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Understand the Seven Dimensions of a Business Model Through an Example

May 6, 2008
You need to know what a business model is. Let's consider a child's lemonade stand to help with your understanding.

Assume you are a parent of two children who set up and operate a lemonade stand in front of your house one day. You provide the supplies and help with the preparations.

Business models contain seven dimensions that define how well your organization is positioned to serve customers and defeat the competition. Here is the list:

1. "Who?" defines all the stakeholders you are serving or affecting.

The stakeholders include you and your children, the customers, suppliers, and anyone whose health or safety is affected by where or how your children operate the lemonade stand.

2. "What?" describes the offerings and their benefits and negative influences that affect each stakeholder.

You and your children are providing lemonade to customers as a source of cooling, refreshment, and calories. Customers benefit from a sense of helping two children.

If the customers are lonely or want to make friends, your children provide companionship.

On the downside, neighbors who are distracted or inconvenienced by what you do find the lemonade stand is a nuisance. You want to minimize the downside by keeping noise down, not blocking the street or sidewalk, and promptly picking up any trash.

3. "When?" captures the timing of offerings' effects on stakeholders.

The timeframe involved includes the hours you operate and thereafter, whenever any effects occur.

4. "Where?" identifies the location for delivering the benefits and other impacts.

The stand is located in front of your home, but the effects can reach wherever the lemonade and trash are carried or traffic is disturbed.

5. "Why?" gives the rationale for providing the stakeholder benefits you deliver.

The reason your children have set up the lemonade stand and that you are helping them is to provide the stakeholder benefits described in the category of "What?" listed previously. In addition, your children enjoy a chance to learn something about business, serve others, make a profit, and have a fun experience. You receive a sense of satisfaction when your children pursue a new constructive interest.

6. "How?" explains your method of providing your offerings and being compensated for them.

Your lemonade is made from frozen concentrate bought at the supermarket, chilled with ice while stored in a portable cooler and served in paper cups. You and your children prepare the materials in the kitchen, carry them out front yourselves, and operate from a portable card table that you help them carry to and from the house. The children advertise with a small sign they made from craft materials bought at the art supply store.

7. "How much?" states the price customers and users pay and incur.

The price is thirty-five cents for the first cup and twenty cents for each refill to the same paper cup.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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