Rowan Gormley: “Ask, don’t tell, if you really want your business to grow”

Rowan Gormley is one of the UK’s most successful serial entrepreneurs and, like all successful entrepreneurs, has collected some scars along the way which ultimately have helped him to achieve his success.

Rowan qualified as an accountant, but hated it so much that he left the day he could. He had always wanted to start his own business and very early on in his career he met Richard Branson, who gave him a job and enabled him to start a business too.

In 1995 and in just ten weeks Rowan, Jayne-Anne Gadhia, Tony Wood and “a bunch of nutters” set up Virgin Money which floated on the stock market for £1.2 billion.

From Virgin Money, Rowan then set up the Virgin One bank account and in 2000 set up Virgin Wines with Laura Knight and his brother Clinton. Virgin Wines was sold to a competitor in 2008, after which Rowan founded Naked Wines.  [Shortly after this interview, Naked Wines was bought by Majestic Wines and Rowan was appointed as Chief Executive of Majestic Wines.]

Hi Rowan and thank you for your time today. Tell us how you came to be here.

The reason I left Virgin Wines was that they fired me. Not Virgin, but the people we sold it to. So, it was quite a traumatic event, but actually it turned out to the best thing that ever happened to me.

After I got the boot, 17 other people resigned. So, we had the opportunity to set up a completely new wine company, but it was in 2008 which was obviously a pretty scary time to be doing anything because the whole world was collapsing around our ears. But this was with a group of people who were really new and excited by it. So, in many ways, it was just a fantastic chance.

We were lucky in that we raised funding very quickly, which enabled us to get started, and, because it was a completely new venture, we were able to look at the business in a completely new way. Instead of just setting up another wine retailer, we really focused on solving a problem.

What problem was that?

The problem is that the two people in the wine business that count, the wine maker and the wine drinker, they’re both getting screwed and all the people in the middle are making all the money. It’s not that anyone is being criminal, it’s just that it’s an incredibly inefficient market. So, what we wanted to come up with was a business where the wine drinker and the wine maker both got a better deal and we built a business that could make money, while still achieving that. So, rather than making money at the expense of suppliers or customers, we wanted to create a virtuous circle, where everyone was better off.

The virtuous circle model that we eventually came up with is that we get our customers to invest in our wine makers and, because our customers help our wine makers by providing them with funding, our wine makers don’t need to waste their time and money selling back to those customers. Which in turn means they can give them better wine for less money. The customers get reward for investing with access to delicious wines they simply wouldn’t be able to buy any other way. And they get to do it at a price that is affordable to normal people, but they’re drinking wines that rich people drink. The end result of the customer proposition is that you no longer need to be rich to drink great wine.

For the wine makers, it is your opportunity to make your wine the way you want to make it, without necessarily having to learn how to become an international businessman.

I’m hearing a lot in your story around integrity?

Yes, that’s absolutely right. The reason we’re called Naked is we figured out that if we’re going to get people to fund wine makers they’ve never heard of, to make wines they’ve never tasted, they really had to be able to trust. The wine drinkers needed to trust the fact that the money was going to go there, the wines were going to be OK and, if they weren’t, we would sort it out and just refund their money.

So, we had to be completely transparent. The customer had to be able to meet the wine maker; they had to be able to talk to each other. It was no good us saying ‘this wine is delicious.’ They had to see that other customers thought that wine was delicious. What that means is you’re pushing the power that companies normally try to hold onto themselves out to your suppliers and your customers. Perversely, I think we’ve landed up with a better company as a result.

That resonates a lot, in terms of win-win business.

Yes, exactly. That’s exactly what we’re trying to achieve. I think, you know, there’s an old way of doing business which is in many industries, where someone is making money at the expense of someone else. We really wanted to try to turn that round, to be more of a ‘making money with other people’ and in a way that was collaborative.

It’s not because – and we are nice people – it’s not because we want to be nice, it’s because we wanted to build a business which had really strong, long-term shareholder value. The best way to do that is you can’t create long-term value if you’re screwing your customers. At some point, it will bite you on the arse.

The idea of ‘creating with’ sounds very much a driver for you personally…

Yes, exactly. Well, it’s worked really well. We’ve got 300,000, we call them Angels, who are people who invest in our wine makers. Last year we did something like €80 million in sales in our sixth year of business. We’ve passed the break-even point and we have a fantastic following from our customers.

As you say, really strong growth within that too…

Yes, exactly.

During your growth journey, were there points at which you were frustrated and, on reflection, were problems of your own making that you needed to see in a different way to unlock that forward motion?

Yes, you know, because you were creating a new kind of business, it was hard. When you went to the wine makers and said “What do you hate most about your job? All right, we can fix all of that for you.” What amazed us was the number of wine makers who, when you were able to show them that you could fix their problem for them, they didn’t want to know.

You think, well, you’ve just told me how much you hate the fact that you sell to an agent, who sells to a retailer, who then beats you up on price and then doesn’t pay you what they agreed to pay you anyway. Yet when we offer you an alternative, you go “Oh, I’m not sure about that.” So, that took a lot of understanding of how to deal with it. Curiously, with our customer-facing staff, one of the things we’ve really emphasised to them is we want customers to experiment and try different wines. That means if someone doesn’t like it, just refund them.

