Effectuation Stories

          Case studies, lessons and stories about Effectuation!

          Cube Route to Riches: the Story of Rubik Cube

          Stuart Read and Nick Dew look at the lessons tobe learned from Erno Rubik's global bestseller.

          Silver Anniversary of the Cube

          Time to put away those champagne glasses, the 25th anniversary of Rubik's Cube Mania is officially over. Hard to believe that the blockbuster toy that frustrated our childhood and sold almost a hundred million units between 1980 and 1983 is already an antique. But what caused the rise and fall of the product behind the first self-made millionaire from the Communist Block?

          Cubist Means

          Father of the cube Erno Rubik was a sculptor, an architect, and a teacher of interior design. Spatial relationship problems were his business, and realizing them in three dimensions, his specialty. In class he was likely to build a physical design in order to make a point. As he did with the cube. Rubik's cube was not originally intended to be a blockbuster, or even a toy. It was the presentation of a solution to a structural design problem of surfaces in three dimensions that could be manipulated in any direction.

          Inventor turns Entrepreneur

          Technical creations come along all the time. Making a market for them is the job of the entrepreneur. And without such explicit intentions, Rubik started the process by sharing his puzzle with his students and friends. Their attraction to it indicated opportunity. So when Rubik met Tibor Laczi, a salesman from an Austrian computer company, Rubik was open to what happened next.

          ''When Rubik first walked into the room I felt like giving him some money,'' he says. ''He looked like a beggar. He was terribly dressed, and he had a cheap Hungarian cigarette hanging out of his mouth. But I knew I had a genius on my hands. I told him we could sell millions.'' - Tibor Laczi on meeting Erno Rubik

          Building a Block of Partnerships

          Laczi took Rubik's cube to the Nuremberg Toy Fair and there met British toy specialist Tom Kremer. Kremer shared Laczi's attraction to the cube, and the pair negotiated an order for a million Cubes with the Ideal Toy Company in New York. Rubik set up production in his native Hungary, to feed the escalating demand for his toy. But manufacturing high-quality consumer products behind the Iron Curtin in the early 1980s proved an insurmountable challenge. Ironically, the wild success of the cube compounded with the expense of returned defective cubes, ultimately leading to the collapse of Ideal Toy Company.

          The Colors and Sides of Entrepreneurial Value

          The interesting thing about entrepreneurship is that value created in the process finds many homes. Rubik himself came away with about $3million. Laczi did well. The Chinese factories which picked up manufacturing the Hungarians could not handle did well. The event organizers who held Rubik's cube solution competitions did well. Retailers selling the product did well. So though Rubik himself is the obvious entrepreneur, the other players in the story contributed to the process, many benefited from it, and they are all entrepreneurs.

          Solving Your Own Puzzle

          Fortunately, entrepreneurship is not a Rubik's Cube puzzle. There is only 1 correct answer and 43 quintillion wrong ones for Rubik's Cube. Perhaps quite the reverse is true for an entrepreneur. Starting with what you know and using the partnerships you build may offer 43 quintillion possible paths to success. The question is how to align your own particular pieces for the solution that's right for you.

          Written by Stuart Read, professor of marketing at IMD and Nick Dew, assistant professor at the Naval Postgraduate School.

          Publication: British Airways Business Life

          Stuart Read
          Saras D. Sarasvathy
          Relevant Principles:
          Bird-in-Hand (Means)
          Affordable Loss
          Lemonade (Leverage Contingencies)
          Crazy Quilt (Partnerships)
          Pilot-in-the-Plane (Control vs. Predict)

          PDF 50X50-1 babl_rubik.pdf

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