I see the same problem with positioning happen over and over again. It's commonly treated like a sales and marketing exercise to find that magical statement that makes customers thrown the brochure down and run into your front door.
I believe that's the last step of positioning. The first step is understanding that your brand exists in a fixed territory, selling roughly the same thing, at roughly the same price, to roughly the same audience as your competitors. Positioning doesn't answer the question: "Why Our Brand". It develops a business environment where your customers think: "Why It's Only Your Brand".
Sadly, most brands like to copy what worked already. They copy everything about their competition including the growth strategy, the product features, the messaging, entire customer segments, and often, the pricing. Basically the entire business of a competitor and just put a new name on it. The logic is understandable. If another business is succeeding, moving closer to them feels safer than moving away from them.
You can guess what happens. The more these businesses borrowed from successful competitors, the harder they became to distinguish from them. Their differences disappeared and it wasn't long until they found themselves competing on the only thing they had left: proximity.
That observation stayed with me for years. How do you teach someone that differentiation isn't a branding exercise? How do you help a leadership team feel the consequences of strategic sameness before they experience them in the market?
The answer ended up being lemonade. If a kid can put together a lemonade stand and sell it, it should be easy for a founder or CEO to do the same, right?
That's why I created The Lemonade Stand Challenge. On the surface, it's a simple business simulation. Two teams compete to sell lemonade on a crowded beach. Beneath the surface, it reveals something far more important. It exposes how quickly successful people drift toward the middle of a market.
I've run this exercise with startup founders, business owners, marketing teams, and even the executive leadership team of a multi-billion-dollar chemical company. And they put on one of the best examples of this exercise.
We divided up their leadership and department heads into two teams with one goal: transfer your strategy into the market. Sell lemonade and don't lose your sales dominance to the other guys.
Despite their experience and their million-dollar strategic decisions... both teams rushed straight toward the middle. Not a bad play on the first round. The problem was the following rounds where they both continued to fight for the same central spot, cannibalized each other’s markets, and split customer attention - without creating any meaningful advantage.
Give two groups the same product, the same price, and the same opportunity with the same audience, and most of them will race toward the exact same position because it's easy to benchmark against the person you want to beat instead of innovate for the territory itself.
And that instinct is responsible for more business failures than most people realize.
Here is how you can run this for yourself.
The Inspiration Behind the Lemonade Stand Test
Most businesses misunderstand positioning. They treat it as a marketing exercise, a way to communicate a unique value proposition, craft a clever tagline, or create a compelling website headline.
In that version of the world, positioning happens after the important decisions have already been made. The product is built. The pricing is set. The strategy is decided. Then someone is asked to "position" it.
But positioning was never supposed to be the final step. Positioning is a business strategy. It determines where you compete, who you compete against, how customers evaluate your value, and whether competitors can easily replace you. I think it should influence what product is made, with what features, and how it's expected to exist in a competitive market.
I didn't fully appreciate or understand this distinction until I began working with startup founders. 14 years ago, nobody even knew the word "positioning" and it was years away from being an investable strategy. But even then, I found a way to gamify the science.
The Lemonade Stand Test was born from a frustration I experienced while trying to explain the need for maximum differentiation with startup founders.
No matter how ambitious the team, how innovative the product, or how talented the leadership, I kept seeing the same pattern emerge. Businesses would identify an opportunity, enter a market, and then slowly drift toward whatever their competitors were already doing.
It wasn't intentional. In fact, it usually felt logical.
If a competitor was succeeding, the instinct was to move closer to them. Match their pricing. Mimic their features. Adopt similar messaging. Appeal to the same customers.
The result was predictable: differentiation disappeared.
Over time, I discovered this wasn't just a startup problem. It showed up in established companies, executive teams, and entire industries. The gravitational pull toward the center of the market is incredibly powerful. Economists have studied this behavior for decades through concepts like Hotelling's Law, which explains why competitors often cluster together instead of carving out distinct positions.
The problem is that customers rarely reward similarity. The businesses that create outsized growth are usually the ones willing to claim territory others ignore, serve customers differently, and build advantages competitors struggle to replicate.
