Duende and he told me why he had failed – and what I must do to avoid his mistakes. He warned me that British Airways would become the enemy, that they were ruthless and had destroyed his business.

We had to protect ourselves against currency fluctuations. The fixed instalments for the jumbo were due in US dollars, but sterling's value was plummeting against the dollar. Our customers were paying for tickets with UK pounds, and we had to be careful not to get stung.

We were also responsible for insurance – and here we nearly came unstuck. We could only get insurance when the Civil Aviation Authority in the UK had given us full certification for airworthiness. So we undertook a test flight, the plane took off – and a flock of birds flew straight into the engine. Which exploded.

A new engine was going to cost us £600,000 – and, naturally, because we'd had to abort the test flight, we weren't insured yet. This nearly brought down the whole of Virgin as it just took us over our overdraft limit. Don and the other directors wanted me to postpone the launch date, but once I was sure everything was safe, I wanted our airline to get going.

In those four months or so to get the airline going, we had to learn every single thing about the airline business, from reservations to ticket sales and whether to sell our tickets through travel agents or to sell them direct. I had to find out about marketing to let people know about our new airline, and to design and colour the plane. At night, I worked on planning the interior designs, selecting fabrics and even discussing the menus and the choice of wines. We had little or no budget for advertising, so I took Freddie's advice. He told me not to be shy, and to use myself to promote the business.

Four months to learn how to deliver an airline. Not easy. But definitely doable. Those business leaders who seek, in interviews and in their writings, to turn their industries into complex puzzles, subtle chess games of one sort or another – these people really, really annoy me. It isn't enough for them that they're good business people: they have to be Confucius. To listen to them, you'd think you must be born into an industry to make any headway in it. And this is rarely true unless you are truffle hunting. A basic understanding of the business, gleaned by immersing yourself in every little detail for months or even weeks, is often enough to get you started. The volume of information you'll need to hack through will be high – so find some friends to help you – but the underlying business model is always fairly simple.

Remember to communicate, and pay attention to detail. You wouldn't believe how far you can get, just by remembering and practising those two rules. But the evidence of their effectiveness is there for all to see, on our Virgin Atlantic flights. And many of our original decisions are still in place. The bar in our business class was unique to Virgin at the time, and it's still there. The ruby-red uniforms were really gorgeous outfits, and they still are. We went for a first-class product but charged a business-class fare – and that remains our philosophy today.

So, on 21 June 1984, we took to the air from Gatwick in Maiden Voyager. It was a flight for many friends, family and other well-wishers. Joan and I sat with Holly on our knee throughout the flight. But the airline was very nearly stillborn. The day I returned, Coutts Bank visited my home to say that since we had reached the overdraft limit, they would now start to bounce our cheques. Here we were, one of Britain's most successful private companies, and expected to make £12 million profit, and they were threatening to make the whole Virgin group insolvent because we were just over our £3 million facility. As I said, communication is important – and to that we might now want to add the words, 'especially communication with one's bank!' But honestly, in my view, at that time, Coutts was hopeless. Short of employing a spiritualist and a Ouija board, we were never going to get through to these people. They had no insight at all into our individual projects and subsidiaries. This would have to change. By the end of the week we'd switched banks to Lloyds, who increased our overdraft facility tenfold to £30 million. Don't be afraid of changing your bank if they are unreasonable. Banks are not for life. But don't put it off till the last minute!

Cash flow was exceptionally tight in the early years. Passenger numbers were highest in the high-summer season, yet our costs were fixed throughout the year. But the exciting feeling for everyone at Virgin Atlantic was that people loved flying with us from the very start. We had a sense of humour, which I think is important, and our pilots and cabin crew were all up for the great adventure. My nasty experience with Coutts Bank, meanwhile, had taught me that we needed to have a professional relationship with our bankers – keeping them informed of every move and letting them know precisely our intentions – and we needed corporate managers such as Don Cruickshank to do this for us.

In the fairy tale, when the little boy starts laughing and pointing at the naked emperor, everyone – including the emperor – realises the emperor's mistake, and the little boy is instantly vindicated.

Well, life's not like that. Let me quickly tell you of a couple of occasions when we laughed and pointed at some ludicrous business absurdity – and the emperor's ministers rushed over and promptly smothered us.

On 25 October 2003, Matthew Parris wrote in The Times: 'When we were younger we thought ourselves the first generation when everyone would fly faster than the speed of sound. We were to be the last, not the first.'

He was writing about the last commercial flight of Concorde. The BA 002 service from New York touched down at London Heathrow at 16.05 on 24 October 2003, bringing the first supersonic transportation era to a close twenty-seven years and nine months after it began.

British Airways and Air France's decision to ground the fleet was a disgraceful one because it was taken and executed to ensure that nobody else could ever fly the planes again, in some cases by literally cutting off the tips of their wings. It was an insult to Concorde's engineering brilliance. We knew that we could make a go of the service, and Virgin mounted a Save Concorde campaign. But it came to nought, due to British Airways' insistence that no one else could maintain and run the fleet. They hurriedly dismantled the planes and dispersed them to museums around the country – just to make sure. It was a deplorable way to end such a glorious era.

At the post-flight bash British Airways chairman Lord Colin Marshall was keen to show the 300 guests, who had just arrived on the three flights, the live BBC news report of the historic arrivals. To his horror, the soundtrack accompanying the picture turned out to be by John Hutchinson – a former Concorde pilot! John lambasted British Airways for retiring the aircraft while still in its prime, and very generously sang my praises for trying to keep her flying.

Sir Colin disappeared behind the screen – and the sound suddenly cut out, apparently interference from all the TV satellite vans parked nearby . . .

The moral is that it is important to stick to your guns. The public isn't stupid, and I think we've reaped huge rewards for being forthright in the marketplace.

