Actionable Insights

CEO Playbook - A Tale of Two Lemonade Stands

Dec 16, 2017 2:57:05 PM / by Adam Nathan

 

Business Model - Bartlett System Lemonade Data Strategy

As your company's CEO, you are the chief strategist, designer and evangelist for your business model. The clarity you create around your target customer, your value proposition and the differentiated activities your organization delivers is critical.

If your business model isn't clear - or even defined - then you’re not ready for an investment in an analytics strategy. Put down your checkbook, and Don't Pass Go.

How can you gut check whether your business model is ready? This article contains some key questions and a relatable anecdote about two lemonade stands that should start you on your way.
 

The CEO's Default Business Model

Many businesses, maybe even most, have a muddy hybrid of business models. They have built up over time, one opportunity after another.
 
The same enterprise might have wildly different customer personas, value propositions and activities, some of which cannibalize the others. Yes, checks are still coming in, but the mix of revenue activity and internal mini-businesses are becoming incoherent.
 
Maybe they've built up over time with different leaders, or customer relationships, or opportunities. Maybe every leader reacted to the situation unfolding immediately in front of them with no larger vision. But now there is little to differentiate the business as a whole.
 
There's no business model strategy.
 

 Is This Me?

A great way to spot this is in your company's internal language about its business.
 
Businesses without a differentiated business model tend to sound reactive in their language. Listen for comments that sound like this.
  1. "Our large accounts trust us to help them in a whole bunch of new ways." (We react to large clients)
  2. "We do a little bit of X, but then we won Y so we did that, and now there's a possibility of getting Z. Z is going to be huge." (We react to emerging opportunities)
  3. "Our competitors are doing A and we need to respond to that." (We react to competition)
These reactive approaches might pay the bills for a payroll season (which is why they are so alluring), but they have three fundamental faults.
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3 Challenges with the Default Business Model

The first is that it's hard to scale a business that responds reactively.
 
It requires enormous organizational dexterity and top-flight people to deliver a changing slate of customers, products, services and approaches. It's hard to deliver excellence when focus and resources are spread so thin and so wide. You can only grow as fast as you can respond competitively to each new opportunity. 
 
But that’s not the worst of it:
 
Without a targeted customer, value proposition and differentiated activities, sooner or later businesses end up racing to the bottom on price.
 
Unless you can provide the same goods or services substantially cheaper than your competition (because you have a secret sauce), you will become a provider of commodity service at commodity prices.
 
You will be a supermarket like all supermarkets, a bookstore like all bookstores, a consulting company like all consulting companies.
 
But, wait, there's more! Your troubles have barely begun!
 
What's worse than racing to the bottom on price while trying to find all those amazing people and resources?
 
What's worse is being upended by someone else's business model that does deliver value in a unique and differentiated way. Try watching your clients shift loyalties and pay more for the privilege. Insult to injury.
 
Ugh.

So What's the Strategic Expectation of a CEO?

Unfortunately, you own this problem, and it's yours alone. 

 

It can't be delegated. No external vendor can solve it. Others may have ideas and input, but the business model is yours to build, evangelize and prioritize. It's not a democracy.

 

The business model that you communicate to your board, your leadership team and your rank and file must-must-must create a compelling picture of the customer, the value prop and the differentiated activities your organization provides.
 
And if others can't repeat it back to you coherently, you're not there yet.
 
Business Model Bartlett System CEO Dashboard
 
One of the most powerful things that the CEO's strategic business model does is clarify what not to focus on. This might be half the battle: saying no to things.
 
Michael E Porter - Actionable Analytics - Bartlett System.png
 
Is this true for you and your organization? 
 
If you asked your board or your employees to describe your business model, could they? Or would they run to look for the marketing department's answer on your website?

 

You Are the CEO of a Commodity Lemonade Stand

But I promised you a tale of two lemonade stands, and I haven't delivered yet. So, here we go:
 
Imagine you are the 5th grade CEO of your neighborhood lemonade stand.
 
It's at the end of your parents' driveway. You could call it a multi-generational family business.
 
It's a hot day. You round up some other kids. You get a pitcher, some cups, and sort-of permission to use your mother's sugar. You holler after cars and wave signs that say “Lemonade for $1.” You pour lemonade into cups and all over the folding card table. The customer doesn't care.
 
What could be a simpler way to make money?
 
