Effectuation Stories

          Case studies, lessons and stories about Effectuation!

          The Story of Gardener's Eden

          Unearthing Opportunity
          As an executive at diversified mail-order retailer Avion Group, Ruth Owades saw opportunity. Choosy gardeners did not have easy access to premium specialty gardening equipment. But these amateur horticulturalists could be profitable, easily reached, and extremely loyal if well served. She proposed the business to Avion, but they had no interest. Her next step was to ask them to take the idea and develop it on her own. Surprisingly, they agreed.

          Harsh Elements
          Ruth had not worked outside the comfortable confines of a corporate environment. A brief investigation into setting up her own operation revealed that investment money for an unproven entrepreneur with an unproven idea was not exactly forthcoming. Ruth's best offer for funding involved her providing 25% of the money for the venture from her own bank account, while giving up 49% of the company to the investors. Determined both to make it work, and not to need another penny of investment, she plunged into business, naming her new venture Gardner's Eden.

          Seeding Symbiotic Relationships
          As Ruth set her idea into actio her approach was simple. Figure out who would benefit from her success. Tell them the story about what she was trying to accomplish. Explain to them why they were critical to the venture and how they would be successful when she was. And push each entity to make an investment to help her be successful.

          Pruning at the Printer
          Ruth's first stop was the printer. To a mail order company, the single largest expense is typically the printing and mailing of the catalog ? a line item that can account for up to half the costs in the business. Ruth needed both a fantastic job, and good financial terms; two elements which are usually mutually exclusive. So she proposed a scheme where the printer would bid on not just her first catalog, but her first two. This showed the printer that she was willing to make a commitment to them, in exchange for favourable treatment on their part. Her suggestion was novel to the industry and was well received. So when she went in and said "Gee, the other printers are offering me 90-day terms. Can't we do better than that?", the printer gave her 6 months to pay.

          Digging Deeper Gardner's Eden needed more than catalogs, however. And Ruth doggedly pursued each supplier necessary to make the venture happen. She negotiated with the utilities so that she did not have to tie up her cash with deposits for the electricity and the telephone. She arranged long credit windows with the suppliers that manufactured the exotic gardening items she intended to sell. She drove hard bargains with both her landlord and with the credit card company for unusually low terms. She even pursued her local postmaster, visiting him again and again until he turned up a forgotten regulation that enabled her to collect her daily mail without any service charge.

          Cultivate with Your Partners
          As the picture came together, Ruth had built an environment where everyone around her had a reason to do something special to make her successful. An environment where she had transformed suppliers to the venture into partners with the venture. An environment where Gardner's Eden was able to flourish. Ruth's revenues well exceeded $1million when Gardner's Eden was acquired by toney home products retailer Williams Sonoma, less than 4 years after she launched the venture. Not bad. As you get ready to dig in the field of opportunity, think about who will benefit from getting their hands dirty with you, and how they can help you be successful. This article was adapted from existing written sources, primarily Harvard Business School case 9-383-051: Ruth M. Owades.

          Written by Stuart Read, professor of marketing at IMD and Saras Sarasvathy, associate professor of business administration at the University of Virgina's Darden School.

          British Airways Business Life
          Stuart Read
          Saras D. Sarasvathy
          Relevant Principles:
          Affordable Loss
          Bird-in-Hand (Means)
          Crazy Quilt (Partnerships)
          Pilot-in-the-Plane (Control vs. Predict)

          PDF 50X50-1BABL Owades

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