Why Category Design Is A Marketing Superpower w/Christopher Lochhead

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Every marketer needs a superpower.

But Christoper Lochhead may have uncovered the greatest superpower of all.

It’s something called category design.

Category design is the process of building a new space that your company can own and dominate over the long term.

It’s about “following your different” instead of trying to be “better.”

As the co-author of future classics Play Bigger and Niche Down, Chris could easily be called the godfather of category design.

That’s why I was so thrilled to interview Chris for the #categorycreation series on the B2B Growth Show.

Chris’s advice on category design is pretty extensive, so we’ve broken his interview into two parts. In part one, Chris shares:

  • Why category design is a marketing superpower.
  • Why category kings tend to capture 76% of a market’s economics on average.
  • What the 3 pillars of a legendary company are.

And in part two, things get even more interesting. Chris will discuss:

  • Why believes Pepsi’s attempt to unseat Coke as the category king is one of the dumbest marketing efforts ever.
  • What Picasso can teach marketers about the importance of being different.
  • Why trying to convince people that you’re better than something else can actually work against you.
Both episodes are below, and you can also find them in Apple PodcastsGoogle Play, Stitcher, or Spotify.
 
Part 1
 

Part 2

John Rougeux: Chris, welcome to the show today. So great that you can be with me today.

 

Chris Lochhead: John. Thank you for having me on. I’m stoked to be here. Yeah, yeah.

 

John Rougeux: You know, as a student of category design, just getting to interview you is, uh, is pretty humbling. It’s a huge honor. And, uh, just yeah, I can’t thank you enough for taking the time to be with me.

 

Chris Lochhead: Well, I can’t thank you enough for having me and I’m a student of category design too.

 

John Rougeux: Yeah. Well, I think it’s safe to say that you’re a little bit further ahead of me, but, uh, uh, you know, we’ve, we’ve got a lot of talk about in that, in that regard. Um, but you know, before we dive into things, I go, got to ask you, Chris, you wrote this book with a few others called play bigger and one of the authors described you as the Bruce Willis of CMOs, or like the Bruce Willis, if you were a CMO in a Die Hard movie. So I want to ask you, is that your superhero or is that your action hero of choice or was that kind of thrust upon you?

 

Chris Lochhead: It’s funny, I forgot that. Yeah, Kevin Maney wrote that, which is very, uh, fun I guess.

 

Chris Lochead: Um, I mean my superhero as a kid and even today as an adult that I related to more was always Batman and Bruce Willis was not, uh, it was not famous when I was a kid. But, um, it’s hard not to love, particularly the first diehard movie.

 

John Rougeux: You haven’t gotten any, uh, uh, glass in your feet and your marketing career?

 

Chris Lochhead:  That will help, you know, I’ve gotten a lot of glass with my feet and my marketing career and I’ve had a lot of people shoot at me and call me names, tried to kill me and a wish ill upon me. So, uh, I, I relate to that part of it and I’ve left a lot of blood, sweat and tears on the, on the marketing startup battlefield, so to speak.

 

John Rougeux: All right, well, speaking of blood, sweat and tears, you’ve, uh, you’ve built a major consulting company called, uh, Scient during the dot com boom. I think you once hired a couple of thousand people in just three years later, you help reposition Macromedia before Adobe made that acquisition and even turned a software company called Mercury Interactive from a $1 billion company to a $5 billion company. So maybe to give us some context for the interview today, can you just give me a little bit more about your, uh, your 30 years of marketing experience and how that brought you to where you are today?

 

Chris Lochhead: Sure. Um, so as you said, you know, I’ve, I’ve done three tours of duty as a public company, in tech, a CMO in silicon valley, and I got started pretty early on John. Um, I got thrown out of school at 18 for failing out and being stupid. And so I like a lot of entrepreneurs. Um, you know, for me, entrepreneurship was not a way, uh, up in the world necessarily, but a way out, you know, a way out of a life of struggle. And I think for a lot of us entrepreneurs, um, uh, we, we, we, we start a, because it’s no one else will bet on our future because there’s no evidence that betting on us makes any sense at all. And so, you know, in a lot of ways, entrepreneurship is a way to bet on yourself. And so I very early on bet on myself and started my first company at 18. And then by the time I was 27, 28, I was here in Silicon Valley and I was the head of marketing for a publicly traded software company. But at the time, you know, just onward and upward since then. And then at by 38, after we sold Mercury to Hewlett Packard, you know, I just decided it was time to hang them up. And since then I’ve been doing some advisor, a board consulting type stuff. And then, uh, as you know, most recently and the last couple of years have kind of reinvented myself as an author and a podcaster.

 

John Rougeux: Yeah. And you’ve written a couple books that are pretty widely circulated, at least among the crowd that I speak to, Niche Down and Play Bigger. Can you give me a quick kind of run down to those two?

 

Chris Lochhead: Yeah, the both books are, uh, about this concept, this new strategy in business called category design and Play Bigger is more for if you, if you, if you want to think of of them this way, big E entrepreneurs, that is to say, I raise a bunch of money. I’m trying to grow really fast. I’m trying to design a new category that I can dominate and become the next, uh, Cisco, Google, Oracle, Facebook etc, and then my second book, Niche Down is about the same concept of category design, but applied to, if you will, a small E entrepreneur. Um, I just opened a pizza parlor or I’m a flower shop or a, I’m a restaurant or as we have here in, um, I live in Santa Cruz, California. We seem to have a new craft brew pub opening every 15 minutes in town. So, um, for those entrepreneurs who, you know, save up a little bit of money, maybe borrow a little bit of money from their, uh, uncle Steve or whatever and on her hanging out a shingle. So Niche Down is for small E entrepreneur, there’s height a category and play bigger is for big E entrepreneurs and how they can do the same thing.

