In their book Play Bigger (HarperBusiness, 2016), Silicon Valley business advisory firm Play Bigger LLC co-founders Al Ramadan, Dave Peterson, and Christopher Lochhead, with writer Kevin Maney explore the decision making-strategy behind industry leading businesses. In the following edited excerpt, the authors explain how these companies achieve success through the premeditated design of a new business category.
The strategic secret behind the best new companies is not simply innovation or even disruption--it's a discipline called category design.
Category design means taking rational steps to design the space around your company and product, and changing people's minds so they understand your product or service and demand it. It's the opposite of "build it and they will come," which too rarely works.
The companies that implement category design stand a chance of defining, developing and then dominating an entirely new category of business. It's not hard to think of such category kings, because they're so tightly associated with the category they created. Today's category kings are companies like Salesforce.com, Uber, Google, Facebook, Amazon.com and Apple with its iPhone and iPad. Historic category kings include Kodak, Xerox, Coca-Cola.
In business, the odds are stacked against any one company becoming a category king. Yet we're in an era when the category king wins big and everyone else goes home. If the odds are the same for every company, your company needs to make decisions and implement a strategy that gives it the best chance to beat the odds and beat competing companies.
An occasional category king might be almost entirely the result of luck. But most category kings are not an accident. Many start out with a lucky break, addressing a seemingly small problem that later taps into big demand at exactly the right time. But those companies usually develop and dominate their new categories by making skillful decisions and executing on a purposeful plan.
So there are three things an entrepreneur needs to do to improve his or her odds of success: product design, company design and category design. They may not always happen at the exact same time, but they all must be done.
Entrepreneurs typically start out focusing on product design. They're just trying to build something that works. Product design is the purposeful building of a product and experience that solves the problem the market needs solved. The goal is what is traditionally called a great product/market fit--in other words, a great product/category fit.
Once a company does that, management often turns to company design--figuring out what the company will be like and how it will operate. Company design is the purposeful creation of a business model and an organization with a culture and point of view. The goal is a great company/category fit.
And then...most business leaders stop. They forget that the product and company don't exist in a vacuum--they exist in a space, and if the company doesn't design that space, someone else will, like maybe a competitor. The company that defines the space usually wins it.
Category design, then, is the mindful creation and development of a new market category, designed so the category will pull in customers who will then make the company its king. In marketing terms it's the "air wars"-- winning the war for popular opinion, teaching the world to abandon the old and embrace the new. Category design builds the profile of the space while drawing attention to the company creating it.
There are a million ways to do category design. Here, we describe some of the steps that have helped build recent and past category kings. They include:
-Do a deep dive to discover the category you're creating. Typically, a category is defined either by a problem you can solve in new and unexpected way, or by a technology that solves a problem people didn't even know they had. When Steve Jobs introduced the iPad, he called it a new category of product that sat between the iPhone and laptop. Before that, people didn't know they needed a product in that space. But once Jobs presented the category, the market got it.
-Develop a powerful point of view--or POV--about the category. This is a story that will help the market move from the old way of thinking to your way of thinking--we call it "conditioning the market." The POV is also a way to define the new space on your terms, making it harder for any competitor to claim the space.
-Evangelize the category throughout every part of your company. Every employee needs to buy into the POV. If they do, they will all act in unison to help create a category king.
-Generate "lightning strikes" meant to grab the market's attention and believe that your company is doing something important. These might be stand-alone events, a hijack of an existing industry conference, or a blow-out product launch. The blitz around a new Hollywood blockbuster--including ads, TV appearances by stars, promotional events--is a great model for a lightning strike.
-Using your category to de-position previous categories. Disruption is a by-product of creating a new category that happens to suck the life out of an old category--the way Salesforce.com's cloud-based software emasculated the on-premise CRM software industry. Disruption should never be a goal, but it will be an outcome if you create a great category.
The legendary, enduring companies get the three elements of company design, product design, and category design in such a state of synchronicity, they reinforce each other and build momentum. These enduring companies create and expand categories over and over. Amazon.com has been a master at creating new categories at the same time as it creates a new product while also making sure the company fits the category. It did this with the Kindle e-reader and with Amazon Web Services cloud computing.
And this cycle of product, company and category design is not just for tech startups. Corning has pulled off this kind of strategy over and over for 165 years, and is still doing it today with new categories of glass that never before existed. One of the greatest category creation events in computing history was orchestrated by IBM when it brought out its System/360 computer in 1964, more than fifty years after the company was founded.
Just remember: a great category creates a great company and product, not the other way around. If you can't build and evangelize a great category, the company and product will probably never get traction.