Virgin is putting its reputation on the line
City & Business
Sunday 09 February 1997
No doubt Stagecoach, the other main contender for the West Coast franchise, will be feeling a little sore. Perhaps it was hampered by its recent acquisition of Porterbrook Leasing which supplies rolling stock for the West Coast Main Line. That is a contract which could be under threat given Virgin's ambitious and creative rolling stock plans. More importantly, Porterbrook may have rooted Stagecoach too deeply in the past, thus depriving it of the Virgin Vision of tilting trains and sharply reduced travelling times.
As a regular victim of the Stagecoach vision of rail transportation, I have to say I am deeply unimpressed. I am sure the company is awash with statistics demonstrating the great steps forward it has made since it took on the South West trains franchise. Unfortunately, these are not readily apparent on a cold winter's morning when yet another train has been cancelled.
What appears lacking from South West is something that is at the heart of the Virgin ethos - attention to customer service. From aeroplanes to the Internet, whenever Virgin is involved the customer is always made to feel welcome and wanted. This is not because Virgin is staffed by nice people. It is because it is staffed by good business people.
However, Virgin Rail recognises that it takes a lot more than just slapping its name on a few trains to deliver the improvements in value and service that customers demand. There will be no promises of overnight transformations. The company recognises it will be months rather than weeks before all passengers are provided with the service they need.
Virgin is doing more than risking just its capital in its rail venture. It is also putting at risk the Virgin brand name. Railways are a rather different proposition to cola and jeans. Here, exposure to the mass consumer market is not always a matter of choice. Indeed, large chunks of that market are inherently opposed to the concept of rail privatisation. If Virgin fouls up, the consumer will show the company no mercy. That is a great incentive to succeed.
There are many who might like it to fail, but even more who believe it will not. They include an impressive array of financial backers including Bankers Trust, JP Morgan, Electra and the Texas Pacific Group, which are all supporting the Virgin Rail Group. Given that they envisage spending pounds 1bn on the West Coast Main Line franchise over the next few years, they are certainly prepared to put their money where their mouth is.
The Virgin Vision of an integrated rail network is immensely appealing. With fast links between most of Britain's major cities and continental Europe, a service constructed with the customer in mind, and a philosophy that is designed to get travellers out of cars and aeroplanes and back on to trains, it has all the elements of a winning formula.
The only question is, why on earth did someone not think of it a decade ago?
All change at ICI
WHEN ICI was known as the bellwether of British industry it was a much easier business to understand simply because you did not really need to understand it. If what was good for ICI was good for everyone else then what else did you need to know? Today it is a more complex beast. No longer the plodding sheep which everyone else follows, it is now an altogether more active animal that is prepared to twist and turn to meet the needs of ever-changing markets.
The demerger of Zeneca, the pharmaceuticals business, may still be regarded as a defining moment in ICI's history, but the process of continuous change which now runs throughout the company is the more important shift in emphasis. Witness the company's endeavours to fill the value gap. This is not just glorified cost-cutting. ICI has made constructive use of its employee empowerment programme and is now embarked on the Symphony purchasing project, which is designed to save pounds 100m a year through improved processes and practices.
Last week's announcement that ICI plans disposals worth pounds 1.5bn, including the Tioxide business, was perhaps wrongly interpreted as an indication that all ICI can do is get rid of things. That is not the case.
Intriguingly, ICI is amassing a powerful war chest, which leaves it extremely well placed to take advantage of the global restructuring of the chemicals industry that is already under way. This flexibility is at the heart of the new ICI philosophy. The company may operate in old-style cyclical businesses, but that does not mean that all ICI can offer is an old-style predictable response.
Out of the frying pan ...
ANDREW COOK, the chairman and chief executive of William Cook, is no doubt feeling rather pleased with himself this weekend. On Friday Triplex Lloyd formally lapsed its hostile bid for Cook, paving the way for the rival management buyout to proceed. It is a victory that retains Cook's independence and severs the uneasy relationship Mr Cook has had with the City.
However, while William Cook may step out of the public limelight, it will step into intense scrutiny from Electra Fleming, the venture capitalists backing the management buyout.
Venture capitalists are more demanding than institutional investors. What Mr Cook has evaded in terms of quantity will be more than made up for by Electra's quality.
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