Effectuation Stories

          Case studies, lessons and stories about Effectuation!

          Clean Start - Good Kaarma

          In a Lather

          What do you do when you wake up one day in San Francisco and realize you actually want to be living on a sparsely populated Estonian Island in the middle of the Baltic Sea? You make sure you will be able to support yourself, by starting a company there, of course. That is what Stephen and Ea (pronounced e-ah) Greenwood did when they moved to the island of Saaremaa in 2004. But then come the details - what kind of company, where to start, and how to make it work?

          Opportunity Bubbles

          The answer to some of those questions lies in starting with what you have. The Greenwoods took stock of their assets. A derelict farmhouse on 4 hectares of Estonian island real estate. The island of Saaremaa with its numerous beaches and spas, and more specifically, their town of Kaarma. Access to $10,000 in seed investment through a friend managing an EU entrepreneur incubator fund, if they could come up with a convincing idea. And appreciation of a sustainable, organic lifestyle. While it may have been difficult to conceive new venture directions after the first paragraph of start of this story, against these constraints, it actually becomes easier to imagine the Greenwoods in the organic farming industry, in the eco-tourism business, or in the promotion of Estonia to potential US visitors, for example.

          Natural Ingredients

          Adding further to their list of constraints, the Greenwoods knew that startup costs for their business could not exceed the $10,000 funding they might receive from the EU (as they had no more cash to put into the venture), and they decided their business had to have year-round revenue potential. Against the complete set of inputs, the Greenwoods decided to launch a business making organic soap. Potential customers needed to wash all year long, the business required no expensive equipment, and the product would meet their personal desires for a pure and healthy offering.

          Warming the Water

          With the basic idea clear, the Greenwoods were able to put together a plan that enabled them to secure EU funding. And with the money, they started renovation of the farmhouse (their production facility and first retail location). They also started experimenting with soap manufacture (using less expensive non-organic ingredients for practice). Stephen learned computer programming so he could set up an Internet site for the company, and the Greenwoods, continuing to use what they have, named the firm GoodKaarma after their town of Kaarma. Next, the couple began putting together partnerships. They approached local spas, to see whether GoodKaarma could work with them to develop customized soap products that would enhance the spa-goers' experience. And they worked with local designers and printers to create packaging using organic local materials.

          Scrubbing Sensation

          Today, all of GoodKaarma's soap production happens in the farmhouse kitchen using simple household equipment and wooden molds they made. The soaps are created by hand (using certified organic ingredients) in small batches of about 7 kg. Production is year-round with all 13 varieties available on the Internet, as well as exported to retail outlets in Ireland, UK, Sweden, Finland, Denmark and Germany. The soaps are also available throughout Estonia and under private label at many of Saaremaa's best spas. Over 5000 people visited the GoodKaarma Talu (farm) in the summer of 2008 to buy soap, many of them also participating in the Greenwoods second business, hands-on soap making classes. And GoodKaarma was recently recognized by Estonian President Toomas Hendrik Ilves and his family as a model of sustainable entrepreneurship. Perhaps most important, the Greenwoods are now permanent residents of Kaarma. How do you want to spend your life?

          Written by Stuart Read, professor of marketing, IMD, Lausanne, Switzerland and Robert Wiltbank associate professor of strategic management, Willamette University, Oregon, and also available at Business Life.

          Publication: British Airways Business Life
          Stuart Read

          PDF 50X50-1BABL Kaarma

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