Of course in most businesses, when a customer calls and says “I don’t like the wine, I want my money back,” they try and look after the company, rather than looking after the customer. So, it actually took quite a bit of energy from us to get our people to understand that by looking after the customer, they were looking after the company.

That frustration there, around enabling your people to put the customer in the middle, what was the ‘eureka’ moment for you personally, that enabled you to move beyond that?

I think that the biggest dawning realisation for me was that I couldn’t tell people what to do. The realisation that I can’t do everything myself and telling someone how to do their job wasn’t an efficient way to get them to do their job, that I had to change the way I worked.

Moving from ‘Here are the ten things you need to do, come back and tell me when you’ve done them,’ kind of mode, through to a ‘This is where we want to get to; you tell me how you want to get there.’ Letting people – and forcing people – to figure it out for themselves which actually starts by taking much longer, but, of course, in the end produces much better results because everyone is far more motivated when they’ve built their own plan. They’ve got buy-in into the plan, they’re far more responsible for the outcome.

So, that was a big behavioural change for me because when you start with a start-up, on day one I buy my wines, I write the copy, I design the website and I do all kinds of things I’m not qualified to do. Over time you had to get used to the idea that you had to get other people to do this and you had to get people who were better than you to do it better than you. That was more about sharing a vision and then standing back.

I suppose another thing – another big change for me – has been if someone wasn’t quite nailing the job, I would tend to compensate by picking it up and doing it for them, but of course you can’t do that beyond a certain point. I had to become much more structured about saying ‘Here are my expectations and this is what you need to do to do this job.’ Then, with people who were failing with it, helping them to understand why and where they were falling short and then working with them to sort that out or else get them out of the organisation. It was quite tough.

It is the willingness to have those honest conversations.

Yes. It’s just confronting difficult situations really. The easiest thing to do is to let those things slide.

You’re talking around what I call ‘Letting Grow’. Letting go and sharing control and decisions to enable the team to step up and enable the business to grow. Moving from managing, which is typically a ‘tell’ to achieve a task, to leading. It’s about enabling people to do it for themselves.

Yes, absolutely.

If you were boarding a plane in 30 seconds, what other advice would you give business owners who were looking to grow their business?

30 seconds; I like that! Confront your demons. I think the hardest thing for a business owner to do is to move away from the areas that they are comfortable in to the areas that are tough. I think generally businesses fail never for lack of hard work, never for lack of good intentions and, quite often, people know in advance the reasons why it’s going to fail, but just didn’t confront them.

It’s about trusting yourself…

Yes. As an example of that, when we set up Virgin Wines I had two successful start-ups behind me so I was pretty convinced I was God’s gift to start-ups. We started this business: internet, wine and Virgin. Three sexy words right there; what could possibly go wrong? But we had our proposition completely wrong.

We raised a pile of money at the height of the dotcom boom, blew it all, had absolutely nothing to show for it. We were sitting in a situation where I really couldn’t accept that I’d just got this wrong and we just kept pouring money down the drain instead of acknowledging we’d got it wrong and taking the remedial action. What eventually forced me to do that was running out of money. I wish I’d done it earlier.

Instead of desperately holding onto something that seemed like a good idea a few years ago, but hadn’t worked, we said ‘If we were the new management team coming in to run this business, what would we do?’ As soon as we approached it from that completely fresh point of view, what we saw was selling big wine brands for slightly less than supermarkets wasn’t a viable business.

What customers really wanted from us was access to smaller, artisanal wines. We had to dramatically slash our overheads and bootstrap the business. We did that, we turned it around and we built it back up again into a successful, profitable business, but I probably took a year longer to do that than I should have because I refused to confront the fact that I’d got it wrong.

Thank you for your openness. What was the key to you confronting that? What helped you?

Like I say, running out of money! Part of it was I had a team around me of very good people who’d actually been telling me the right things to do, but I’d struggled to come to terms with it. So, I was fortunate in that I didn’t need to go and invent a new business, there were already people who were helping me to do that. I suppose it was those two, really.

The team around you and listening, being able to take that step back…

Yes, most definitely. Great. Thanks, Angela and all the best.

Thanks, Rowan. I really do appreciate it and I know that many other business owners will too.

In brief

You can’t do it all yourself. Telling people what to do doesn’t make them want to do it. When they feel that they have the control and the tools to work it out themselves they will put so much more in. It takes longer the first few times, but really pays dividends with motivation, buy-in and growth, both their own and that of the business, in the long term.

Moving from tell to ask is the key difference between managing and leading. When you tell you are managing the task. When you ask you are leading the person to grow their skills, be more self-sufficient and enabling them to support the growth of the business.

Confront your demons. Most people can tell you what’s wrong in their business and they procrastinate and rationalise why they’re not taking action to put it right. The health of your business, and often yourself, depends on your ability to confront your demons as a business owner. If you struggle, a good coach will help you learn to identify the actions you need to take and how to take them.

If you want long-term, sustainable business, make sure your business model is win-win, based on mutual trust and collaboration.

Anyone who loves great quality wine at wholesale prices and wants the opportunity to get under the skin of their wine by understanding where and how it’s made and to meet the producers can find out more at www.nakedwines.com/angels. The video of the UK Tasting Tour gives a fantastic insight into how it works and what it’s like to be part of the Naked Wines community.