Even Virgin pivoted its business model

Early stage entrepreneurs are not the only ones practicing the art of pivoting business models to find more lucrative opportunities. I've previously posted about the necessity for a business to change (or 'pivot') its business model until it has a business that might be somewhat lucrative. Yet, this is not a practice that is just for startups.

Richard Branson, founder of Virgin, has moved through more businesses than most can imagine. In more recent decades, these have largely been partnerships for the purposes of moving into new markets: Virgin invests the brand, and another partner brings some expertise and money. In the early years, the strategy was more centered around finding the bigger opportunity that naturally flowed from a smaller opportunity that Virgin was already doing business in.

Branson started first publishing a student newspaper in London, UK. Through the paper, Branson realized that he could sell mail-order music across the UK. Pretty soon, Virgin was selling mail-order music through a number of different newspapers and publications. It was a good business that only got better when a disaster stuck -- a three month postal strike in 1971. This led Branson to open a shop on Oxford Street as the only way of continuing to sell records. Branson redefined music retailing. Until then, music stores had been much like libraries: serious and dull. At Virgin's record stores, consumers could lounge on couches and listen to music through in-store music systems with headphones. Virgin's record stores quickly expanded across the country.

Branson's next move - the next pivot - was simple and insightful. He looked that the records that he was selling in the stores and realized that his cut from the price of the goods sold was small compared to what others in the value chain were getting. On this basis, he decided to open a music studio that bands could use to record music. Again, he differentiated the studio. Called The Manor, it was a mansion in the countryside, rather than a closet in a city block. Bands could spend weeks there, refining and recording their music.

Watching artists come and go through the countryside mansion, it was here that Branson's team spotted Mike Oakfield, a backing artist whose own records had been rejected by every record company in the UK. Virgin released Tubular Bells, the success of which rocketed Virgin into position from which it first could become a global music icon, and then a global brand.

The story of how Virgin moved from selling music mail-order through newspapers to signing big-star artists such as Janet Jackson is a familiar story of how entrepreneurs pivot business models.

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