And, man, this business model has worked for years! It's golden! At $1 your price is outrageous, and you don’t have any competition! The bar is low! Cars pull over and stop, just like dad said! I mean you're killing me! It's a glowing business miracle! You need more water, more sugar, more lemons! 
 
Mom!
 
Your business is still in the age of exclamation marks.
 
But now what if all this activity at the end of your driveway, brings out the entrepreneur in the 5th grade CEO across the street? What if he or she has the same signage cardboard, the same lemonade, the same folding card table and cups?
 
And what if the only differentiation in your business model has been "find an empty street with no other lemonade stands."
 
This CEO stint of yours at the lemonade stand is not going to end happily, but you can probably see this coming.
 

The Competitor CEO's Lemonade Stand 

You know, at first things didn't look too bad for you: 
 
You had five kids on your team and they only had two! Two! They're nobody! They're tiny! They're saving money on sugar and making bitter lemonade!
 
Their lemonade is awful! Beyond awful! And they're charging ridiculous prices! They have spelling mistakes in their signs.
 
I mean you'd almost want to help them except all the cars are stopping over there now.
 
Why? Why? Why?
 
Why's your team all going home? Why does one lemonade stand do seven times better than another when they are running the exact same business with the same business model?
 
Well, for one thing, they aren't running the same business. And it's not the same business model.
 
They are performing a business model magic trick.
 
 
CEO Magic Trick - Business Model

 

The Business Model Magic Trick

While your team was busy pouring lemonade all over top of the card table, the other team's CEO said this to their one teammate:
  1. The Promise
    1. "Joe, we are going to kill the stand across the street. They have no idea what's coming."
    2. "We’re going to do it with less sugar and smaller cups."
    3. "And we're going to charge four dollars a cup, and they'll pay it."
  2. The Customer & Value Proposition
    1. "Crazy, right? But why will they pay so much, you're wondering?"
    2. "Well, I noticed something. I noticed that the adults who stop really just like to help little kids succeed in business. I couldn't tell you why, but this is the exact kind of thing adults care about. That and cat videos. We'll target both."
    3. "Lemonade is not where the value is for the adults. The kids across the street are selling lemonade. But anyone can sell lemonade. We're selling something else, and it has more value to the customer. We're selling a feeling to them, a feeling of having helped children prepare for the world to come. That's our value proposition."
    4. "Are you with me, Joe? Do you see it?"
  3. The Differentiated Activity
    1. "Well, this is what we're going to do:"
    2. "You'll make one sign that says: Support Tomorrow’s Business Leaders"
    3. "You'll make another sign that says: We give 10% to the pet rescue shelter."
    4. "This will be funny: don't even put the word lemonade on the signs."
    5. "And spell things wrong. I'll bet adults even like that, too. They'll think it's charming - and we aim to make our customers happy."
    6. "If you need help, I'll be sitting over here by the till."
And just like that, the startup CEO across the street has run you out of business and back down your driveway.
 
$4 lemonade. Impossible. It's like a magic trick.
 
Is your business model like a magic trick?
 
Download Your CEO Playbook
 

Before Your Analytics Strategy

Sooner or later, mud-brown generic business models fail. They get stuck in a growth rut or are left to compete on price. They're like ROCKY trying to just go the distance.
 
It doesn't matter matter how talented the players are, if the CEO's business model doesn't have some the hint of a magic trick in it.
 
But that's not you.
 
 
You need defined customer personas, a compelling value proposition, and differentiated activities that help you deliver something truly unique and valuable.
 The Bartlett System Analytics Value Lifecycle
 

The Bartlett System Analytics Lifecycle

Our entire Analytics Strategy begins with a differentiated business model. Everything starts here, in your office: the actionable insights, data ROI, data portfolios, CEO dashboards, machine learning, blockchain, all of it.
 
It all starts with you, the CEO.
 
First strategy, then data.
 

There is no point deploying analytics to find the cheapest cups and sugar for your lemonade, if the CEO across the street knows where the magic is - or how to deliver it better than you.

Download our CEO Playbook to learn more.
 
   Download Your CEO Playbook
 

Topics: CEO, Strategy, Business Model

Adam Nathan

Written by Adam Nathan

Adam brings twenty years of experience helping business and non-profit leaders drive value with actionable insights. As a long-time business owner and CEO himself, he understands that creating value from information is never a given and that creating a data driven culture is a learned skill.