In 1997 I came to share my experience about the lottery business with Thabo Mbeki, who was then the deputy president of South Africa. I thought a national lottery would be an excellent way of raising vital funds for the nation.

A lottery is a licence to print money because there is no competition. There are no risks at all in running a national lottery, and it is also one of the easiest companies in the world to set up. The formula has been tried and tested worldwide. In almost every country and state the lottery is run so that 100 per cent of the profits go to good causes. The country appoints a trustworthy business person with lottery experience and he or she hands the profits straight to the government's charitable arm for distribution to the most important causes in the country – usually for education, health or fighting poverty. What these lotteries don't have is a level of shareholders creaming off the profit between the person running the lottery and the good-cause fund.

I had made two unsuccessful bids for the National Lottery in the UK – in 1994 and 2001 – and to this day it still perplexes me that Camelot, the company that runs the lottery on behalf of the government, and who employed GTech (one of whose directors tried to bribe us during our bid), has been allowed to make so much money at the expense of good causes.

There was not a lot of love lost between me and Camelot in those days. The lottery company once hired Madame Tussaud's, the famous waxwork attraction in London, for a corporate evening. A brother of one of our Virgin Atlantic staff was at the party and found that my wax model had been temporarily removed and put in the broom cupboard for the evening. Actually, I think my effigy took one look at the company it was keeping, and walked.

So I said that if South Africa set its lottery up in the right way, it could be a provider for good. But I was anxious they didn't make the same mistake as Britain. I was seriously concerned that some in the business community were putting pressure on the government to set it up as a profit-making scheme for the business community.

I pointed out that the Conservative government in the UK made that mistake in 1994 and instead of the lottery being something the whole country has been proud of, it is talked about, even among regular ticket buyers, with some contempt. At the time, the opposition Labour Party realised this terrible mistake and pledged to turn the lottery into the people's lottery when Camelot's licence ended.

In 2007, with Labour still in power, Camelot were given the licence for a third time – another political promise broken by a government once in power.

I tried hard to convince Thabo Mbeki and the president not to make the mistake that was made in the UK. But it seems that, in the end, they also fell into the same trap as the UK, and granted the licence to a commercial company, Uthingo Management.

Sometimes you will fail to transform a business because of other people's short-sightedness. Other times, you fail because of other people's greed. It's that simple and that galling. The fight you lost will turn out to be worth it down the line: the public will respect you for it, and show you great loyalty thereafter.

Delivery is the moment where your good intentions meet the real world. Delivery is best approached steadily, and with fortitude. You'll need stamina and patience to deliver well – especially when everybody is out to kill you.

For a long time I have nursed an ambition: to run a profitable airline in America. The most important word in that last sentence is 'profitable'. It was easier said than done, and although the new baby is now doing extremely well, the arrival of Virgin America, our airline in the US, was a slow and painful birth.

The United States of America is littered with the carcasses of British businesses – and rock bands too – that have tried to make it big and then foundered. I wanted Virgin to be different, and Virgin Records USA and Virgin Mobile USA showed what could be done. But airlines – with their huge amount of federal regulation, issues of ownership and industry resistance – are a different ball game. It's a bit like Arsenal playing in the American National Football League.

The first hurdle was the certification process. Under US law, foreigners can own as much as 25 per cent of the voting equity in a US airline and an additional 24 per cent of the non-voting stock. I expected negotiations between the US and the European Union on aviation treaties to loosen this, letting in greater foreign investments and stimulating competition. But it wasn't happening quickly enough, and we had to ensure that at least 51 per cent of the business was owned by Americans.

The arrival of Fred Reid to lead Virgin America, in April 2004, was a boon. Fred, the former president and chief operating officer of Delta Airlines, had a welter of airline experience spanning more than twenty-five years, and he knew his way around Washington, DC. Our legal and political advisers were anxiously pursuing an operating certificate for Virgin America. It was all highly sensitive, and Fred cautioned me and the Virgin people that even the slightest off-hand remark by any of us in any venue official or otherwise could easily trigger a ninety-day delay in certification. It was election year, and our application had unique aspects which made it frighteningly easy for a hostile party to trip us up. And there were plenty of them: Fred told me that every single airline in America was dreading our entry into the market.

After 9/11 and its aftermath, I saw an opportunity to capitalise on the weaknesses of the big US carriers. United Airlines was operating in Chapter 11 bankruptcy protection, and American Airlines and Continental were slashing costs and staff to compete. I've been asked if there are such things as insurmountable problems in business. I think there were for these legacy airlines, with their large payrolls, outmoded practices and ageing fleets of planes. According to The Economist in 2007, their own poor management and circumstances beyond their control – oil prices tripling, terror attacks in 2001 and a plummeting dollar – lost them a cumulative $35 billion in the five years to 2005, a mind-blowing amount of money for investors to lose.

We honestly thought that by abiding by the rules of the US government and the Department of Transportation, a timely decision would be made. We did not expect it to drag on and on. Our application turned out to be a lesson in naivety. The US DOT is not accountable to anyone about when it approves applications, and it took its own sweet time. Existing US airlines, although visibly failing to serve the public with decent fares and service, became involved in a spectacular filibustering process to delay and deter us from getting off the ground. We were a visible threat, with our new fuel-efficient aircraft and a genuine focus on the consumer experience. Noticeably absent from all the ganging up were the two airlines we'd surely compete with: JetBlue and Southwest. You would think they had more to lose yet these two healthy and strong airlines didn't jump up and down and cry, 'This isn't fair.'

To meet the DOT's hurdles, the Virgin Group moved heaven and earth, making concessions beyond what was required by US law. Fred Reid reassured the American regulators that our airline was indeed 'Born in the USA'. A tranche of sophisticated investors were on board, and those investors hired Don Carty, a thirty-year industry veteran and former chairman and CEO of both Canadian Pacific and American Airlines, to lead the board. Virgin had a statutory right to three board directors but we gave up one.