 

John Rougeux: Good deal. So you’ve written two books, you’ve had a pretty long marketing career, lots of different experiences and uh, I believe you have been referred to this kind of a Sensei in the marketing space. Um, is that how you describe yourself or a, should we call you something else, Chris?

 

Chris Lochhead: Uh, well, some people have pejorative things to call me, but, uh, I mean, look, I don’t know that that’s for other people to decide. I’m, I’m the guy who like a lot of marketers, like a lot entrepreneurs, um, you know, got into business because it was a way for me to bet on my future when nobody else would. And so I had nothing to lose. And, um, I’ve learned a lot of things along the way. Some from reading, some from mentors and of course a lot from trial and error and, um, you know, so look, I think I’m just like a lot of marketers, you know, we get out there in the world and we’re trying to, uh, design and dominate new categories and build great companies. And I love technology, you know, and I, I came to silicon valley from Canada and like a lot of, um, immigrants.

 

Chris Lochhead: Um, you know, silicon valley has been an amazing place for me. And so the aha for me in this regard, John, is, you know, my whole career I was the youngest guy in the room, you know, cause I started at 18, I was the CMO of a public company at 27, 28 and, and I, I never thought I would be doing anything other than that, you know, being the guy who was working on hard 60 to 80 hours a week, traveling all over the place, he used to travel two to 400,000 miles a year. And I, you know, I was the up and coming guy. Right?

 

John Rougeux: Yeah.

 

Chris Lochhead: And sort of  the interesting thing is you get to a place in your career where you wake up one day and you go, oh, um, I, you’re not the up and coming guy anymore. You’re now the been there, done that guy. And so, uh, you know, I’m a been there, done that guy and of course I’m still trying to learn, you know, just like you, I’m a category design, um, student.

 

John Rougeux: Yeah. Yeah. Well, so, so real quick just to give us more context. Oh, best moment as a marketer, a worst moment as a marketer.

 

Chris Lochhead: You know, I’ve had so many best moments as a marketer.  You know, look at it. You can’t eat, you can’t beat going public standing there at Nasdaq pushing a button, you know, uh, as we, as, as I got to do at science and you know, I joined that company as the founding CMO. We were 30 something people and you know, uh, we got to well over 2000 people and we designed it, dominated the space. And that’s incredibly exciting. And so experiences like that are amazing. Um, at Mercury we got into a massive amount of trouble and, uh, our stock cratered and we had to fire our CEO, CFO and general counsel in one day and the whole company almost blew up. And that happened in November and our stock went from the mid forties to the low 20s, and it was incredibly challenging. And then fast forward to June, July of the next year, uh, and we sold the company to Hewlett Packard for $5 billion.

 

Chris Lochhead: That was a pretty good day. And then I’ll tell you, you know, as a kid with no education, um, who essentially I guess as he got thrown out of high school, I’m dyslexic and have some number of these other learning differences to sit there and be the first, uh, authors to launch a book at Nasdaq on Facebook live in front of a almost half a million people, um, in the, in the Nasdaq recording studios and Times Square. Um, you know, that that was an amazing experience. And the other one today that’s probably maybe a little less dramatic than that, but, uh, it’s rare for me today, John, to go a day without somebody sending me an email or a tweet or a linkedin or something saying that, um, one of my books or one of my podcasts made a difference for them in their life. And that may be isn’t quite the big thrill of hitting the Nasdaq button or becoming a number one bestseller. But when you get to the stage of life that I’m at, you know, all I really want to do today, John is have a very good time and make a very big difference. Okay. And so it’s insanely rewarding. Knowing that other people say I’m making a difference for them and their careers and in their business and the fact that, you know, somebody lets me know that on a pretty regular basis, that’s probably the greatest reward that, uh, I had. I can imagine for having a 30 year career like I’ve had.

 

John Rougeux: Absolutely. I can, I can imagine that. And hopefully after we share this episode, you’ll get a few more of those emails and phone calls, kind of thanking you for your expertise. And, uh, you know, you’ve talked about category design, your books are on that kind of thought process. So maybe to kind of dive into that topic a little bit further, um, just kind of start us off by telling us what category design is and why should marketers and entrepreneurs care about it.

 

Chris Lochhead: Yeah. So, you know, my a writing partner, Kevin Maney says that category design is a new lens on business. And once you have the lens, you have really, I think, an unfair competitive advantage. I don’t know if you, um, if you saw the movie taken with Liam Neeson. No, I haven’t. Oh, it’s a, it’s a great movie about a guy who’s a former, I don’t know if he’s CIA, but he’s, you know, he’s a former badass, uh, black ops kind of a guy and, and these, these bad guys kidnap his daughter. And, um, there’s a scene in the movie where he’s on the phone with the bad guys and he says, uh, they say they want a lot of money to get his daughter back. And he says, look, I don’t have a lot of money, but what I do have is a very special set of skills, skills, skills honed over a long career that make me a really big problem for people like you.

