THINKFUN, ACT GLOBALLY

How the Maker of Popular Brainteasers Learned to Conquer the Challenges of a Global Business

BY PATRICK DOOLEY , Global Trade Magazine

Master Minds Bill Ritchie and Andrea Barthello, married couple and co-creators of ThinkFun, headquartered in Alexandria, Virginia.

Bill Ritchie is tough to figure out. To his puzzle-enthusiast friends, the co-founder and CEO of ThinkFun is a businessman who enjoys the occasional brainteaser. His colleagues in the business world see Ritchie—an avid puzzler homegrown in a family of “Bell Labs people”—as an incidental international businessman trading on his first love, puzzles.

Ritchie sees the two as one in the same: business is a puzzle.

“The way I approach a puzzle is trying to figure out the underlying structure of it and to unlock its natural rhythms,” says Ritchie from the Alexandria, Virginia, headquarters of ThinkFun, maker of challenge games dreamed up by science types, engineers and mathematicians. “You figure out how its flow wants to be and you try to move it in that direction and see if you can figure it out. I really enjoy that process of trying to work through what is it I don’t understand, how do I massage this area and how do I identify something that’s just not working right and kind of open it up.

“Business,” he says, “is very much the same kind of thing for me.”

The world of international business has afforded Ritchie no shortage of challenges, from orchestrating the company’s first big international break, to dealing with copycats and the ongoing calculations of competing in a highly contested global toy and game industry.

ThinkFun’s initial global breakthrough shared the same “natural rhythms” as the company’s first blockbuster game, Rush Hour. In this puzzle, the player is given a small grid jammed with cars and trucks facing up and down, left to right; the object is to slide these pieces around the board in their given direction, eventually clearing the way for a designated red car to drive out of the gameboard’s single opening. Unless the player moves every piece to the correct position in the correct order, the red car will never get free.

German-Rush-Hour

Ask Ritchie and his wife Andrea Barthello, co-founder of ThinkFun, about their international breakthrough and they’ll give you a memorable name: Izzi Daddaboy. A buyer for Harrods of London, Daddaboy had wandered into ThinkFun’s booth at an annual toy fair—aptly named “Toy Fair”— in the early ’90s and said to Ritchie, “We need to do business together.” But to make this possible, according to Ritchie, the three needed first to slide a number of other pieces into place, clearing the way for the deal.

First, there was the problem of appearance. Before Daddaboy arrived on the scene at Toy Fair, ThinkFun’s packaging was, Ritchie says, “godawful,” too much even for someone like Daddaboy, whom Ritchie says “was in the business of [finding] diamonds in the rough.” But the packaging changed with ThinkFun’s very first export relationship—with a German company that discovered ThinkFun’s first “commercially viable” game, SpinOut, at New York’s Museum of Modern Art.

“This German group that was looking to create the German equivalent of the Sharper Image catalogue came to New York,” says Ritchie. “[They] shopped at the Museum of Modern Art, found SpinOut, contacted us, came down to visit us at Alexandria, set an agreement to send it into Germany, purchased product in bulk and made their own packaging.”

A friendship developed that allowed ThinkFun to use the German distributor’s packaging style and graphics, a totally new look for the young company. “We were being courted by Toys-R-Us to do versions of packaging that had the little kid with the smiling parents behind,” says Ritchie, “sort of the classic beauty-shop thing.” Thanks to the German partner, “we went to a highly graphic, adult-oriented black background with high color accents—a completely different look based on these Germans. That basically put us in a position to have Izzi Daddaboy come and go, ‘Hey, I like these.’”

Daddaboy liked the games so much he inked a deal on the spot for ThinkFun puzzles to be sold at Harrods of London. “I remember going out and celebrating at dinner that night,” Ritchie says. “It wasn’t a slow process. It was sort of amazing how fast the guy moved. Rare, too.”

If the partnership with Daddaboy and Harrods of London was a move made possible by ThinkFun’s first export effort, it follows that this discovery would never have taken place if not for another momentous change Bill and Andrea implemented beforehand.

