Business Stripped Bare (29 page)

You will not get bored on our flights.

So innovation has to be appropriate for your business. It must fulfil a need, and it must give you an edge over your competitors. Our food-ordering system was an extension of our service philosophy, the idea that the cabin crew wanted to give passengers control. No airline in the world but Virgin America offers on-demand food ordering. We decided that free airline food was a failed model. Free is not necessarily good; customers have low expectations and the airline is pressured to slap down the absolute bottom-quality snack. But our team asked some questions and offered a simple solution: if you pay a little bit, you will get what you want. Customers had passively accepted the norm of free peanuts and then nothing at all ...

The Virgin USA brand team did some research on Virgin's US customers and learned that they tend to be open, ambitious, very social and up for trying new things. It says something about you if you choose to fly with Virgin. You can think of flying as being trapped on a plane with strangers but we think our passengers have more in common with each other than they would with passengers on a legacy carrier. The team liked the idea of giving people a real opportunity for community creation, whether it's on the entertainment system or chatting with the person next to you or texting someone a few rows away.

We knew broadband was coming but couldn't time it, and we needed a stopgap to invite people to chat and interact in the cabin. So Charles put chat rooms and seat-to-seat chatting in the inflight entertainment system, with keyboards at every seat. It's a totally new way of stretching out and interacting while being in a confined space. And through those little seat-back entertainment screens, we created a social community. It didn't hurt that our small new airline's tight-knit cabin crew was friendly, remembered repeat passengers and helped to make each flight feel like a party.

While the commercial team was about to order millions of dollars' worth of planes, the brand team was at the next desk demanding a brighter shade of white from the seat supplier. The supplier had never had this sort of request before; in fact, seat-back colour choices ranged from ten shades of beige to the same of purples and greys ... but no white, and definitely no whiter-than-iPod white.

Lighting on planes tends to be harsh and grim, so Adam designed a mood lighting system with special controls that was custom-developed for us, a first for aeroplanes. Because no whiter-than-iPod white option was available, we gave the seat-backs a unique coating, giving the lighting a sleek surface to reflect off and washing the cabin with soothing light; it was a deliberate visual experience to give the impression of space and freedom.

These simple details are the stuff of Virgin. If that's what business professors call innovation, fine. Innovation is often what you didn't know you wanted until you got it. Now the other airlines look outdated and neglected, so they will have to catch up to our innovation. And so the cycle of competition goes.

Like any Virgin company, the Virgin America team were surrounded by, learned from, and influenced amazing specialists. Colleagues are your best resource at Virgin companies: open and thoughtful people to bounce crazy ideas off – which don't seem so crazy when the person next to you shares your vision and can help you realise it. The Virgin brand demands people like that, people who are going to ask tough questions and demand excellence and something different.

Could the team have worked as effectively in a different setting, a different company? They were indeed extraordinary but the circumstances were equally unusual. The team weren't motivated by getting ahead – there was no corporate ladder and they weren't inspired or intimidated by a bureaucratic hierarchy. They were empowered and they owned the product, and they would have to live with it once it launched. Because the brand is known for being a leader and going against the grain, there's a bit of pressure to innovate – not just for the sake of innovation but truly to deliver something better.

Virgin America also benefited from being the underdog. The airline was a start-up minnow fighting the legacy sharks that wanted to keep its planes grounded. This do-or-die mission was motivating.

Innovation doesn't necessarily mean being first or biggest, but being the best. We weren't the first carrier to introduce low-cost fares to Americans. We aren't interested in flying into every airport in all fifty US states. We want to offer travellers an excellent flying experience to a small but growing number of urban point-to-point centres. We have a model that gives us the flexibility to navigate these turbulent times. We want people to enjoy flying again and that's why Virgin America continues to focus and innovate on the customer experience.

Customers are talking about Virgin America. They're writing in their blogs about a vacation and how it started with a flight on Virgin America and how much fun they had on their flight or how clever the safety video was. They're uploading on their Flickr pages snapshots of themselves on our planes or the inflight entertainment screen.

This tells me we're doing a pretty good job of it so far.

The power of research and development is great – too great just to be let out to graze on the existing market. Governments and powerful philanthropists have understood this for centuries, and have tried, often quite successfully, to harness innovation to their own long-term purposes. I am becoming more and more involved in questions of how we can best direct capital investment to address the problems which we know are round the corner, but which are not yet driving the day-to-day responses of the market.

Schemes to encourage advances in a particular field are not new, of course. The first recorded prize created by the British government was launched in 1714, offering financial incentives to the inventor who developed a device capable of measuring longitude within half a degree of accuracy. This was vital work at the time, because European seafaring nations, including Britain, were finding themselves caught up in increasingly violent skirmishes with each other – all because they couldn't agree on the location of borders and treaty lines in territories far away from their home shores.

Fifty-nine years later the prize was won by John Harrison, a self-educated Yorkshire clockmaker. The prize – £20,000, a vast sum for its time – made his family's fortune.

I've always liked the idea of prizes. Even if a prize isn't awarded because the competitors fail in their attempts to win it, the very fact that there is a target to aim for can drive an idea forward to early maturity. As focus points for venture capital, technical innovation and entrepreneurial ambition, prizes are hugely valuable. And as we've been discovering at Virgin Galactic, our space-tourism operation, prizes like the Ansari X Prize capture the public imagination, providing the commercial applications of the future with a firm foundation.