I created the Lemonade Stand Test to make that lesson impossible to miss.
Rather than teaching positioning through slides and theory, the exercise allows teams to experience the consequences of sameness firsthand. Within minutes, participants watch themselves drift toward the middle, compete for the same customers, and dilute their own advantages.
More importantly, they discover something far more valuable: growth rarely comes from fitting in. It comes from understanding your unique advantage and building a strategy around it with conviction. They get to compete against colleagues, knowing they share the same goals and a fixed amount of customers in a shared territory. Your sales will come from meaningful difference. Not a marketing pitch but the way the business is built to compete.
Because the goal isn't to become a slightly better version of your competitors. The goal is to become the option customers can't easily compare.
What is the Lemonade Stand Challenge
The Lemonade Stand Challenge is a short and impactful exercise I utilize working with clients, teach at workshops and events, and even kick off a yearly incubator and startup accelerator with.
I maintain that it is one of the most powerful hour sessions that any company can utilize, whether you're a multi-billion dollar conglomerate or a startup about to take it's first step.
The exercise is straightforward. Two groups start selling lemonade on a fixed beach. It's easy to visualize with a single sheet of paper or a large, central whiteboard. Each team starts selling the same cup of lemonade, at the same price to the same audience. Their first goal is make to make sales by controlling territory. Through a couple rounds, the goal stays the same: make sales, except the teams are free to change any element of their business they wish to keep their competitive edge.
The challenge is straightforward. The lesson it to show participants that winning in competitive environments requires understanding customers, anticipating competition, and adapting based on intelligence and behavior, all within limited territory and resources.
The greatest lesson here - besides the opportunity to playfully yelling at their competitors - is that the best ideas come from calculated distance. Sometimes being the consultant helps me dispassionately analyze things that companies are too close to the problem to see. Secondly, teamwork is never to be underestimated.
At its core, The Lemonade Stand Challenge is about forcing differentiation under pressure. It shows, faster and more brutally than any theoretical workshop ever could, how quickly businesses default to sameness when survival instincts kick in. And it reveals the core truth every brand must understand: you don't win by being available, you win by being unmistakable.
When I managed a startup accelerator, my core goal above every action revolved around showing founders where their real unfair advantage lived and how they could exploit it before competitors even saw it coming.
It wasn't enough to just work hard on a passionate idea. They had to out-position, out-maneuver, and out-differentiate.
Perform The Challenge With Your Team
Like I said, this is possibly one of the single most profitable 30 minute sessions you can do with your team. On the surface, it's a simple simulation. Two teams compete to sell lemonade on a crowded beach. Beneath the surface, it reveals how companies make strategic decisions, how they react to competition, and how quickly they drift toward commoditization when they fail to differentiate.
What begins as a simple exercise often turns into a mirror reflecting how organizations operate in the real world.
PREPERATION
Divide everyone into two teams. If teams are larger than 4-6 players, I usually make two concurrent sessions so teams are small and agile. It's important that there is at least one judge that is facilitating the game. I usually like having the rest of the crowd working collectively as the judges and giving challenges to the teams as they build.
You only need a large shared whiteboard or a single piece of paper on a table. For the sake of the game, the beach covers the entire piece of paper of whiteboard. Along the top of the playing field is the ocean while the bottom is a range of hotels separated by a boardwalk. Teams can freely draw on the whiteboard/paper to show where they would place their lemonade stand and any other changes they feel is relevant.
The judge is encouraged to throw in curve balls.
The exercise is easily done in 15-30 minutes depending on how fast conversation moves. As the judge, I usually give two minutes for each team to deliberate on their current strategy for the round. After each team is ready, they each get 60 seconds to pitch their strategy and then start the next round. The game is usually held over 3-4 rounds. Slowing the game is incredibly beneficial and gives room for more cross talk.
Round One: The Equal Start
The exercise begins with a level playing field. It's important that each team understands the only major variable in a controlled market is their approach.