Having launched the company hand making puzzles from wood and wire out of the couple’s basement in 1985 under the original name Binary Arts, the evolution to injection-molded plastic games necessitated a move to a third-party, Virginia-based manufacturing facility. That arrangement was short-lived. After just three initial products, Ritchie soured on the deal when he brought a new design to the manufacturer.

“I showed it to him and said, ‘Can you quote this for me?’” he recalls. “And he just looked at me, handed it back and sort of laughed and said, ‘No.’ To his mind it was so out of the realm of possibility that he couldn’t even imagine how to manufacture it. He wouldn’t even give me a high price quote on it. He was just like, ‘No, you can’t do that. That’s crazy.’

“It was that moment I realized that I needed to do something if I wanted to keep growing my business.”

That something was to follow a recommendation to a Chinese manufacturer, where Ritchie was given a quote that was “exactly right in line” with his target price for the end user. Not only would the new arrangement allow for more complex designs, it would give ThinkFun a scalability unavailable in its previous U.S. manufacturing arrangement. Suddenly it could produce more games like SpinOut, which would be picked up by the Museum of Modern Art and set in motion the series of events that led to its products being sold in Harrods of London. ThinkFun was now a truly global company.

LEVEL II

As anyone who has ever played a game knows, moving to the next level doesn’t eliminate all challenges—it only creates more complex challenges. Between the times ThinkFun was arranging lasting partnerships in Germany and Europe, it had also found distributors in Canada and Australia. Along the way the company learned a valuable lesson: Work only with like-minded distributors.

“In the early days we would have people come into our booth and sort of say, ‘Hi, I sell into this market and I need a big discount from you because I’m dealing with exports,’” Ritchie recalls. “We’d say, ‘Oh, you want to buy that many? Well, okay, we can do that.’”

These distributors would buy a lot of product without a pricing agreement worked out, creating problems that wouldn’t become apparent until years after the companies had dramatically overcharged back in their home markets. “They would sell through and make a profit, but then the market was kind of dead because the products had gone in at the wrong price,” Ritchie says.

Speaking Your Language For international packaging, ThinkFun relies on its network of distributors to have translations made for local markets. Using local translators, the company keeps the rule explanations lighthearted for a family audience, rather than reading like instruction manuals.

Speaking Your Language For international packaging, ThinkFun relies on its network of distributors to have translations made for local markets. Using local translators, the company keeps the rule explanations lighthearted for a family audience, rather than reading like instruction manuals.

ThinkFun discovered that a department store in Italy had its SpinOut game—a perennial top seller—sitting on its shelf for more than 10 years after buying it from one such distributor. “The way it was described to me is that it was a constant reminder to the buyer of what a bad product it was. The reason is that [the distributor] had overpriced it. It didn’t sell at the price they were charging. A few units made a big stink because they got stuck and were placed by someone who was looking to make a one-season killing.”

So how can an inexperienced exporter avoid the same challenge? First, price fixing is illegal, so you can’t tell someone what to charge. “What you can do,” Ritchie advises, “is have sort of a larger relationship conversation about what the company’s values and philosophies are—what you believe together and what you think is appropriate for the market.

“I think it’s probably the case that as a general thing, when you’re a new company and hitting the blocks and kind of up and coming, there is just a class of [distributors] who basically, they’re bridge burners,” Ritchie says. “They do their thing and they just move on. If you don’t have any experience in that, you’re the bridge that they burn.”

INTERNATIONAL FLATTERY

As ThinkFun’s roster of export markets expanded, so did copycats. “You know how they say copying is the sincerest form of flattery?” asks Chris Gough, ThinkFun’s director of international sales. “It doesn’t make you feel good.”

Call that an understatement.

Barthello recalls: “The worst thing that happened was a distributor in Belgium who basically started making products that looked just like ours, but they weren’t quite specifically knocking us off—but it’s our distributor!”

“They did a good job of distributing our products,” says Gough. “They were aggressive and got us out there, and we had some good years. The problem was they started copying our platform of games and creating their own.”

