🏃 Escape the Competition Trap: Embrace Category Design and Dominate Your Market

What is the problem most businesses face today?

Whether you run a software outsourcing company, a food products company, a restaurant, an HVAC company, a folk art store, a law firm, or you’re a freelancer or marketing agency.

The problem is you’re competing with almost an infinite number of other businesses who do exactly what you do.

We’ve been forced into the commodity business because of the internet.

Every other business out there is just an internet search away.

We’re caught in the game of:

• Better

• Faster

• Cheaper

• More luxurious

• Higher quality

via GIPHY

Better. Faster. Cheaper

That’s the game we’re playing. The game of “competing.”

And we’ve been taught this since we were little. We have to be more “competitive.” We must “compete” in order to win.

It’s part of the capitalist DNA.

But that’s the old way of doing business. It’s the way of commoditization. Of “same-old same old.” Of the path to nowhere fast.

Instead of Competing, Design a New Category

There’s a new way of doing business which puts you at the top of a new category you own.

It’s called Category Design, and it will help you be a category king or queen where you don’t compete with anybody (at least not yet).

Category Design: The Definition

First, let’s define category design: what is it, and why does it matter?

According to the Category Pirates (Chris Lochhead, Eddie Yoon and Nicolas Cole), in their latest book “The 22 Laws of Category Design”:

Category design is about the exponentially different. It’s about creating different futures by creating new and different business categories. Category design is not about competing. It’s about creating.

When you design a new category, you don’t compete with other companies within a category. You don’t try to be the number one company in an existing category.

You eliminate the competition.

In his first book about category design, “Play Bigger,” Chris Lochhead, (with Al Ramadan, Dave Peterson, and Kevin Maney), laying out the case for category design, explained that when designing a new industry category, you define a problem that the market previously didn’t know could be solved.

When you identify – and market – the problem, you define a new category.

Your company then gets associated as the solution to that problem.

In a key passage from “Play Bigger,” Lochhead et al said:

Once the public understands the problem, people latch on to the most popular solution. Given all of the product and service choices people must make, it can get too burdensome to research every offering. So we pick the leader…[t]he perceived best takes almost all the market share; second best manages to hold on to enough to keep going, and the rest get pretty much nothing.

Focus on this last sentence: “The perceived best takes almost all the market share; second best manages to hold on to enough to keep going, and the rest get pretty much nothing.”

(Think Coke vs Pepsi, Google vs Bing, or McDonald’s vs. Burger King).

Why Design a New Category?

The Category Pirates found that category Queens are able to capture 76% of the category economics, leaving their “competitors” to fight it out for the remaining 24%.

In other words, you capture the lion’s share of the market benefits of a category you own. This includes market capitalization, revenue and market share.

You also distinguish yourself from other so-called competitors.

By creating a new category, you’re not better, faster, cheaper.

You’re exponentially different from others.

You are so different that your company defies comparisons.

A Few Category Design Examples

Let’s take a look at Starbucks, for example.

1st Starbucks Store. source: starbucks.com

Starbucks sells $5 coffee, whereas cups of coffee at a gas station cost about $1.50.

Starbucks can’t be compared to anything that existed in the marketplace when it appeared on the scene in the 1970s.

At that time, in the United States, a coffee shop was a diner that sold coffee, and also sold pies, breakfast, sandwiches, dinners and more.

You sat at the counter or at a booth, and a server would come take your order for a “BLT, apple pie and a cup of coffee.”

A coffee house, in the Starbucks sense of the word, is not a traditional American coffee shop.

It’s a new category. And as a result of Starbucks’ explosive rise in popularity, there’s been a subsequent explosion of local coffee houses, all based on the high-end, gourmet coffee concept Starbucks started in the 1970s.

How to Design a New Category

To get a complete roadmap for designing a new category, I recommend reading the complete published works from the Category Pirates, including their newsletter, and their books “The Category Designers’ Toolkit,” “The Marketers’ Guide to Category Design,” “Snow Leopard,” and “The 22 Laws of Category Design.”