 

Chris Lochhead: And so I think category design is a very special set of skills that for marketers and entrepreneurs give them an unfair competitive advantage. And here’s why. Um, most people believe in an unchallenged way that the best product wins. Most people believe that if we can expose the world to our product or our service, that we’re going to win. And most people, um, sort of treat the market like they treat the weather, right? So you wake up in the morning and I say, well, what’s the weather going to be in northern California today? It’s going to be sunny. It’s going to be this, it’s going to be that. And, and, and they treat the market like it is the way that it is. And the first big Aha is that categories, markets behave the way they do because somebody designed them that way. Either um, uh, on accident or intentionally, and I’ll give you a simple example and if you take a big step back and start thinking about, oh, why is it that this is the way that it is in our space as simple example that I, I can relate to is, um, in the United States of America, a high end, Paris sunglasses is about three to $400.

 

Chris Lochhead: And a pretty good medium sized flat screen TV at Costco is $150 to $250. Now if you are an alien and somebody said to you, Hey John, there’s this one category of products that is a piece of plastic that you put on your eyes to make you less sensitive to the sun. And then there’s this other category of products that is a technological marvel that talks to satellites in space and delivers, you know, 100,000 channels or certainly feels that way of, of news and information and entertainment. Which category of product is 400 bucks and which category of product is 250 bucks. Most people would say, well it must be the technological marvel that talks to satellites in space when of course it’s not sure. And so category design is really about why are categories the way they are, who set it up and most importantly what problem and therefore what solution matters. And the big Aha goes like this. The company that designs the category is best positioned to dominate it.

 

John Rougeux: Yeah.

 

Chris Lochhead: And in play bigger, we did a big data science research project or we analyzed every venture back technology startup founded in the United States from 2000 to 2015 and we asked the dataset what percentage of total value created in any given category goes to the market leader, what you could think of as the category queen or the category king. And it turns out the answer to that question, and we wrote an article for the HBR about this, um, is 76%.

 

Chris Lochhead: So two thirds of the economics in any given market category goes to the category queen. And so what’s my point? The [inaudible] is most of us embark on a battle of competition. Legends don’t do that. Legends proactively position themselves as different and unique and design a new way of thinking about a problem and therefore a solution that meaningfully advantages them and is a meaningful disadvantage to anybody that comes after them. And so the big Aha is the most legendary marketers, the most legendary CEO’s, the most legendary a company founders, and frankly the people in the world that make the biggest difference. When we can talk about how this place outside of business, if you want, are the ones that do three things. One, they designed a legendary product. Two, they design a legendary company and three, and this is the part that most people don’t get.

 

Chris Lochhead: They design a legendary category. And when they do that, they proactively positioning themselves to be the company that takes two thirds of the economics. And so what Play Bigger is about what Niche Down is about, is this discipline of category design. Trying to unpack what are the, what are the things that the most legendary leaders in business history have done intuitively to teach the world how to think differently. And when the world agrees with the way you think, Bam, they literally line up in front of your building to get whatever it is that you’re selling. And fundamentally that’s what category design is about.

 

John Rougeux: So you talked about those three kind of pillars coming together at roughly the same time. A great company, a great product, and a great category. And I think those first two, there’s a lot of literature around at a design, great products. Uh, there’s a ton around company culture and how to design a great team. But, um, it seems like the topic of category design, it’s not really been talked about, um, in depth as much as those other kind of, um, two pillars that you mentioned. Why do you think that’s the case?

 

Chris Lochhead: Because I think that, um, we live in a world where we get taught that the most legendary entrepreneurs, the most legendary companies are innovators, right? Christianson wrote the Innovator’s Dilemma. And what most people hear when they hear that is product innovation, right? So we ask most people, why did Apple beat  Blackberry? Most people are going to say, well know the iPhone just a way better product. And so that’s where everybody focuses. And what I would say to you is the statement, the iPhone is a better product is a, an interpretation, B not true because it’s an interpretation, you know, to quote the big Lebowski, that’s just like your opinion man. Right? So an objective measurement, it’s not, and so what category design asks is how do you teach the world to see things the way you do?

 

John Rougeux: So if you were, if you were a research in motion and you were, I guess if you could go back in time and kind of lead that company, what would you have done differently then to kind of position the  Blackberry as that category? Keen and sorry, the category king and two, to kind of position at any Apples or other efforts as kind of a secondary player within that space?

 

Chris Lochhead: Yeah, so the category King or queen stays in their position as long as the world agrees with the definition of the problem and the solution. Okay. And so  Blackberry’s problem was they did not continue to evangelize the raison d’etre for the  Blackberry or said in a different way when the definition, when the design of the smartphone category was, it’s a mobile untethered device whose primary use case is email and phone. Then the  Blackberry one. Okay. When the design of the category gets changed, that is to say the RFP for what most people agree, a smartphone is moved from the  Blackberry definition to a definition called, oh, it’s a magical star trek like device that has all these apps. If you remember in the beginning what made the iPhone go, they had this mantra that they used. They said, oh we, there’s an APP for that.

 

John Rougeux: Yeah. Right.

 

Chris LochheadAnd so when it became about apps, not about email, they were done. Hmm. And so they lost not just a product battle, but the truth. The main thing I lost was a battle for what the definition of a smartphone was. And when enough people agreed with Apple, it was over. And in point of fact, as far as I’m concerned for email, Chris Lochhead was and still is the better device and I’m a, I’m a big guy, I have big hands and using a tactile keyboard that I can feel with my thumbs is a much more effective way to do email. Then using a a non tactile device where I would say probably one in four times when I hit a letter with my thumb, it’s the wrong letter. No, I, so in other words from if the use case is email, Blackberry crushes the iPhone. Jobs and Apple got the world to interpret what a smartphone should be as something meaningfully, and I’m going to use this word on purpose, John, different than what the definition was before. And when enough people agreed with their, what I would call category design of what a smartphone is. Bam. It was over. And at that point there was nothing a  Blackberry could have done.

