There are many ways you can vary this activity. You can make it a game. If you have more than one child, you can see who gets the most words. Or, you can do it with your child and based upon age, you have to get double or triple, etc. the amount of words your child creates. Make sure to go over the words with your child and correct (or have your child correct) any spelling errors. That is part of the learning process.
I have used this activity in the classroom as an activity for students to work on if they finish their other work before others. I have also created an entire lesson around it. I have discussed strategies of getting the most words. For example, once you make a word, see if you can add different endings to it like "s," "er," or "ing." Or, another strategy might be to find all the rhyming words to the word you create.