Each team is selling:
- The same lemonade
- The same pricing
- The same stand size
- The same resources
- The same beachfront map
Their objective is straightforward: Place your lemonade stand somewhere on the beach and capture as many customers as possible. The only decision available is location. You can adapt the rules but I usually tell everyone they are selling a 12 ounce cup of lemonade for $1.
No marketing campaigns. No discounts. No product innovation. No special promotions. Just territorial positioning.
What makes this round so powerful is its simplicity. Participants are forced to answer a question every business eventually faces: Where do we compete? Most teams immediately begin searching for the highest concentration of customers. They look for the center of the beach, the busiest pathways, and the areas with the greatest amount of foot traffic.
At first glance, this feels like the obvious answer. The problem is that competitors are usually thinking the exact same thing.
As teams gravitate toward the same territory, they begin splitting demand rather than owning it. Instead of creating advantage, they create direct competition. Rather than controlling a market, they fight over shared customers.
Without realizing it, they have recreated one of the most common mistakes in business: Competing where everyone else already competes.
The lesson from Round One is simple. Even when products are identical, positioning and branding matter. Where you place yourself influences outcomes long before customers ever compare features, benefits, or pricing.
Round Two: Open Innovation
Once participants understand the limitations of location alone, the game changes. All constraints are removed and teams are now free to redesign their business however they choose.
They can:
- Introduce new pricing models
- Launch multiple stands
- Upgrade their product
- Create flavors, combinations, or premium offerings
- Form partnerships with nearby attractions
- Offer loyalty programs
- Target specific customer groups
- Improve convenience, speed, or experience
Now teams are no longer competing with identical offers, they are solely competing on the territory itself. They are competing unfairly. Thinking strategically about an offer they can fully own that their direct competitor can't. In fact, it's not even about competition. You should learn that it's easier to utilize competition so that they become irrelevant.
The shift is immediate. Instead of asking, "Where should we stand?" teams begin asking:
- Who are we trying to serve?
- What do customers actually value?
- How can we become the obvious choice?
- What can we offer that others cannot?
The conversation evolves from geography to value creation instantly. Some teams attempt to win through lower prices. Others pursue premium experiences. Some focus on convenience. Others specialize around specific customer groups such as families, athletes, or tourists.
There really isn't a wrong answer here. The most successful teams discover an important truth: The better product doesn't always win. The better strategy does.
Customers do not buy products in isolation. They buy context, relevance, convenience, experience, identity, and outcomes. The teams that recognize this begin building genuine advantages rather than simply hoping customers choose them.
Round Three: Competitive Warfare
The final round is always my favorite because teams have information on the playing field, their own strategic direction, and their competitor's direction as well. Known Competition is a very helpful data point.
Now every team can see exactly what the other side is doing. You can see their goals and the actions they are taking to enforce them. If they are prioritizing locations, don't compete on the same goal and instead build a Tiki hut. You can each pioneer on your own strengths and fight FOR customers, not AGAINST each other.
The most exciting part is that nothing exists in isolation anymore and every strategic move creates consequences. Teams can redesign their offers, reposition their stands, adjust pricing, change ingredients, add new products, target new audiences, and respond to emerging threats.
Counter-positioning is encouraged. Adaptation becomes mandatory. This is where the exercise becomes truly revealing.
Many teams discover that their original strategy only worked because nobody challenged it. Others realize that what looked unique was actually easy to copy. Some become trapped in reactive decision-making, constantly responding to competitors rather than creating their own advantages. The strongest teams begin thinking several moves ahead.
Instead of simply reacting, they start asking:
- What will competitors do next?
- What gaps are being left unserved?
- What position would be difficult to attack?
- How do we make comparison less relevant?
The conversation shifts from selling lemonade to controlling strategic territory. Participants begin to understand that positioning is not a static decision.
It is an ongoing game of adaptation, anticipation, and advantage creation. Every move changes the battlefield. Every decision influences the options available to competitors. Positioning becomes less like advertising and more like chess.
The Hidden Lesson Most Businesses Miss
The most interesting insight isn't what happens during the exercise. It's what participants realize afterward.
