Lois Mitten remembers quite lividly her first brush with competition. It was in 1987, five years after she'd founded the Children's Discovery Center, in Toledo. KinderCare, a big day-care chain, was moving into the neighborhood, and one day Mitten was surprised to find two KinderCare managers walking through her center. "I never felt threatened until then," she recalls. In a panic, she ran to her advisers. It was her accountant who urged her to treat the incident as an impetus to differentiate her business.

For ideas, Mitten attended a major child-care conference. But inspiration struck elsewhere: during a chance visit to a children's museum, she fell in love with the hands-on exhibits. "I said, 'This is it! This is unique." She began mapping out designs for a new center; local merchants pitched in to create a play area with a pint-size hospital, veterinarian's office, restaurant, and beauty salon. A 15-foot dinosaur presided over a "fossil dig." In 1989 the new place opened to a rousing reception, signing up 135 kids in two months.

Mitten has visited 10 children's museums nationwide; she opened a second museum-inspired center last year. Her $1.8-million company is on track for 22% growth this year.

* * *