Q: When everything goes right in a business, things feel easy and rewarding. When things go wrong, you have to learn how to fix them and move forward. What was one of the biggest mistakes you ever made in business, and how did you correct it and bounce back? — Jason Weiss
A couple of weeks ago I was in New York, and I took a cab to a meeting. It was early morning when we drove through Times Square, so the place was relatively empty. The car stopped at a set of lights, and I looked up and saw a sea of red looming over me that brought a smile to my face. Though I was a little bleary-eyed, I jumped out of the cab, pulling a colleague along, and had some pictures taken in front of the giant Virgin Disruptors ad, which was promoting a debate that we were holding in the city later that night. Seeing your brand’s name up in lights is always exciting — especially when you’re not expecting it.
After I got back in the cab, I started thinking back to the other memories of Times Square. For years, our Virgin Megastore sat right in the middle of the iconic intersection; I remembered how great it was to see the hustle and bustle of tourists inside.
The next memory that came to mind put a wry smile on my face — the time we crashed a tank in Times Square.
It’s fair to say that our launch of Virgin Cola in 1994 was not subtle. Driving a tank through New York’s streets before smashing through a wall of Coca-Cola cans certainly created some front-page headlines, which was exactly what we wanted. With Virgin Cola, we felt confident that we could smash our way past Coca-Cola and Pepsi, our main competitors. It turned out, however, that we hadn’t thought things through. Declaring a soft drink war on Coke was madness.
I consider our cola venture to be one of the biggest mistakes we ever made — but I still wouldn’t change a thing. As you pointed out, Jason, mistakes give you the chance to bounce back and make smarter choices the next time around.
Virgin Cola did have a promising start. Despite the fact that our marketing budget was only a fraction of Coca-Cola’s, we managed to garner a fantastic amount of media attention, and much of it was very positive. But the more noise we made, the more seriously Coke began to take us. And when you’re starting a business, it might seem flattering to receive attention from a rival at first, but it starts to become much less enjoyable when you realize that your competitor has billions of dollars in profits at their disposal, and they’re going to use it to bring you down.
We had effectively parked our tank on the lawn of the world’s largest soft drinks brand, and we weren’t quite prepared for the size or the ferocity of Coca-Cola’s response, which included a steep increase in their marketing budget and pressure on distributors not to work with us. Had we known how the company would react, we may well have taken a different approach. That was the first of two reasons that we failed. The other, more important, reason was the fact that we didn’t follow our own rules, which is a cardinal sin. Virgin only enters an industry when we think we can offer consumers something strikingly different that will disrupt the market, but there wasn’t really an opportunity to do that in the soft drinks sector. People were already getting a product that they liked, at a price they were happy to pay – Virgin Cola just wasn’t different enough (even if we did create bottles shaped like Pamela Anderson that kept tipping over because they were top-heavy!).
Nevertheless, it was a great learning experience for our team, and in taking on the role of plucky underdog, Virgin seemed to win over a lot of the American public, which certainly made things easier when we launched subsequent businesses there, including our airline.
When we started up Virgin America, the U.S. market was flooded with domestic airlines that were offering their customers, quite an appalling level of service. We were able to shake things up and provide our passengers a truly different, vastly improved experience, which quickly won us a lot of support and, more importantly, a lot of customers.
Perhaps the biggest positive to come from Virgin Cola, however indirectly, was the launch of Innocent Drinks. Co-founder Richard Reed, a former employee at Virgin Cola, was inspired by his experience, and later started selling his own smoothies with a couple of friends. He now heads one of the biggest, most purposeful drinks brands in Britain. And it’s very satisfying to know that he got his start at one of our Virgin businesses.