Indeed, success in the world of aviation has been built on winning trophies. In December 1912 Jacques Schneider – a French industrialist and a fanatical balloonist – offered a trophy for a seaplane race. This was the Schneider Trophy. To secure it – and to pick up 75,000 francs in prize money – a pilot needed to win three races in five years. In 1919 Raymond Orteig, a New York City hotel owner, offered the $25,000 Orteig Prize for the first non-stop transatlantic flight between New York and Paris. It was eventually won by Charles Lindbergh in 1927 – while the Schneider Trophy was still up for grabs. In 1925 the UK's air ministry formed a racing team at Felixstowe, Suffolk, and commissioned the designer Reginald Mitchell to develop a monoplane to compete for the Trophy. The result was the Supermarine S5, which spawned successive improvements. The S6B broke the world speed record by flying at 407mph, a record that remained unbroken for fourteen years – while another direct successor, the legendary Spitfire fighter plane, probably saved Britain from invasion by Nazi Germany.

Prizes are not the only way to encourage research and experiment. Tax breaks serve innovative businesses well. Various schemes have been rolled out by successive governments, with varying degrees of success. In the private sector, the new generation of entrepreneurs emerging from Silicon Valley and elsewhere in the world are keen to encourage new ideas to help them achieve their philanthropic goals. Some of their schemes are incredibly ambitious. You need to be aware of these developments, and I hope that, as well as offering a few lessons about innovation, this chapter will serve, in passing, as an introduction to some exciting and fast-developing areas of business.

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Like so many leaders and heads of state, from Blair to Mandela, President Mikhail Gorbachev was a persuasive salesman. 'Richard, you are known in Russia as a very brave adventurer, surely you would like to be a cosmonaut?'

In the aftermath of the Soviet Union's implosion, Gorbachev was sweeping away all the symbols of the inefficient and discredited communist regime. In the Kremlin, the free market was the buzz, with Margaret Thatcher its flag-waving hero. And it was Thatcher who told her new-found Russian friend that I was worth meeting.

So here we were now, at the Livadia Palace, once the imperial home of Tsar Nicholas and his wife Alexandra, in Yalta on the Black Sea. This was the Italianate residence where Churchill, Roosevelt and Stalin met to redraw the map of Europe at the close of the Second World War. The Russians were very keen to persuade me to help open up this beautiful area for tourists – and earn them much-needed hard currency.

A few days later, I was flown by helicopter to Star City at Baikonur in Kazakhstan for a VIP tour. As a Westerner, it was a privilege to be allowed into this secret world. Here were the creators of the Sputnik satellite, the Vostok, Voskhod and Soyuz manned missions, the Salyut space station – and of the ballistic missiles that had once threatened us. This was where Yuri Gagarin blasted off into space in April 1961 to make history. And now a new breed of Russians occupied this place, negotiating with all the entrepreneurial zeal of a Palo Alto deal-maker.

These guys offered me a once-in-a-lifetime opportunity: to sit in a capsule on top of a Russian rocket and be blasted into space. They were giving me the chance to become the first ever space tourist.

Of course, there was a price tag.

Over $30 million.

At the time Virgin had a high-level ballooning project called Earth Wings and a Soviet cosmonaut was coming to join our team. I was very keen to do business with the Russians – all good grounding for the future when I planned to start a low-cost Russian airline – but the price tag for this junket – $30 million! – was astronomical. It felt immoral to me, the idea of spending that much money on myself.

It's certainly far too much for one individual to fork out for a trip into space. Yet that remains the going rate if you want to spend your annual vacation at the International Space Station. It seems a fortune to pay when there are other priorities in life. It made me question the ridiculous economics of putting people in space – and it sparked my search for the big-business breakthrough that would make space travel a more realistic proposition for many, many more people and be able to get crucial science and technology into orbit at an affordable price to really make a difference to life here on Earth.

I passed up my opportunity, but others were more than willing to pay the price. Dennis Tito (who actually has a scientific background working as an engineer in the Jet Propulsion Laboratory in Pasadena) became the first civilian to go into space in 2001. Tito was followed by Mark Shuttleworth in 2002, Greg Olsen in 2003, Anousheh Ansari in 2006 and Charles Simonyi in 2007. All said the experience surpassed their wildest expectations. As I write this, English-born Richard Garriott, the son of an astronaut, is expecting to fly into orbit in late 2008. He will be only the sixth paying customer. Half a dozen people in space, at a total cost of nearly $200 million – that isn't very good, is it?

Thirty million dollars isn't space tourism. It's private exploration by rich individuals subsidising a Russian mission. The chances of a tourist going into space are currently one billion to one. I want to shorten those odds drastically. I want to see if taking people into space could become a working business proposition and also create a new technological platform for science, satellites and other human activity in space. There is no doubt though that tourists need to be the first stepping stone on our journey.

Our initial task has been to establish the likely demand for what we have in mind. In a new field, this can be hard. What questions should we ask, and how should we interpret the answers we get back?

Market consultancies are a mixed bag, on the whole. You should definitely see what they have to offer, but please, never neglect your own reading and thinking. Consultancies, like any group of experts, are best given something to chew on, and the more insight and detail you can provide about your needs and questions, the more useful the advice you will get back.

I can't deny that, in our hunt for sound advice, our passage has been smoothed by the fact that space has such huge commercial potential. Apart from Virgin Galactic, there are others anxious to become involved in commercial space: there is Jeff Bezos, who made billions selling books and other goods in cyberspace with Amazon.com; the Las Vegas hotel magnate Robert Bigelow, who is now developing a large inflatable space-hotel; John Carmack, the computer-games creator behind hits such as Doom and Quake; Elon Musk, the founder of PayPal, who has set up SpaceX, a commercial orbital transportation service.