Eventually, in May 2007, we were granted approval – but there was a sting in the tail. Fred was told by the Department of Transportation that since he'd been taken on by me personally (which was not true) – and I was a foreigner – he would not be allowed to run the business.

This was a blow for Fred, and for us: we had to find someone else to lead it. Virgin America should have been ready to launch at the end of 2003. Instead it launched in August 2007. It had taken nearly four years – Virgin Atlantic took four months. During our battle to cut through the Gordian knots of US regulation, six new planes sat idle on the ground for nearly eighteen months. They alone burned $11 million before we made a penny. In its first year, Virgin America has won all sorts of awards, including Zagat's 'best first-class service in America' and 'best domestic airline' in Travel + Leisure's World Best Awards. The airline has stimulated competition among carriers and created thousands of jobs. And as a consumer champion, Virgin is making good on our promise of a better overall experience and better prices whether you fly Virgin America not.

Virgin America's new president and CEO David Cush, formerly of American Airlines, and his team have a unique business model with the kind of flexibility needed to cleverly navigate these turbulent times. They're continuing to deliver a great flying experience to a small but growing number of urban point-to-point centres. Now the battle is to make the airline profitable. At a recent Washington Aviation lunch an American Airlines director said to a colleague that it was ironic that American Airlines had lost one of its best people as a result of its own lobbying on Capitol Hill to get rid of Fred Reid. Some clouds do indeed have silver linings.

All businesses, at least when they start, want to be agents of change. This is not always easy – especially if you're operating on a shoestring in a developing country with poor infrastructure, and where the delivery systems are held together by little more than bribery. In those circumstances, pretty much anything new is a threat to your business.

Equally, it is all very well being cast as an agent of change in an ambitious, developing country – but you can never afford to forget that your arrival is going to hurt people. The welcome changes you're bringing in may well look like threats – and almost certainly will be threats – to existing interests. These interests may look rather paltry to you, but they're life and death to some.

Knowing when to tread carefully, and when to put your foot down, is a lesson all businesses must learn, if globalisation is ever to bring about change for the better.

June 2004: I was with my family, playing tennis in our garden in Oxfordshire, when the call came through. I wasn't too surprised to get the summons. For a few years, I had been in discussions with several Nigerian officials about airline services into Africa. Now I was to go to Paris and meet the Nigerian president himself.

Nigeria is a great entrepreneurial nation and there are many excellent business people throughout the country. But it is hampered by poor infrastructure.

Chief Olusegun Obasanjo, now the former president of Nigeria, is a commanding character. A retired army general who has served his country, he is a towering presence throughout Africa. What I liked about President Obasanjo was that he came across to me (then) as a very honourable man. He liked me, and I him. That's the way it is in business. The president was very open and honest about the problems of the past. He was now pursuing a programme of privatisation. The airline industries, however, posed serious difficulties, particularly regarding regulation. In the past, the president acknowledged, there had been all kinds of shady deals and lobbying done between the airlines and the aviation suppliers. He wanted a much fairer and transparent system. (Later, in my notebook I wrote: 'In all my dealings with him and his cabinet, never a hint of corruption. A desire to cut through red tape and get things done.') I agreed, saying that we weren't interested in being involved with anything that meant backhanders or 'special' payments. If he wanted us to help, then we would work together on a basis of trust.

The airline industry across parts of Africa has an atrocious record on safety – planes crash quite regularly, particularly in Sudan and Nigeria. I wanted to use our expertise to make a difference. But I was also very mindful of affronting people's sensibilities – a Westerner criticising a developing nation even as it tries to turn things around. My experiences with Virgin Nigeria were to throw these tensions into sharp relief, as we struggled to attain world-class excellence in an underdeveloped and undercapitalised industry.

I had told the president that my vision was the creation of 'a world-class airline with a spirit of Africa and Nigeria at the hub'. It was certainly something that Obasanjo thought would give Nigeria a renewed sense of stature. But we had to set about a serious issue: the African air traffic control system was in need of overhaul and investment, its operators were in dire need of retraining – and Nigeria had one of the bleakest aviation track records in the world.

In early September 2004, I was in Nigeria's capital, Abuja, for another meeting with the president. It was nearly 1 a.m., and a long queue of Nigerians were waiting patiently in the corridor of one of the city's best hotels. Fortunately I was able to jump the queue, as government advisers whisked me to his top-floor suite.

He put his hand on my shoulder and said: 'I like you, Richard.'

'Thanks, Mr President,' I said, rather bowled over by such a welcome. 'Erm, what is it about me that you like?'

'I like the fact that you never wear a tie. I hate those stuffy English gentlemen with their ties.'

Our talks went extremely well and I was able to say that he could be assured of Virgin's commitment to his country. We shook hands on the deal, and the next day we launched a new airline for Africa.

I knew the president admired our flagship, Virgin Atlantic. Though launched as a cut-price airline, its success was also based on giving the business traveller the best customer service in the world. We'd offered our business travellers what first-class passengers on other airlines didn't get. We had pioneered comfortable reclining seats, flat beds, lounges with hairstylists and masseuses, and a motorcycle and limo home-pickup service.

In economy, Virgin Atlantic was the first to provide personal video screens in every seat-back, so that the traveller could choose the films and television shows he or she wanted to watch.

Nigerian Airways had been the nation's flag carrier from 1965 until 2002, but it had been overrun with bureaucracy and riddled with corruption. During the summer of 2004, the Nigerian federal government proposed a new flag carrier as part of its privatisation process. They wanted Virgin's support. On Tuesday 28 September 2004 – the same week we were making an announcement about Virgin Galactic – I flew from London to Abuja to join President Obasanjo once again and the Minister of Aviation, Mallan Isa Yuguda, to sign a Memorandum of Mutual Understanding, which formally established Virgin Nigeria as a new flag carrier.