But in a nutshell it comes down to the following 6 steps:

1. Identify an Unsolved Problem

Category designers must identify – and solve – a previously unsolved problem for a specific niche.

Whoever frames the problem owns the solution.

• Starbucks solved the problem of no place to get a decent cup of coffee.

• Tesla solved the problem that people concerned for the environment couldn’t find a viable car they could show off to their friends and family.

• Southwest Airlines solved the problem of having to drive three hours to the next big city for a business meeting, and drive back again in time to have dinner with the family.

• Softtek solved the problem of having to communicate late at night, or asynchronously, with your IT outsourcing team, especially if problems needed immediate resolution that only a team on your own time zone can help you with.

2. Name and Claim The Category

Languaging is the next step in your category design process, and it starts with the problem.

When you identify a previously unsolved problem, you name – or rather rename – the problem in a way that sets you up as the hero for your customers who are experiencing this problem.

When Softtek designed the near shore category, they identified time zone problems as an acute problem for US businesses.

By coining the term “near shore,” they immediately contrasted it with “offshore” and started to identify it as a net negative.

Uber highlighted another problem we thought we’d have to live with forever: dirty, unreliable taxis with moody taxi drivers.

But languaging is more than just reframing the problem. It involves inventing a new vocabulary to describe everything associated with your new category.

That’s what HubSpot was able to successfully do when they coined the term “inbound marketing,” or when Salesforce coined the term “Software-as-a-Service (SaaS).”

3. Market Your Category, Not Your Brand

When you become a category designer, you focus on educating the market (with content you create on your blog, on social media, or at conferences and on podcasts) not about your brand, but about your category.

HubSpot did this to perfection.

The book “Inbound Marketing,” together with the HubSpot blog, their trainings and certifications.

And “Inbound,” their popular annual conference.

These have become legendary sources of digital marketing education for B2B companies wanting to learn how to carry out inbound marketing to promote their companies.

And HubSpot’s own software has been the happy beneficiary of their promotion of the inbound marketing category.

As of the writing of this chapter HubSpot’s stock price was trading at $555.36 per share.

4. Innovate Your Category, Business Model and Product

Category designers not only invent a new category vocabulary.

They invent a new business model and a new product as well.

Uber didn’t just invent a new category, they deliver a different product.

It’s not a taxi service. It’s a private car you temporarily hire to take you from one place to another.

Uber doesn’t own any vehicles.

They provide a software layer that enables vetted drivers and passengers to connect with each other, while Uber gets a small percentage of the fee.

5. Focus on Superconsumers

Superconsumers are 20% of your market that account for 80% (or more) of your sales.

They’re the ones who experience the problem you’ve identified.

• They push your category forward.

• They promote you and your category.

• They become an independent sales army on your behalf.

In “The 22 Laws of Category Design,” the Category Pirates say your ‘supers’ are that small segment of your market who are obsessed with the problem and your solution.

They bring 7 different types of wine glasses to a wine tasting.

They’re the Harley riders that go to every motorcycle rally on the calendar.

They’re the ones that go to all the Taylor Swift concerts, own all her t-shirts and swag, buy her CDs and vinyl records.

6. The Information War, the Air War, and the Ground War

You’ve identified a previously unsolved customer problem.

You’ve named and claimed the problem and the solution to design a new category.

You’re not ready to start marketing your category.

The next step is to plan and prosecute the information war, the air war, and the ground war.

• The Information Wars: The information wars are the content you create that establishes the languaging, frameworks, processes and standards of your new category.

• The Air Wars: The air wars are the marketing campaigns you use, leveraging the content created in the information war section. This is the newsletter you write, your Twitter threads, your advertising, your regular weekly podcast, your PR campaign, and more.

• The Ground Wars: The Ground wars are the tactical blocking and tackling that gets the message across on a one on one basis. It’s how you apply the content from the information war to the actual sales strategy. These are the lead magnets, conversion forms, and sales collateral your sales force uses.