When asked about companies that are great examples of Phoenix Principle companies I like to discuss Virgin. For years Virgin was considered a small company, but it is a great example of a small company that has become very, very big by following The Phoenix Principle.  There is no doubt that the company founder, Richard Branson, had a lot to do with the company’s enormous success (just as Steve Jobs has had a huge impact on the success of Apple and Pixar).  But we can look beyond the flamboyance of Branson to see that the success has had everything to do with avoiding Lock-in to a particular Success Formula and instead accepting Disruptions to constantly create and then manage White Space.

Virgin was founded as a "publishing" company, putting out its first magazine in 1968.  In 1970 I guess you could say it became a "media" company as that’s when it entered mail-order music sales.  By 1971 Virgin expanced into hard assets by opening its first retail record store, and then in 1972 opening its own studio to actually produce its own content, leading to the Virgin label introduction in 1973. In 1976, Success Formula expansion continued with the opening of a nightclub in 1977.  In 1979 Virgin ignored the thinking of everyone else in the "music" industry by signing on The Sex Pistols – an outrageous band which made Virgin a well known label and very wealthy.  By 1980, Virgin was   pretty well established as a publishing/media/music company with enormous profits and great success.  This could easily have Locked-in Virgin.

Then, in 1984 the company realized it had to expand or stagnate.  But it didn’t select just one project.  The company opened a potpouri of new White Space.  Virgin Atlantic Airways was opened to haul passengers, and Virgin Cargo to haul goods. A hotel was opened in Deya, Mallorca.  And Virgin Vision opened shop with a 24 hour satellite music channel.  What do these have in common?  Nothing more than each was a new opportunity to expand the company into high growth industries.  The businesses did not even share the goodness of being in high margin businesses – as practically all were markets where profits were extremely rare to nonexistent.  Thus, the second great Phoenix Principle axiom was applied.  Virgin did not dictate how these projects would succeed.  Rather, they were each given resources and permission to find a new Success Formula in markets where Locked-in competitors did poorly.

In 1994 Virgin Cola was launched as a company to compete with Coke and Pepsi.  In 1996 Virgin opened Virgin Bridal, the first mass-retail approach to the formerly cottage industry of bridal shop goods.  Virgin also partnered with a company winning the contract to build the Channel Tunnel rail link between the UK and Europe.  In 1997 the company got into the rail business full bore with 15 lines in England and plans to expand.  That year the company also launched Virgin Vie – a cosmetics company.  And Virgin Direct banking was opened in the U.K.  Why do I mention these?  Because they were just some of the projects launched in the 1980s and 1990s that did not become wildly well known successes.  Part of creating and managing White Space is trying things that don’t work out.  Portfolio management says that we need a mix of projects, yet most organizations cannot stand the thought of investing in something that does not succeed.  At Virgin, managing White Space does not just mean starting new things – it also means knowing when to sell or otherwise get out.

This all got my attention recently because Virgin America will be going into service soon, carrying air passengers across the U.S. (See full article in CIO Magazine here.)  The project is a marvel at how to manage White Space, culled from decades of doing it well.  Simplification is a cornerstone, as the new enterprise is ignoring long-held "beliefs" about what works with airlines – an industry in which 160 air carriers have gone bankrupt since the deregulation in 1978.  Virgin relies heavily on vendors and contractors/consultants to get things done in the early days.  Rather than use "industry standard" software packages for critical applications like bookings/reservations and scheduling they are literally building their own; and using Linux open source code rather than proprietary source from companies like Oracle or Microsoft.  And much of the work is being done in India by companies that has never worked previously for an airline.  Virgin is demonstrating that competing means doing what your competitors don’t – in order to be more flexible and develop a new competitive advantage.

Great companies are no accident.  What they have in common is a willingness to Disrupt their Lock-in and use White Space to create new Success Formulas.  Long-term, success does not come from understanding your "core competency" and optimizing it (if that were true Virgin would likely have followed the path of Playboy magazine or Sun records – the fabled company that launched Elvis but is now gone), but rather from overcoming market Challenges and developing new solutions to compete. To this day Virgin follows this path, fearing no new markets and entering with their own unique Success Formula developed in White Space.  And anyone can participate, on the company web site is a link where you an submit your own Big Idea for consideration – always on the lookout for Disruptions and opportunities.