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SIZE DOES MATTER 141
THE ATOMIZED EMPIRE
Much the same principle applies to the way he organizes his
business empire. To avoid bureaucracy, the whole of Virgin is
divided into manageable chunks. To maximize the entrepre-
neurial energy, and to counterbalance the risk of losses in one
part of the empire infecting the other parts, each Virgin venture
is intended to be a stand-alone business (even though in prac-
tice, cash generated by one business is often used to finance
another). This is reflected in the structure of the Group.
Branson rejects Western corporate orthodoxy, preferring a
loose grouping of companies more akin to the Japanese keiretsu
model or family of companies: the Virgin Group is a collection
of semi-independent, loosely connected empires.7
The Group, he says, is defined by its constituent parts. Each
one of which is housed in a different building and encouraged
to have the characteristics of a small business in its own right.
Virgin has an exceptionally decen-
Branson on the
tralized structure. The Virgin brand
atomized Virgin
is controlled by licensing agreements
with each business. (Branson s inter-
empire:
ests are protected by ensuring that he
Where we see
almost invariably has an ownership
an opportunity or
stake of 50 percent or greater.) The
gap, we start a new
businesses are run as independent
division. Every time
companies by their own boards of
directors.
a business gets
too big, we start
The Virgin Group consists of a num-
another one.
ber of divisions or clusters of related
142 BUSINESS THE RICHARD BRANSON WAY
concerns. For example, a travel cluster contains two airlines, an
aviation services business and a travel company. An entertain-
ments cluster includes cinemas, music Megastores, a record
label and film interests. The financial services cluster sells pen-
sions and investment plans.
Where we see an opportunity or gap, we start a new division.
Every time a business gets too big, we start another one, Bran-
son says. This in turn fosters a cozy, informal atmosphere. A
general rule of thumb here is that once a business gets too big to
know everyone by their first name, then it is time to break it up.
Usually there are no more than 60 people in any one building,
Branson says.
THE HOUSEBOAT HQ
Long before they fell out of favor with management gurus, Bran-
son spurned the very idea of a large corporate headquarters.
For many years, he ran the Virgin empire from a houseboat on
the River Thames: board meetings were held around Branson s
kitchen table, or in a nearby pub. When the houseboat sank,
taking most of his belongings with it, he had to make alternative
arrangements.
But even then he wasn t prepared to move into conventional of-
fice space. The Virgin HQ moved upmarket with the purchase
of first one, and eventually a whole string of houses, in London s
trendy Holland Park. Different Virgin businesses were located
in the different houses, providing each with a sense of identity,
and enabling the different management teams to run their own
show. For a while, Branson ran the business from an office in one
of the houses which doubled as his home. He now has an office at
a separate Holland Park address down the road from his house.
SIZE DOES MATTER 143
A visiting reporter described the Vir-
Out of the
gin hub: The house is certainly grand
(creamy walls, white molded ceilings,
apparent random
and all the vast stucco proportions
chaos of the Virgin
the rich in west London acquire) but
organization,
it is nothing like a modern corporate
a business
headquarters. 8
philosophy almost
Even today, the idea of housing the
an entrepreneurial
company in a tower block would be
blueprint could be
anathema to the Branson philoso-
discerned.
phy. The various Virgin businesses
still operate from buildings scattered
around Holland Park.9
GOOD IDEAS ALWAYS WELCOME
The Not Invented Here syndrome is the scourge of many busi-
ness organizations, but the Virgin culture is open to new ideas
from any quarter. Richard Branson has made it company policy
to listen. He has also made it public knowledge that the company
will take a look at business proposals from would-be partners. In
reality, Virgin ends up rejecting about 95 percent out of hand,
preferring to explore the ones that have serious backing.
Within the Virgin organization, Branson heads up a small team
(including himself, and an experienced venture capital expert)
that meets to discuss these proposals.
He has always encouraged Virgin employees to make sugges-
tions for improving the business and estimates that he receives
between 30 and 40 letters a day from Virgin staff. He tries to
reply to their letters first. But the whole structure of the com-
144 BUSINESS THE RICHARD BRANSON WAY
pany is designed to encourage entrepreneurial behavior, and to
engender a sense of belonging.
As Branson s biographer Mick Brown observes: Out of the
apparent random chaos of the Virgin organization, a business
philosophy almost an entrepreneurial blueprint could be
discerned. By situating each company on its own albeit small
and determinedly unglamorous premises overheads were kept
to a minimum, but, more important, a familial atmosphere was
created among staff.
NOTES
1 The management guru Tom Peters, in particular, has raved
about the efforts of companies such as the ABB, the Swed-
ish-Swiss engineering company, to break themselves down
into small entrepreneurial units.
2 He did have an attack of takeover mania in the mid-1980s,
but it was short lived. Virgin s hostile bid for EMI was cut
short by the stock market crash of 1987.
3 AMP subsequently bought out Norwich Union s share in
the venture.
4 Campbell, Andrew and Sadtler, David, Corporate Break-
ups, Strategy & Business, Third Quarter 1998.
5 Rodgers, Paul, The Branson Phenomenon, Enterprise
magazine, March/April 1997.
6 Richard Branson: the interview, Forbes, February 24, 1997.
7 Mitchell, Alan, Leadership by Richard Branson, Amrop Inter-
national, 1995.
8 Has he won the lottery? The Independent, December 17,
1995.
9 Campbell, Andrew and Sadtler, David, Corporate Break-
ups, Strategy & Business, Third Quarter 1998.
SIZE DOES MATTER 145
SIZE DOES MATTER
The Virgin Group is effective because it maximizes the entre-
preneurial spirit of its staff whilst minimizing the bureaucracy
of its systems. Virgin is not a traditional hierarchical company.
Rather, it is a cluster of loosely associated businesses, with
their own offices and their own management teams. The
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