The airline was created with a $50 million investment, the shares split between the Nigerian investors, with 51 per cent, and Virgin Atlantic, with 49 per cent. The aim was to widen the offering in time on the Nigerian stock exchange. It was set in stone that the home base would be Murtala Muhammed International Airport (MMIA) in Lagos, flying to London, Abuja, Kano and Port Harcourt, then to Abidjan, Accra and Dakar. Although we'd be a minority partner in this new airline, I wanted us to bring all our expertise to help our Nigerian partners create the best airline, not just in Africa – but in the world.

We brought in Simon Harford, who had worked with Barbara Cassani on setting up British Airways' low-cost airline, Go, to be the CEO, and he set about his task with alacrity. He signed up KPMG and Philips Consulting to handle recruitment – a key area for us. We were swamped with applications – nearly 25,000 wanted to join the airline.

Virgin Nigeria was to be built from scratch: a modern airline with excellent service. We believed the business would create several thousand jobs within five years and, indirectly, a further 200,000 jobs.

We set about building a best-in-class terminal for Virgin Nigeria at MMIA, and commissioned EDS to deliver us an integrated airline reservations, ticketing and baggage system that was as good as anything else in the world. We signed a deal to lease the first of our Airbus A320s, with sixteen business-class seats, for the domestic routes.

Meanwhile, Simon and his team were working to finalise approvals from the Nigerian Civil Aviation Authority. On 13 June 2005, tickets went on sale – via phone, travel agents and the Internet – for our inaugural flight from Lagos to London Heathrow, arriving at Terminal 3. The tickets were sold out within a few days. We aimed to fly weekly at first and then three times a week operating an Airbus A340-300, with 187 economy, 28 premium economy and 40 business-class seats.

Our maiden flight left Lagos for London on Tuesday 28 June. The aviation minister, Isa Yaguda, presented the first group of trained cabin crew with their 'wings to fly'.

In the following days the domestic services would be launched too. The initial feedback was tremendous. One regular flyer, Dan Ekpe, said the sight of Virgin Nigeria's aircraft on the tarmac in London had filled him with 'a sense of pride' that a Nigerian carrier was now doing a great job.

In the first ten months, we flew 500,000 passengers on our six planes, two Airbus 340-300s, an A320-200 and three Boeing 737-300s.

On 11 July 2005, President Obasanjo sent Virgin a note to thank us for our commitment: 'I believe that your role in the aviation sector will bring innovation, competition, new technology and, of course, a lot of satisfaction to the Nigerian public.'

He then went on to remind me that there was a need to 'Nigerianise' the staff at all levels in order to anchor the future of the airline on indigenous capacity from management through to technical and cabin crew. 'I know that you have put a quality training facility and programme in place. It is my expectation that you will use these facilities to train Nigerians in all critical areas of airline management and operations.'

We did indeed. We put a lot of time and effort into training and recruiting staff for the airline. We set up a technical partnership with the Nigerian College of Aviation Technology to train new pilots who would then be sent away to get experience on short-haul airlines. We also set up apprenticeships, and offered automatic employment to those trainee engineers who successfully completed their courses.

Within the first year we were able to expand services to Dubai, as well as increasing the internal domestic routes from Lagos to Abuja, Port Harcourt and Kano, as well as Lagos to Johannesburg.

In November, having taken the airline through its momentous launch – a remarkable job in such a short time – Simon Harford decided it was time for someone else to take the reins; he announced that he was moving on. His job was taken up by Conrad Clifford, who had come with me and Simon on my first trip to Nigeria in 1996. It was a challenging time to be taking over, but Conrad, who had set up Virgin Atlantic's operations in Nigeria, was ready to take the airline to its next stage of expansion.

However, I can't deny that I had some concerns about the way things were going.

For the existing Nigerian airlines there were serious problems. One was bankrupt, and while it had enough cash to cover the cost of crews, landing and navigational fees, fuel and insurance, there was no money left for reinvestment and maintenance. Another had only one serviceable plane. The remainder of its fleet was grounded because they could not fund maintenance. This was a simply atrocious situation.

The Federal Airports Authority of Nigeria still required a lot of help to make things work more smoothly. The feedback I received told me that outside Virgin Nigeria, things were being very badly run. It was going to take time to create a superb new airline in Africa. Our competitors in Nigeria still had planes falling out of the sky and customers plummeting to their deaths.

On 22 October 2005, a 25-year-old Bellview Airlines Boeing 737 took off from Lagos with six crew and 111 passengers on board. After passing through 13,000 feet, the plane stalled, tipped and nosedived into the ground. Although the aircraft came down nineteen miles north of Lagos, it took the rescue teams nine hours to locate the wreckage. The plane had an old search-and-rescue system which hampered search efforts.

On 10 December, a Sosoliso Airlines DC10 from Abuja crashed on landing at Port Harcourt, killing 109 people. Among those who died were seventy-one students of Loyola Jesuit College in Abuja who were returning home for their Christmas holiday.

A few months later, again at Port Harcourt, an Air France jet was badly damaged after crashing into a herd of cows. Thankfully, this time, no one was hurt.

Then, on 18 September 2006, a Dornier 228 military plane crashed killing fourteen officers, including ten generals. In another Nigerian crash, a number of senior politicians were killed.

Delivering the Virgin brand in Africa is important – it must stand for the same values as in other parts of the world: integrity, safety and a commitment to customer service. Maintaining the highest standards of safety is something that can never be compromised, and over the years several international transportation groups have been forced to pull out of Africa because the cut-throat local competition chooses to ignore the regulations.