 

John Rougeux: Mm. So if, if someone was listening to you kind of lay out those two examples and they a little skeptical, they might say something like, well, those are consumer products and there’s so much advertising and marketing and they’re serving such mass markets that it’s, it doesn’t really apply. People don’t buy phones based on speeds and feeds. They buy it for emotional reasons. It’s kind of the aspirational purchase, you know, for an iPhone, especially when they’re nearing $1,000. But again, the skeptical person might say, well, but in the B2B space, people are more rational. They’re doing product research. They have, um, uh, you know, committees who are buying these products and services. And there were taking a more thorough objective kind of measured look at, at what the capabilities of each product is. Now I know, I know you’re going to tell me that’s not true, but I want to hear why that’s the case and why that skepticism is kind of unfounded.

 

Chris Lochhead: Well, the first thing I’d say is if you think that B2B products are purchased based on any kind of analytics, any kind of objective RFP process, mmm, your eff-ed, you’re finished.

 

Chris Lochhead: Because it turns out there’s no difference between the way human beings buy consumer products and B2B products. And you could set up the biggest evaluation committee you want. Those evaluation committees are put in place to justify the emotional decision that has already been made. And if you don’t think that’s true, um, you’re not going to have a very long or successful career in B2B marketing. That’s just the reality of it. And I know that might sound harsh, but I’ve been doing this for 30 years and here’s the Aha. Um, in every RFP situation, who would you rather be the company responding to the RFP or the company that helped the company or the, excuse me, the, the, the vendor who helped the customer write the RFP because there’s no such thing as in RFP that is it meaningfully influenced by the agenda of a vendor of one sort or another.

 

Chris Lochhead: And that’s because people already decide what they want to buy and then they use the RFP process to justify it and sure. Are there times where there’s a front runner and the folks on the buying side think they’re going to buy from company A and they end up buying from company B? Sure. But that probably happens less than 10% of the time. They already know when the cycle begins. That’s the first piece. The second piece is what category design is really about. It’s about writing the RFP for the space, your telling everybody if you want to buy, you know this type of product or service, this is what you should be looking for. So for example, Marc Benioff is arguably the greatest category designer of the last 20 years in the B2B space. When he started, he was exactly the opposite of where the entire technology space was at the time.

 

Chris Lochhead: He said, don’t buy it, rent it, and don’t run it in your data center. Run it in our data center and just put your data about your customers and your and your salespeople and your forecast on our servers. And we’ll take care of that for you. That was 180 degrees away from where the category was. That man single handedly made the cloud happened because he taught the world how to think about computing in a completely new way. And he designed a new category. He changed, he moved the world from the way it was to the way he wanted it to be. And that’s what legendary category designers do. And that’s what legendary people do on a sale by sale basis. And if you’re really smart, you move the entire market category from where it is to the way you want it to be. And that’s what’s required.

 

Chris Lochhead: And you can compete on speeds and feeds all you want. But if somebody else has tilted the, um, the design tilted the agenda has a, a, and we say these words on purpose, different point of view about what your, what the carbon singulator space should be. You will be Blackberry, not Apple. And that’s just the truth and the data supports it. Um, two thirds of the economics go to one company that’s been validated by the Harvard Business Review. Uh, and look, you can deny that all you want and I wish you a lot of luck, but, um, you’re probably going to burn a lot of money and you’re probably going to cause yourself a lot of heartache living inside that paradigm. And if that’s what you want to go do, then you know, you can go bang your head into that wall. And legendary entrepreneurs will be busy designing, uh, what we, what we call the magic triangle, getting product company and category, right? So you talk about this idea of designing a category and the economics of that and all the reasons why that’s worth pursuing.

 

John Rougeux: So what does that process look like? You’ve been through this a few times. A yourself, haven’t you?

 

Chris Lochhead: Over 50. Yeah.

 

John Rougeux: Yeah. So, so what, what does that kind of look like? We don’t need to go to feel like a step by step, you know, A to Z, but like what are some of the big pieces that have to happen for category designed to actually be something that you’re doing successfully?

 

Chris Lochhead: So the first question to ask yourself is what makes me either as an individual in your career or me as a company or, or us as a company depending on how you want to think about it. Uh, so what makes us different and specifically, um, how do I think about a problem and therefore a solution in a different way. And so for example, there’s this company called GOJO industries and they are the creators of a new category of soap that emerged about 50 years ago. Before that, there was just what today we call bar soap and um, they thought that was gross because it’s nasty and it can be full of hair and full of dirt.

 

Chris Lochhead: And so they reimagined the problem called how do I clean my hands without having to deal with a yucky gross bar of soap and GOJO industries therefore created liquid soap, they new category of soap and then I’ll, and then repositioned as a result of that traditional soap as hand soap or bar soap. Fast forward to the mid nineties, many decades after they had done that by staying focused on the problem. That is to say, how do I want to think about cleaning my hands? They tilted the agenda one more time. They said the problem with liquid soap is I need water. So how do I wash my hands? How do I get my hands clean with a, in the absence of water and GOJO Industries created a product that we now all know called Purell l and a new category called hand sanitizer. And that was in the mid to late nineties and it prior to the mid to late nineties nobody was walking around going, Hey John, I got this big problem called hand sanitization.