Many businesses believe they're operating in a sophisticated market strategy.
In reality, they're still playing Round One. They're selling nearly identical products. Targeting nearly identical customers. Making nearly identical claims. Competing in nearly identical places. Then they wonder why growth feels difficult.
My Lemonade Stand Challenge reveals that success rarely comes from trying harder in the middle of the market.
It comes from intentionally creating advantages others cannot easily replicate. Because customers aren't choosing between products.
They're choosing between positions. And the businesses that win aren't necessarily louder, bigger, or better funded. They're simply easier to choose.
The Danger of Drifting Toward the Middle
Economists have observed this phenomenon for decades. I frequently reference The Principle of Minimum Differentiation shared in Hotelling's Law, an inspiration behind this exercise. I've built off it's major concepts, but love referencing it as it highlights the brutal reality that in a competitive market, businesses often end up clustering around the middle, offering nearly identical products, services, or placements, even if it’s not ideal for customers.
It was first formalized by Harold Hotelling in 1929 in an economic paper about spatial competition. I have a longer review of Hotelling's Law that breaks down the origin, use, and modern limitations here.
Hotelling’s Law in Simple Terms
- If two competitors are selling the same thing to the same group of people, they’ll drift closer and closer togetherover time to try to "capture" as much of the market as possible.
- Instead of one vendor going left and the other going right (to better serve different customers), they both squeeze toward the middle.
- This "meet in the middle" instinct leads to commoditization: offerings become virtually indistinguishable except for tiny differences.
- The fear is that if you're too different, you’ll lose easy access to the biggest group of buyers — so businesses copy each other, cluster together, and slowly destroy their own differentiation.
The tendency for businesses to drift toward the middle isn't just anecdotal. It's a well-documented economic phenomenon known as Hotelling's Law. I break down the concept and its implications for modern businesses in a separate article about My Principle of Maximum Differentiation.
When competitors are left to make decisions independently, they tend to drift toward one another. They cluster around the same customers, the same features, and the same messaging.
The result is a market full of businesses fighting over increasingly small differences.
What begins as competition eventually becomes commoditization. This is why differentiation cannot be treated as a marketing activity. It must become a strategic discipline.
Without deliberate differentiation, businesses naturally migrate toward sameness. And sameness is where margins shrink, loyalty disappears, and growth becomes increasingly difficult.
The Real Takeaway
It should be easy to see why I love this game. The Lemonade Stand Test is a fun, social, gamified lesson about competitive strategy.
It teaches that positioning is not something you communicate after the fact. Positioning is a series of strategic choices that determine where you compete, how you create value, and whether competitors can easily replace you.
The most dangerous thing about competition isn't that your competitors are getting better. It's that they're getting closer. Closer to your products. Closer to your messaging. Closer to your customers. Closer to your category.
And if you're not actively creating distance between yourself and the rest of the market, you're slowly becoming interchangeable with it.
That's the real lesson behind The Lemonade Stand Challenge. The businesses that win don't necessarily have the biggest budgets, the loudest marketing, or even the best products. They have the clearest strategic position. They understand who they serve, where they create value, and why customers should choose them over every available alternative.
Most importantly, they refuse to drift toward the middle. Because the middle is where differentiation dies.
The Lemonade Stand Challenge is one of my favorite exercises because it compresses years of market lessons into a single experience. In less than an hour, teams can see the forces that push businesses toward commoditization and discover how strategic positioning creates unfair advantages that competitors struggle to replicate.
I've facilitated this exercise with startup founders, executive leadership teams, marketing departments, innovation groups, and organizations navigating growth, change, and competitive pressure. It works equally well as a leadership workshop, strategic planning session, team retreat, conference breakout, or innovation event.
If your team is struggling to differentiate, facing increased competition, preparing for growth, or simply needs a new way to think about market strategy, I'd be happy to bring The Lemonade Stand Challenge to your organization.
Because positioning isn't something you talk about. It's something you practice. And the companies that practice it consistently are the ones that shape markets instead of chasing them.