Working in the Nigerian marketplace was becoming increasingly tough. I and my team in Virgin Nigeria were growing increasingly frustrated. We were striving so hard to build a safe, high-quality airline, but we found ourselves thwarted at every turn. We were incurring all the costs of putting together a quality operation from scratch, but in a market that put safety and quality last. We were, in the end, just an airline: we couldn't hope single-handedly to transform the industry's entire infrastructure. We needed help.

I appealed to the president to ensure that companies that were not prepared to operate to the correct standards or who cut corners were dealt with rapidly. If necessary, he should take steps to remove their Air Operator's Certificates. It was simple: unworthy aircraft should be fixed – or scrapped.

Not long after, a directive arrived, forcibly ejecting Virgin Nigeria from its operational base at Lagos Terminal 1 (home of Virgin Atlantic's Nigerian operation), and relocating it at Terminal 2.

We wanted to keep all of our operations in one terminal – to create a hub, rather than be split across two terminals – and this was the binding contract we'd entered into with the government. Conrad and his team were trying to create an airline that could effectively compete on the world stage. The airline had grown dramatically since 2005, operating thirty flights per day with an excellent safety record. Splitting the airline would increase costs considerably.

We prepared to challenge the directive in the courts – and just hours before the hearing, agents who appeared to have the approval of the Federal Ministry of Transportation and the Federal Airports Authority of Nigeria came in the night like mafiosi with sledgehammers and demolished our business-class lounge.

I had to write to President Yar'Adua, Obasanjo's successor, asking him to intervene personally in this dispute. I knew that Nigerians wanted an international and domestic airline that they could be proud of – and we'd worked hard to deliver this. What we needed now was some common sense and cool heads to ensure that disputes never again escalated in this way.

Fortunately, the president took on board what I said in my letter, and as this book is going to print the issue appears to have been resolved.

*

Out of recession, new ideas and new businesses often grow. But how do you deliver new products to a market that's barely staggered free of the emergency room? How do you get people who've spent the last months or even years firefighting to think strategically? This was one of the challenges facing me as I set out to create mobile networks across the world.

Since 1995, I had been harrying our Virgin management team in London to find a way into the growing market for mobile phones. In the last fifteen years, the mobile has become the personal possession that has most changed the way we live and work across the globe. In 1998 more mobile phones were sold worldwide than cars and personal computers combined. But the early dominance of the giant mobile phone companies was not doing the consumer any favours. I was increasingly frustrated and keen to get involved, but we had neither the firepower nor the infrastructure. What we had was the Virgin brand and a service ethos.

Following Gordon McCallum's arrival, we focused on mobile phones as the sector meriting our greatest attention. One of the downsides was that Virgin Radio, our FM radio licence, was doing well, selling advertising slots to the major phone companies, and the management were trying to discourage me from anything that might jeopardise their revenue. The competitive mobile companies were spending huge amounts and there was a fear – unfounded, in my view – that we might lose their custom.

Gordon McCallum, Stephen Murphy and the team identified a report from Goldman Sachs which they thought might whet my appetite. It was all about MVNOs, and as you can probably imagine, it wasn't exactly bedtime reading.

An MVNO is a mobile virtual network operator. It's a phone company, but a phone company without any of the usual telecoms paraphernalia. No telephone exchanges, no phone masts, no networks, wires, switches or cables under the ground. Instead, an MVNO rents time and bandwidth on another carrier's system.

I'm always scouring around for a bargain. And you can usually track them down where someone has produced too much of something and isn't selling enough even to cover their costs. This was happening all over the telecoms industry. The big mobile phone operators had paid vast sums upfront for their mobile infrastructures – now they needed to pull in revenue, and so were keen to lease time to others.

Our first call was to British Telecom, the UK's national phone company, employing tens of thousands of people. Since they had been privatised, BT had been forced by European Union regulations to allow other phone and Internet service providers to piggyback on its massive, fixed-line network. Setting up our own stand-alone telecoms company didn't appeal to us. During our talks I met Tom Alexander, a former professional go-kart racer, who was working with BT Cellnet as deputy commercial director. My instincts about people are usually pretty sharp, and I liked Tom. He shared my passion for business. (He later told me his father had been an inventor in the horticultural industry, and that this had inspired his entrepreneurial streak.)

We thought BT Cellnet would make a good partner, so Virgin made an offer. We started fleshing out how Cellnet as a 'consumer-focused, youth-oriented mobile business' might work with us – and we were also keen to work with BT to secure a third-generation (3G) mobile phone licence. Competition for these five licences on offer in the UK was proving so fierce BT Cellnet had to abandon discussions with Virgin to concentrate on their bid (and, as we subsequently discovered, on one of the most successful rebrands I can think of, to O2, with a much more youth-focused orientation that competes head-on with Virgin Mobile!). Nevertheless, I called Tom. 'Why don't you come over and have a chat about setting up a new company?'

Tom came over that same day to my house in Oxfordshire and we sat with a notebook and pen and plotted how we might run an MVNO.

Gordon and I managed to persuade Tom to jump ship, bringing with him his colleague Joe Steel, then in his early thirties and a mobile phone whizz. Meantime, we began looking for another partner, now that BT Cellnet had pulled out to pursue its bid for a 3G licence. One2One was a company operating in the south-east of England, in the area contained by the M25 orbital motorway. The company was a joint venture between Cable & Wireless and US group MediaOne, and they were keen to talk to us. One2One's strategy of free weekend and evening calls had left it with a network that hardly anyone used during the day. I was sure that Virgin could fill their dead air.