 

Chris Lochhead: Nobody thought about that. Nobody, zero. There was no, there was not a box on the wall of every hospital in the world was squeezy stuff coming out of it to rub on your hands. There were, there were no moms walking around with strollers, with a tub of this stuff that they bathe their baby in that time a day. Right? And so my point is this GOJO industries by continuously focusing on the problem called how do I clean my hands and how do I clean my hands in what you and I today would call multiple use case situations, have continuously done category design around their product innovation. And now there’s not a parent in the world that wouldn’t have this stuff on them to clean their baby. Right? And so, um, that, that’s really the point. The point is legendary companies stay focused on the problem, stay focused on how they want to address problems in different ways.

 

Chris Lochhead: And when the world sees the problem the way they do, then the world wants the solution. And the big marketing Aha is they don’t market their product. Legends market the problem because they understand the bigger, the more urgent, the more strategic the problem, the more time, money and energy people will apply to solving that problem. And if you’re the company setting that agenda with what you could think of as a point of view, um, then you’re going to be the company that is the category designer. And if you can pull off all three components, product, company and category at the same time, Bam. That’s how you get to be Cisco. That’s how you get to be WhatsApp. That’s how you get to be GOJO Industries.

 

John Rougeux: So you’re talking about, um, defining this problem and marketing that versus the product itself. Does this, uh, does that process mean that you have to have a huge advertising budget, a huge team to support that, a big kind of PR push? Or is it, uh, you know, equally or can it be effective if you kind of are taking it from a more of a grassroots approach or a more organic route?

 

Chris Lochhead: Yeah, mmm. You can absolutely take the more organic route. And, um, Victor Hugo famously said, all the armies of the world cannot stop an idea whose time has come. And so in category design is a process and approach to making it your time. And so as you go to execute from a marketing perspective, what you want to ask yourself is, what’s the best way to have my point of view about a problem? And therefore a solution, uh, catch fire and look would having a $250 million marketing budget help? Sure. Okay. But you know, if you look at it, most startups don’t have anywhere near that. And so the thing you got to ask yourself is what are the ways in which I can move the thinking in the space to my agenda and begin to ask yourself that. And you know, we can get into tactics if you like, John, there’s, there’s a lot of ways to after this thing, but fundamentally you’re doing something different.

 

Chris Lochhead: What most people are doing is they’re competing, they’re competing on price, they’re competing on speeds and feeds my carbon regulators, and I’m going to use this word on purpose better than your carpeting you later. And anybody who’s having a better conversation has fallen into a product feature and price, um, war. And that’s always a race to the bottom. The other thing about this word better is when I say my product’s better than your product, what’s left in everybody’s mind is your product better is a comparison game. And so, you know, right now, I don’t know if you’ve seen this ad, the idiots at Pepsi are spending God unknown millions of dollars on a new campaign with, um, uh, the guy from the office. And I don’t want, it’s a lot of TV, which, which guy? The main guy. I’m in the gym or Michael? Michael Scott yet. Uh, yeah, yeah, that guy.

 

Chris Lochhead: Steve Carell. Yeah. And the first set of ads have this are I think in a diner, if I’m remembering right. And the waiter or waitress comes up to these folks and says, you know, what, can I get you to drink? And they say, um, you know, we’d like a Coke and, and, and the waiter says, we’ll Pepsi do or is Pepsi all right? Or something like this. And then, and then this actor gets up and says this, Pepsi, all right, well, Pepsi’s awesome and it’s this and it’s that. And, and I’m sitting there going, you dumb efforts. You guys are so stupid. Because the minute he says, well, Pepsi’s, Ooh, do you mean Pepsi’s all right? They’re comparing himself to Coke.

 

Chris Lochhead: And so whenever we compare ourselves to somebody else, what’s left in the mind of the customer, the consumer, the buyer is the thing that we are comparing ourselves to as opposed to our own unique space. And so all they’re doing with this multi zillion dollar campaign is telling the entire world that Pepsi’s the category King and our, excuse me, Coke is the category king and we’re not. It’s the dumbest marketing campaign maybe in history. And that’s the trap that everybody falls into this, this comparison game and all the comparison game does is validate that the company end or product you’re comparing yourself to is the category king and you’re not. So it really works against you because you’re having the conversation on someone else’s terms instead of your own. Yes. And you’re also, the game is wired against you because the rules have been created by somebody else. The minute GOJO Industries says, well, it’s not about how do I wash my hands, it’s about how do I get my hands clean in the absence of water, they have redesigned the way we think about it.

 

John Rougeux: Yeah, it’s, it’s funny you mentioned that Coke and Pepsi example because a few decades ago they did that famous kind of taste test, a campaign where they talked about how Pepsi tastes better than Coke, which is exactly, I’m kind of going against what you talked about earlier. It’s the taste is objective or sorry, you taste is subjective. Uh, but they’re trying to positions they were, they weren’t trying to position Pepsi is kind of an objective, better a product than Coke and then you know, 30 years later they’re still fighting the same battle.

 

Chris Lochhead: Yeah. The other thing that the category does of course is they look at who number one is and um, they assume that number one is the best product. That’s the assumption that you and I make. The other thing that’s interesting if you get into the human psychology of it, John, is human beings are pack animals. We don’t want to be an outlier because if there’s 10 of us together in the woods and two of us are way over here and eight of us are over there, the two that are way over here are the ones more likely to get eaten by the bear. And so every, every user of Zoom makes potential users of Zoom more comfortable. That zoom is what I should do. Um, and so human beings are herd or pack animals and so we are comforted by buying the product or service that is the category king.