At the outset of the relationship, the distributor had only been involved in young-age puzzles—think baby toys, like the frames with multi-colored twisty wires that tots slide beads across. Not exactly brainteasers. After taking on the partnership with ThinkFun, suddenly the distributor came out with its own line of multi-challenge puzzles with varying degrees of difficulty. The Rush Hour game, for instance, has 40 challenges with “Beginner” through “Expert” levels. The Belgians began producing games with 50 challenges, and instead of “Beginner” their version was called “Starter.”

It’s an obvious case of a partnership that needed to be severed immediately, but the process wasn’t so simple. “We ended the relationship and we did it to the letter of the contract—to the letter,” says Barthello. “We’re an incredibly honest company. We dealt with the excess inventory and switched distributors—and they sued us! And then it went to arbitration and we had to pay them $350,000 dollars!”

Barthello blames certain Belgian laws she says treat American companies unfavorably, the ineffectiveness of arbitration and the youthful ignorance of not having established a stronger partnership with a more trustworthy company. “There was no reason why a medium-sized company like us should have to pay them,” she says. “And that’s on top of the $100,000 in legal fees we’d already incurred. I was bouncing off the walls!”

ThinkFun holds a number of trademarks, patents and utility patents, the latter of which come into play with their most popular games, Rush Hour and Zinga. Still, it doesn’t stop everyone. “We have a whole big display of knockoffs in our office,” she says.

Barthello says her takeaway is that you have to be vigilant, have good relationships with distributors and realize it’s too expensive to chase down every would-be copycat in the world. “You have to have good legal advice and do the best you can without getting put out of business.”

LEVEL III

Despite manufacturing in China, ThinkFun does not count the country among its list of nearly 60 export markets. Gough says it could be done with the right distributor, but the challenges of the market have thus far stood in the way. For one, the company would have to export its products to Hong Kong and then import them to China—a strange regulation that no one at the company quite knows the reason for. China is also notorious for bootlegging products, so it can be a challenge to find a distributor willing to compete with preexisting, often cheaper knockoffs.

Games-2Gough and company still hunt constantly for new markets that have the right formula for ThinkFun’s success, but perhaps fewer hurdles than China. “I look at the population, the per capita income and some unemployment rates,” Gough says. Though the wrong mix won’t necessarily preclude an effort to crack a given market, it is good to gauge what expectations should be. “You get in some places where really it’s just a small niche of the socioeconomic level in the countries [who] can afford it, and there’s not a lot of places to buy it,” he says.

Because ThinkFun is a small company, it relies heavily on its distributors, making those relationships all the more important. Once a new game is brought to market, it’s the distributor’s job to make sure translations are made for the packaging and instructions in the language of its home country. “Because we’re dealing with games and toys, a lot of the text is designed to be fun and geared toward kids and moms and dads,” Gough says. “You have to maintain the spirit of the text; you don’t want it to read like a manual.”

Once ThinkFun’s Chinese factories ship its games to Hong Kong, the distributors must work with a third-party logistics provider to transport the products to their various markets. Only goods bound for Mexico, Canada and some Latin American countries take a different route. For these markets, which make up about 10 percent of ThinkFun’s total exports, the games are first shipped to the company’s warehouse in Hanover, Pennsylvania, before traveling to their destination with a logistics provider of the distributor’s choosing. 

A WHOLE NEW GAME

While Ritchie keeps an eye on the expansion of ThinkFun’s global presence, he sees a future without borders and with unlimited potential. He has spent most of the past several years analyzing a new platform—a whole new game—and trying to get a sense of its “natural rhythms.”

“The traditional games market today is really challenged because of the new world of electronics,” he says. “There’s just many things where social trends and distribution channels and everything is changing.

“I don’t have a hardcore plan on how to make that an international business. I do think that the revolution that’s waiting to happen is fusing traditional and online and moving into a whole new world of gaming using these new media techniques that are just emerging now.” He envisions a model where his online game sales fuel additional advertising, which in turn triggers higher sales of his physical games. An online component to the physical game can then drive players back to a web-based component to perpetuate the cycle.

“What I’m thinking is, even as the industry really starts to get troubled, our best days are ahead of us. And ahead of us not like some day in the future, but in the next couple years. For me, there’s never been a more exciting time than now.”

One Response to “ThinkFun, Act Globally”

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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