We signed a deal on 1 August 1999, announcing the plan to launch Virgin Mobile in November. Together we were committing over £180 million to the joint venture, using our high street chain of Virgin Megastores and V Shops as our retail channel. But a few weeks later, Cable & Wireless announced it was selling One2One. Deutsche Telekom swooped to buy and it looked as though Virgin Mobile was dead in the water. I decided to intervene. I went to see Deutsche Telekom boss Ron Sommer to smooth the position. To their credit, the Germans got up to speed with our plans incredibly quickly. And to our delight, they liked what they saw: they agreed to proceed and signed off the joint venture, with One2One now becoming T-Mobile.

The Virgin Group and T-Mobile each invested £40 million, giving us £80 million. And we started negotiations with Royal Bank of Scotland and JP Morgan for extra bank debt of £100 million. It was one of the UK's biggest ever start-ups, employing more than 500 people with plans for another 500 jobs within two years. City analysts Investec Henderson Crosthwaite Securities valued the business at £1.36 billion – and we'd yet to make a penny! We had the seed money. We had the confidence of the analysts. Now we needed to prove ourselves. Fast.

If you are a late entrant to a market, you need to be radically different to win over customers. First-mover advantage is often cited in business as giving the early players the edge, but there are plenty of occasions when this isn't the case. In Virgin's favour is the power of the brand, and its arrival into a market can cause some shock waves. This was what we hoped to do with the mobile phone market.

While Tom and Joe were whizzes in the telecoms field, they required an informal lesson in the Virgin brand. The best person to deliver this was James Kydd, who had been working on the launch of Virgin Cola. James was an advertising executive who had known Will Whitehorn since their beer-drinking days in the student union at Aberdeen University, and he had worked in a number of high-profile consumer brand companies. Like so many people who now work for Virgin, he arrived in 1993 to help the airline for three months and ended up staying. We'd had a woeful business-class campaign and I wanted to scrap it. James fixed it and thought it would be fun to hang around Virgin for a while, so we gave him one hell of challenge: the marketing of Virgin Cola and Virgin Vodka. Taking on Coke was, as I'll discuss later, one of our more ambitious business adventures. In 1998, I asked him to join the team on the Virgin Mobile project as brand director.

Meanwhile, the major mobile phone companies were making the consumer's life complicated – deliberately. Across Europe, the consumer demand for mobile phones was shooting into the sky – yet the cost of the latest stylish Nokia, Ericsson, Siemens or Motorola was often prohibitive. So the phone companies began tying the unsuspecting consumer into two- and three-year-long contracts. 'Confusion marketing' was the spurious tag. A customer would sign up and pay for 200 minutes of voice and 100 text messages, but if they used more than this they were charged more per minute not less, as you might expect for being a good customer. This was barmy logic. Of course it was: it was designed to fool people. The industry was deliberately shrouding itself in complexity to fleece people.

James Kydd and Will Whitehorn attended a day-long powwow at a Hertfordshire hotel to discuss the way ahead with a dozen One2One people, including Alan Gow, the finance director, and Tim Samples, the managing director. The discussion was about how the Virgin brand might be effectively applied to the mobile phone market. There were plenty of mobile phone specialists there who could recite the technical spec, but they weren't people who understood our brand. I heard later that James and Will became a little aerated when they tried to defend Virgin Mobile as a consumer-led mobile phone product.

For Virgin, a recurring problem has been that some people who have tried to do business with us think they have bought a label to stick on the front of a product – that 'Virgin' is only a marketing tagline. On the contrary, Virgin has to be the consumer's champion, rather than just a bold red logo. It has been a difficult job over the years, explaining the commercial benefit of this approach – but I think the success of Virgin Mobile has proved beyond a shadow of a doubt that it works. We started from the basic premise: if you rip off the consumer, then you will destroy the integrity of the brand. It's as simple as that.

So we would not follow the 'confusion marketing' of the other guys. I wanted the whole mobile business to be simple enough that even I could understand what I was being charged. It's a basic business message. If the directors can't get their head around the pricing structure of anything, then how on earth is the consumer going to work it out? And we would move into the prepay market so that more young people and those on lower incomes could join the mobile phone revolution.

We needed to keep the tariffs simple. I wrote in my notebook: 'Let people know exactly what they are paying for – and reward those who stay with us. James said think tins of beans! (The more beans they buy the cheaper the price.)'

James told me later that all the phone people looked on in horror when it was suggested that we make life easy for people. It wasn't what our telecoms partners wanted at first. They wanted to continue with the established charging structure. Joe Steel had experience of this kind of pricing plan – so we asked him to turn it on its head. He got it straight away. We looked at discounting – which had to be a central part of our offering – and rewards for loyalty. If your whole family bought mobile phones it would be cheaper; if it was a Virgin to Virgin phone call it would be cheaper. So there was a distinct reason to buy Virgin. We wanted people to come into Virgin Megastores to buy their phones and purchase their prepaid vouchers for airtime, and we signed up a huge number of places – filling stations, high street chains, local corner shops, even nightclubs – where people could top up their mobile phones.

For the launch we set a simple tariff: 15p for the first ten minutes, then 10p for the next ten and then 5p after this. Later, I wanted to make this even simpler. We settled on 15p for the first five minutes and 5p after that. There would be no confusion about peak or off-peak, local or national calls. Calls to other mobile networks would be charged at a flat rate of 35p per minute. Customers would pay £12.50 for a one-off service pack, including a SIM card, phone number and £10 of free airtime. And they would be able to buy their own phone, choosing from seven models priced between £70 and £380.

Once all this was set in stone I had faith that the team we had put together would be able to run and deliver a great business. I wasn't let down – each one of the Virgin Mobile team could feature in a business-school case study of how to build great collaborative business teams. Graeme Hutchinson, who played with a heavy metal rock band that made two albums, was our head of sales. Andrew Ralston in the customer services office worked exceptionally hard to ensure consistency across our call centre. Steven Day, the former Daily Express journalist, joined as director of communications and did a brilliant job of keeping us in the news, as well as helping with investor relations.