 

John Rougeux Yeah, it’s like a, I think of the book you mentioned, it’s kind of a, a self reinforcing cycle where the category, um, king is seen as like you said, the best product and then people buy that product or that service because it’s perceived as the best and it just continues to, um, kind of cycle itself or drive itself from there. And I know one of the other points you made is when companies are faced with a potentially new category that’s coming to market, there’s a real need for them to take the initiative and define that. Because if they don’t, someone else is going to do that and there’ll be cotton kind of a secondary position. Can you tell me a little bit more about that?

 

Chris Lochhead: Um, yeah, I’ll give you one that has been going on in the tech industry for a long time. A lot of people say email sucks. I hate email when somebody’s gonna reimagine email. And this has been tried many, many times. And the reason that um, no one’s been able to displace email even though many of us agreed that the email paradigm is not, um, maybe the greatest paradigm is because everyone that has tried to take out email has been using email as the point of reference. Right? So if I say to you, Hey John, yeah, don’t think about pink dinosaurs, whatever you do. No, no. Pink dinosaurs. Don’t think about pink dinosaurs. You can think about anything you want to think about, but not a pink dinosaur. You can create any animal you want, any color you want, but just know pink dinosaurs. What’s in your mind?

 

John Rougeux: Yeah, of course.

 

Chris Lochhead: right. And so the reality is, if the problem is how do we have an asynchronous communication that shows up as a time based feed in an inbox? Well, email wins and everybody who has tried to take out email for the most part has lived inside of the framing of the problem that is email. And until you reframe the problem, no one’s going to take out email.

 

Chris Lochhead: Does that make any sense, John?

 

John Rougeux: Yeah.

 

Chris Lochhead: It’s like you’re, you’re talking about your offering in terms of kind of the wrong problem. You’re talking about why it’s better than something else. It kind of goes back to that Coke versus Pepsi example. It’s like you’re setting the stage of, you know, this is why what we’re doing is better than email out. All of a sudden someone has to maybe give up email to use this new thing, which poses a huge kind of mental barrier that they have to get through and instead of taking them to maybe a new way of communicating and reframing a different style, maybe synchronous, you know, we’re non time based perhaps, but I’m like that that shift is, it hasn’t happened. They’re like, they’re talking about something that is working against them. They don’t really have a way two, um, talk about what they’re doing in a way that maybe complements email or it goes on top of email or, um, kind of benefits you in some other way.

 

Chris Lochhead: I’ll give you a simple example that I think certainly I can relate to. Maybe most people can as well. There’s a small chain of restaurants in the San Francisco Bay area, uh, sushi restaurants. Now you think about sushi restaurants as a category, so a well known category. Uh, if I say to you, Hey, John, um, we’re going out tonight for sushi, you have a picture in your mind of what that is probably going to look like, right?

 

John Rougeux: Yeah.

 

Chris Lochhead: This company said, um, we’re not going to solve a problem called how do you make great sushi? Which is the problem that most people look at when they open a sushi restaurant. Maybe they, and maybe they think, how are we going to make great sushi and make money doing? Maybe they look at it that way anyway, however they look at it as how they look at it.

 

Chris Lochhead: And they do what most sushi restaurant entrepreneurs do, which is they compete on how awesome our sushi is, the location of our restaurant, how awesome our staff is, and the value that we deliver, I e. You know, price per quality is good. And, and, and they, they accept those kinds of, um, um, dimensions, if you will, of competition as the only way to compete and what they, what they hope for because they’re artists because they’re, they’re chefs, is that when they open their restaurant, people are gonna say, wow, that’s the best sushi I’ve ever tasted. That’s how most entrepreneurs think. And that’s how tech entrepreneurs think as well. All that’s the greatest algorithm ever, right? Oh Wow. I’ve never seen a carbon dinky laser so fast and so elegant. Right? That’s what they’re all trying to build. So this small chain of sushi restaurants reimagine the problem and here’s how they reimagined it.

 

Chris Lochhead: They said, we love sushi and we love eating on the go, but sushi on the go stocks, I don’t know if you ever tried to eat sushi, walking down the street or eat sushi in your car while you’re driving, like it’s a disaster, right? Because the sauce everywhere and they’re, you know, rice gets everywhere and it doesn’t, sushi is not a good portable food, right?

 

John Rougeux: Yeah. Closest thing I’ve added those, uh, those premade sushi containers at the grocery store. I’m trying to eat something semi-healthy but yeah, so it’s like mediocre at best.

 

Chris Lochhead: So these guys create a new category and they call it the sushi-rido. They take the concept of a burrito and they apply it to sushi and therefore they solve the problem called, how do I eat sushi on the go? And they’re killing it. And like I said, there’s six or seven of them.

 

Chris Lochhead: They’re growing very rapidly and they are not competing on the traditional dimensions. They’re competing on a new dimension, which is what’s the best way to eat sushi on the go to a sushi-rido. And so they have differentiated themselves. And I use that word very much on purpose by creating a new category of sushi called the sushi-rido. And there are now knock offs of the sushi-rido who are trying to engage in a battle with them saying, well, our sushi-rido tastes better than their sushi-rido, but just like the idiots at Pepsi, when you do that, when you rip off the sushi-rido all you’re doing is telling the world that the original sushi-rido is better than mine. Knock off poser sushi, read it. Right. And, and yet this is the mistake that entrepreneurs make over and over and over again. They are essentially doing a copycat strategy.

