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High-Payoff Business Model Innovations: A Lemonade Stand Example

May 6, 2008
What's involved in business model innovation? You simply need to focus on opportunities that usually pay off.

Let's imagine that your children operate a lemonade stand in front of your house one day. You provide the supplies and help with the preparations.

Let's assume that you want to help your children offer a better value at the current price. You could improve the quality or increase the quantity. Why not do both?

If you as a parent are willing to go along with providing "free" supplies, your children will receive more income.

Your children decide to offer fresh-squeezed lemonade as well as diluted frozen lemonade from concentrate. You serve the lemonade in large ceramic mugs rather than paper cups.

You provide sugar that customers can add to make the lemonade sweeter if they like it that way. You also provide lemon wedges that customers can add to make the lemonade tarter if they prefer that taste. You've changed "what?" you offer as well as "how?".

Next, you look into ways to adjust your price structure and prices to increase sales. Rather than offering lemonade only by the mug, you might offer one price for all the lemonade the customer can drink all day. You could even offer a weekly price for unlimited lemonade.

To appeal to parents, you could offer a family price for the week as well. After testing, you decide on a weekly family price approach to complement your per-mug price.

You've changed "how much?" and "what?" is covered by the price. By going past being opened for one day, you've also changed "when?" you operate.

Then, you realize that you had better look into reducing costs that don't help customers. As a parent, you are only going to financially support this venture so far.

How can you get your lemonade supplies less expensively? You speak to the manager of your local supermarket and learn about a wholesale grocer who would sell to you at lower prices for cash if you pick up the supplies at his warehouse. You've made another change to "what?" you do.

Having been inspired by that cooperative experience, you decide to look for ways to make the lemonade stand more beneficial to all. You start with customers.

Since your children have to be at the lemonade stand all the time anyway, you realize they can offer a limited baby-sitting service as well. This offering increases the incentives for parents to buy the weekly family plan so that their children have something inexpensive to drink while they are with you. Your "what?" has expanded again.
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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