Tom, Joe and the team had a real sense of autonomy at Virgin Mobile. I didn't need to be involved day-to-day, but I was sent regular information and figures, which I looked at each night. From the off, the business acted like a listed company – and that's how all start-ups should try to behave. I loved going to the call centre in Trowbridge in Wiltshire to meet the exuberant staff and join in the parties – they knew how to let their hair down and I was exceptionally proud of them all – and delighted for their success. The young Trowbridge staff would turn out in force when I came to visit and they all volunteered to be Virgin Angels at the V Festivals, helping people put up their tents and handing out goodie bags. One of our parties got a little out of hand and the local paper declared on its front page that it had become an orgy, in which drunk young people coupled indiscriminately in the nightclub car park. Good luck to them, I thought: since outside it was minus ten degrees with a foot of snow. Accurate or not, this nonsense was better than a full-page recruitment advert – the following week we were inundated with people wanting to work at Virgin Mobile!

The launch idea was a great caper too: extremely saucy, it made the headlines in all the major UK newspapers. On 11 November 1999, I appeared with seven very attractive women – all naked, except for some strategically placed orange cushions – announcing Virgin Mobile in a giant see-through mobile phone in Trafalgar Square, in the centre of London. Our slogan was: 'What you see is what you get.' I said the confusing range of offers and tariffs out there was just there to fool people, and that if everyone in the UK with a mobile switched to Virgin, they would save a combined £1.6 billion per year.

The Metropolitan Police turned up to find out if our lovely ladies really were stripped bare. We made a swift exit.

I had no idea, back then, how successful this business would become.

On 21 February 2001, I was in Cannes at the 3GSM World Congress, and I announced our intention of making Virgin Mobile the first global MVNO, with non-stop plans to serve ten countries across five continents in the coming years. I informed the delegates about our partnership with Singapore Telecommunications which would result in the launch of Virgin Mobile Asia that summer, and said that partnership plans for Virgin Mobile USA would be announced imminently.

I said Europe, Africa, China, India, Indonesia, Hong Kong, Taiwan, Vietnam and elsewhere throughout South-East Asia and the Pacific Rim were all ripe for MVNOs. I felt I had to explain how it all made sense. 'I believe no self-respecting GSM or future UMTS network could afford to be without an MVNO.' (There were so many acronyms in this business, I'd had to spend the morning rote-learning them. For the record, GSM stands for Groupe Spécial Mobile – the most popular world standard for mobile networks. UMTS – Universal Mobile Telephone System – is its successor.)

It was easy to see why you might want to set up an MVNO. The start-up costs are tiny compared to buying an existing mobile business, and practically non-existent when compared to the cost of building a new network. But what were the benefits for existing network operators?

MVNOs are great at cutting network churn. If a customer is going to leave an operator isn't it better that they go to the MVNO partner than to a rival? Then at least they are still on the network and there's a half-share of ongoing revenues. The MVNO has its brand and the network has its own brand, and different brands attract different people. Two good brands together will invariably attract more custom than one good brand on its own. So, I argued, networks should think of MVNOs as a kind of insurance policy. Collaborating with an MVNO spreads the risks of the business. The 3G standard had made a lot of extra services possible – from on-the-go email to video messaging – but no one really knew how best to exploit, package or sell these services. 'So,' I argued, 'an MVNO with a different strategy on the same network increases the likelihood of success, while stimulating traffic and revenues.'

It wasn't the wittiest presentation I had ever given and it wasn't the glitziest. But my audience was certainly paying attention. The market was in a quandary, and people were anxious to find 3G business models that would work.

The original mobile networks were built mainly for ordinary voice telephony, and assumed transmission rates that these days seem quite slow. At the end of the 1990s, the International Telecommunication Union created a new set of standards called 3G, so that network operators could offer users a range of more advanced services, including video calls and high-speed Internet access. Because 3G networks each use a much narrower band of the radio spectrum than the old networks, there was now room on the spectrum for newcomers to come and try their hand at the mobile telecoms business. At least, that was the theory.

What actually happened was rather different. In Germany and in the UK, for example, the governments' auctions of 3G licences impoverished the very markets they were supposed to encourage. In the UK, the auction effectively imposed a crippling tax on mobile phone operators. It all helped Gordon Brown and Tony Blair and their New Labour project. The money heading for the UK government's coffers was an unbelievable £22 billion, which was a lot of schools and hospitals. To that extent you could see why they were tempted into taking advantage. But it backfired in a way, as the auction winners spent so much on their licences that they ended up really dragging their feet building their networks and developing the very services that the government wanted to promote! We were concerned that T-Mobile might not give us access to 3G, so we wanted to bid ourselves.

Our consortium decided to stick at £1.5 billion, and when bidding for licences began, we were decisively outgunned by silly money. On 5 April 2000 we pulled out of the bidding. At the end of April, the winners were announced: TIW, the Canadian Telecoms company in which Hutchinson Whampoa, better known for 3, have a stake, paid £4.3 billion; BT, One2One and Orange, around £4 billion; Vodafone paid a swingeing £5.9 billion!

We had had a lucky escape by sticking to our principles and only bidding what we thought the licence was worth, not allowing ourselves to get carried away by the open gambling nature of the process itself.

*

In February 2001, as I was speaking at Cannes, describing what I believed was the future for mobile telecommunications – even as I was juggling, or trying to juggle, all those unlovely capital letters, like something out of Dr Seuss – Virgin Mobile's plans were gathering pace in the United States.