 

Chris Lochhead: And my question is, why fit in when you can stand out? Why not do something unique? If you look at every company, every entrepreneur, every marketer, every brand, every artist, every scientist, every political leader that you respect, admire, uh, love and joy. They all share some characteristics and one of them is they broke or took new ground. They are viewed as being the first, um, whether they were, they weren’t as irrelevant. But the reason we know who Picasso is, and if you look at his Wikipedia page in the first or second sentence, it says he’s the founder. He’s the Godfather. He’s creator of a new type of art called cubism. But we know his name. We don’t know the 87th most successful cubist artist in the world. We never heard of her, right? We know who Bob Marley is. We don’t know who the 32nd most popular reggae band in the world is because Bob Marley is the category designer of a new category, a new type of music called reggae. And so my question for entrepreneurs, my question for marketers is who would you rather be? Picasso or Marley or the 47th company? Would you rather be sushi-rido or the fifth sushi-rido company?

 

John Rougeux; Right. So I’ve heard a couple of comments on kind of whether a category exists, um, and kind of its nascent in stages. And so what I mean by that is for some folks say, well, it’s not really a category. If you’re the only company participating in that space, in order for it to be a category, there has to be, ah, multiple companies participating. Now at the same time, there still has to be a first because at one point that category should not exist. And then one company emerged two, three, four, five and so on. And so how do you balance that dynamic of looking at a space, wanting to be the first, but also recognizing that if others don’t participate in that space, then maybe you haven’t really designed a category, maybe you’ve just designed a unique position. And is that, is that a downside? Is that something negative you should look out for or, um, maybe I’m looking at things the wrong way.

 

Chris Lochhead: Yeah, it’s a great question. So I actually, they just had this conversation with an entrepreneur and, uh, he was going to name his product and his category, the same thing, and he was going to trademark. And I said, well, if you trademark it, it won’t become a category. Right? So I phone is a brand. Smartphone is a category, right? Right, right. And so that’s ultimately what you want. You want to have a category name that you do not trademark and you absolutely want competition to rip off. And here’s the truth.

 

Chris Lochhead: Let me just say something. It may not make me a lot of friends, but I’ll say it anyway. Most people are fricking stupid. Most people are not creative. Most people are not innovative. Most people don’t do any real thinking. That is to say thinking about thinking is the most powerful thinking you can do. And most people don’t do. Thinking about thinking, uh, my friend and mentor Vicks and said, most people and most companies are living inside of somebody else’s thinking. And ultimately category design is a way of about, um, uh, new ways of having a market category work in your favor, right? And so given all of that, if you design a new category, you evangelize that category powerfully with a really creative, innovative point of view that frames a problem and teaches the world to move from the way it is to the way you want it to be. Don’t drive to Blockbuster, go to a website called Netflix and just have the movies magically show up in your mailbox. And of course today we streamed them. That’s an idea. That’s a point of view, right? And so, um, here’s the truth. If you have a powerful category design that the, and a point of view that delivers against that category design, then your idiot competitors, when they see you having success will rip you off. They will come and you want to welcome them.

 

John Rougeux: So you, you don’t want to look at competition as a negative. It’s something you really want to foster to help go back to that. A point you made earlier about as a category leader, you don’t want to market your product, you want to market the category itself. And having competition really helps you do that.

 

Chris Lochhead: Yes. And so the only way I want to compete is by having others compete with me. I don’t want to compete with anybody else. So when somebody says, well, who’s your competition? My answer is always, well, we don’t have any real direct competition. We do something different and that changes the conversation. If I say to you, Hey John, let’s go out to dinner tonight and, um, maybe you’re visiting me here in Santa Cruz and I’m telling you about some of my favorite restaurants in town. And I say, um, and so, uh, I’m thinking about maybe Italian or sushi, which do you prefer? That forces a choice in a way that, um, you know, I’m thinking about Italian or pizza. Doesn’t force a choice. You follow me? And so legendary entrepreneurs, the way they want to compete is by having others compete with them, but we don’t compete with others.

 

John Rougeux: Okay.

 

Chris Lochhead: Sara Blakely, the founder of Spanx and the creator of the shapewear category refused to have her in. These are her words, innovation, her invention be thought of as a girdle. It’s not a girdle. It’s shapewear. It’s a new invention. Those are her words. Right? And the reality is it would have been very easy to position that stuff as a girdle. And nobody wants a girdle. Hey shape, where wouldn’t you like to be? A little bit more shapely. And she’s the, um, um, the most wealthy self made female billionaire in American history. It’s because she distinguished herself because she did something different. And now there are shaped where competitors, same thing with Lulu Lemon, I dunno about where you live, John. But sometimes I think in Santa Cruz county there’s a law that says 25% of the women must be wearing Lululemon pants at all times.

 

Chris Lochhead: And they are the creators of a new category of clothing called athleisure. Okay. Right. And now when women go to buy quote unquote yoga pants or athlete or clothes, they are the gold standard because they are by definition the category queen. And so if you’re not wearing Lulu, then you’re not wearing the original stuff. They created a whole new paradigm in women’s clothing. Now had there been stretchy spandexy um, you know, close fitting pants for women before? Sure. Their have of course, but they went out and evangelize this athlete leisure lifestyle and tied their category to an emerging, I don’t know if you want to call it sport or activity or whatever you want to call it, called yuoga. And by doing those things, Bam, they created a whole new category of clothing where one did not exist. And most people today, just like when, when, if I’m sneezy I might say to you, Hey John, please pass me a Kleenex. Which of course is a brand name and the category is, uh, is, is called a tissue, right? Most people say, Oh, you know, um, uh, she’s wearing Lululemon pants. She may or may not be wearing that brand. Lululemon has become the Kleenex of athleisure and yoga pants.