In America, the problem with the mobile market wasn't so much that the government had sucked the blood out of it, but more that everyone was reeling from the sheer cost of creating the infrastructure you need to take full advantage of the 3G standard. In the wake of deregulation, companies had piled billions of dollars into new communications gear to deliver everything from telephone services to viable TV networks to high-speed Internet capacity. The capital spending on infrastructure was massive – more than $100 billion in 2000. Dozens of telecoms start-ups set in place during the previous few years began running out of money and folding. Between June and September 2000, the telecoms giants in the US also began to melt down. Business Week in September talked about an industry downturn as the Big Three local phone companies – Verizon Communications, BellSouth and SBC Communications – watched their shares slide.

Annual revenues – increasing at a respectable 10.5 per cent a year – were simply not keeping pace with the cost of these soaring capital projects. Investors were getting their fingers burned. This was what made Virgin Mobile's MVNO such an intriguing option for our new partners, Sprint.

The problem was, Sprint was hurting just as much as everybody else. They were spending more and more time firefighting, less and less time thinking strategically. Shaken by a bad set of quarterly results, Sprint began to lose their enthusiasm for our innovative scheme. Things began to look dodgy and after nearly a year and a half of discussions and investment there was pressure from the finance team to shut it all down. Charles Levine, the president of Sprint PCS, the wireless division of the US telecoms giant, wanted to go ahead, but he was facing strong opposition. It was time for a last-gasp effort. Gordon encouraged me to phone Sprint's group president, Ron LeMay, and the chairman and chief executive, Bill Esrey.

I said it wouldn't cost them a lot.

No response.

I said it would make money for them in a new category.

Nothing.

I wheeled out the big guns. I told them we could transform their stuffy image.

Nothing.

'Look,' I said, fairly desperate by this time, 'you need a brand like Virgin. Right now you're the phone company of choice for . . . for young Republicans.'

And Bill changed his mind.

We were on.

In June 2000 Red Herring, the business technology magazine, listed the '100 Most Important Companies in the World' and their branding. Virgin didn't make the list. Forbes magazine spent time following me for a cover story in July 2000 and its writer Melanie Wells concluded that our brand was stretched too thinly across too many businesses. Gordon McCallum had told me to my face that Virgin was still 'a British brand'.

We needed to be more focused and show we could deliver an outstanding product to tough international markets. We needed to prove ourselves in the right place. And that place was the United States.

In October 2001, Sprint and the Virgin Group officially announced our joint venture – a Virgin-branded MVNO running on Sprint's PCS digital system. Our aim was to target fifteen- to thirty-year-old consumers in the United States.

Our eyes and ears in America was Frances Farrow. I'd asked her to join the board of Virgin Atlantic back in 1993 and she was a thoughtful and incisive person. She was now CEO of Virgin USA, the headquarters of the Virgin Group in North America, responsible for expanding the Virgin brand, developing new business and managing investments in the region.

Conventional wisdom had it that the prepaid market simply wouldn't work in the United States. Prepay phones effectively guarantee anonymity, and people told me that the only people wanting phones like this were the three Ps market: pimps, pushers and prostitutes! We were less than charmed by that argument. We said that it was fundamentally wrong; that the prepay phone was an attractive category for younger people who didn't want to lumber themselves with niggling financial commitments.

We were reminded of an extremely smart guy called Dan Schulman, the CEO of Priceline.com, one of the most recognised brands on the Internet. Dan, who had previously been president of AT&T's consumer markets, was just then bringing Priceline.com into profit. We had already been talking to him about Virgin Atlantic flights on his price comparison site; now we began talking about the future of mobile phones. On 15 June 2001, we were able to confirm the rumours – and we launched Virgin Mobile in the USA.

In the UK, we had now signed up our one millionth customer. In just nineteen months we had established a record as the fastest growing mobile business Britain had ever seen. (It had taken Orange more than three years to hit a million customers, One2One in excess of four years, Vodafone more than eight years and Cellnet almost a decade!)

We were already rolling out Virgin Mobile Australia to a market that was gasping for innovation; Virgin Mobile Canada, France and South Africa would follow once we had perfected the business model. In a Memorandum of Understanding with Sprint, we said our intention was to launch a Virgin Mobile-branded joint venture company in the USA.

Sprint would be hosting the first MVNO in the US. This gave us a head start; but I knew that others would be watching with interest, and it wasn't long before Disney tried – and failed – to do their own MVNO deal. We soon needed a larger injection of capital. We needed a bigger corporate hitter. We asked the executive headhunters Heidrick & Struggles to scour the market and they coincidentally suggested Dan Schulman who moved to us from Priceline.com in May 2001.

Complex as this account has been, I hope it's clear by now that you don't necessarily need an accounting or a legal brain to run a successful business. Our approach has come by asking questions.

What if we create a product and it's the best in the world – will there be a market for it? The answer to this isn't as obvious as it looks at first. If quality always won out in the marketplace, the Betamax videotape format would have trounced VHS and there would be more Apples than PCs.

If, on the other hand, I asked you: 'Do people want to fly with the best airline in the world?' Without any figures or numbers, your answer would be 'Yes'.

When you're first thinking through an idea, it's important not to get bogged down in complexity. Thinking simply and clearly is hard to do. It takes concentration and practice and self-discipline. Reducing those initial reports on the MVNO model to a simple business proposition took work. It also, dare I say it, took a pinch of courage on the part of Virgin risking its brand and on the part of those who left cosy jobs to make the vision a reality.

It's easy to be hoodwinked by technical-sounding detail, and to parrot it at others, and to feel important in doing so. It's hard to ask the naive question. Nobody wants to look silly.

But I would say you can never go too far wrong by thinking like a customer who's new to the business. Why do these mobile charges make no sense? Because they make no sense, that's why! Because they are there to fool you! It staggers me to this day that, when we entered this lucrative and exciting young market, we were the only one in the crowd pointing and laughing as the emperors of the phone industry strode by.

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 Group 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.