 

John Rougeux: So Tesla, a few years ago released the patents on its battery design. And, uh, I remember reading the commentary at the time and it was, uh, I think supporting is the same idea of, you know, Tesla didn’t just want it to be the only maker of, of electric cars. It really one of the electric car category to grow and blossom. And it new by releasing those patents, it would help foster that. So is that kind of what you’re talking about in terms of fostering competition and not maybe trademarking or keeping everything in house but allowing that ecosystem to thrive?

 

Chris Lochhead: Yes, absolutely. And I would say that Elon Musk is one of the most, um, exciting, natural, intuitive category designers in our world today. And mmm, he, he understood this, that if that if I’m the only company evangelizing, uh, the electric car, then this category might not go. I need to get the entire industry to tip. I need to move the industry from the way it is fossil fuels to the way I want it to be. Electricity and I need the help of competition to move a giant category in this newly designed direction that I just created. That’s exactly what he was doing. And it’s pure genius and it’s worked. Look at the number of new electric cars. Now you could argue, well, what’s that going to happen anyway, I don’t know. But here’s what we do know. He evangelize the, the car he prosecuted the magic triangle. That is to say, great product, company, and category. Right? And to your point, he’s purposely expanding the category by sharing some of the secrets with his competitors so that they can collaborate with him on making the category tip.

 

John Rougeux: Hmm. So Chris, if I’m, uh, listening to this podcast and I’m an entrepreneur or an exec, a marketer thinking about category design, how do I know if it’s something my company should pursue? Because it’s not something that necessarily every company can or should pursue, right? We don’t need 10,000 categories of products, but you know, how does someone make that distinction of whether they go down this road or choose a different path?

 

Chris Lochhead: Look, you could argue I’m overly biased. I think if you’re not doing category design, you’re an effing moron because what’s your declaring by saying we’re not going to do that is by definition we’re going to let somebody else decide what the problem is, what the solution is.

 

John Rougeux: Okay.

 

Chris Lochhead: Teach people about how to value that problem and solution. Okay. And as a result of that, we are going to submit to having a company that designs this category that we’re in, design it and take two thirds of the economics and we will be one of the 152,545 whatever competitors fighting for a quarter of the economics. So if you want to just play for a quarter of economics while somebody else sets the rules in your industry, in your market, in your category, I think if you consciously make a frontal lobe decision to do that, your an offing moron. That’s what I think.

 

John Rougeux: All right. I love it. Love the, I love the candor. So I want to ask you one last question. It’s not about category design or maybe it is, but uh, you know, I’m here in Lexington and most of the world’s bourbon is made within a couple hours of where I live and I know that you enjoy, um, and kind of seeing what’s, what’s best in that space. So a top three bourbons, a three, two, one go.

 

Chris Lochhead: You know, I’m going to have a real lousy answer. I kinda like them all. I mean, I, you know, I drink a lot of scotch. I love Bourbon. I think probably my goto daily Bourbon is just a good old fashioned bullet bourbon. Uh, I get in trouble with a lot of scotch guru guys. I like Jack Daniels. I like a Jack and Coke. I like Gentleman’s Jack. I like, I don’t know if you’ve had the Frank Sinatra Jack. That’s a really fun one. Uh, and so I’m generally somebody who mixes it up. I, when I go into a bar, if they have a good bourbon selection, I’ll ask the, um, uh, oh, here’s this great category design. Remember when they used to be bartenders?

 

John Rougeux: Yeah.

 

Chris Lochhead: You know what they’re called today? Ologists mixologist, right? That’s what they are. They’re mixologist. When I was a kid, if you bought a second hand car, you were buying a used car. Today we don’t buy used cars. We buy pre owned cars. That’s all category design that those are people changing thinking about a particular market category. Anyways, I digress. Um, like, like I said, like Kevin said, category design is a new lens on business. And once you have the Lens, you see categories everywhere. So you get back to your question, John, I will often go in and I will say to the mixologist, mmm, you know, you guys look like you have an awesome, um, uh, an awesome, awesome selection of whiskeys and bourbons. Um, what do you have this new, what do you have that’s exciting? What do you have that’s interesting? What should I try and I generally don’t, um, have mixed drinks, a mixed drink for me as a jack and coke, I get if I’m going to drink a bourbon, I like it. Neat. I liked my bourbon with bourbon, just like, I like my coffee. I like coffee with coffee and I think putting other, I almost said a different word that begins with s, but I’ll say stuff in my bourbon or in my coffee is somewhat blasphemous. And look, I know having spent time in Scotland and and so forth, there are some experts that say you should really put a little water in there, a little ice in there to quote unquote open it up. I think all that’s BS. I like Bourbon in my bourbon.

 

John Rougeux: Yeah, well it’s kind of an interesting space to watch because it is a very, very crowded, if you go to, you know, a liquor store around here, you’ll see literally hundreds of bourbons on the shelf. And so every once in a while you’ll see someone who’s trying to kind of reframe that conversation or talk about a different bourbon or a different, um, blend while it’s still kind of remaining true to that kind of a heritage of bourbon. So it’s really interesting to kind of see what ideas stick and which are just kind of flashes in the pan.

 

Chris Lochhead: And I love the innovation, the new category of whiskey that I love. It’s at least new to me. Maybe it’s been going on for a while and I didn’t notice it. I’m not, I don’t follow it super closely, but there is a, um, a whiskey that’s made here in the Santa Cruz area called Wayward Whiskey. Yeah. And, uh, I joined their club and I, you know, get a selection of stuff from them every quarter and you got to go to their place and pick it up, which is fun. It’s just the other side of town for me. And I was in there a couple of weeks ago, John and picking up my quarterly uh, uh, drop ship of yummy. And while I was in there I noticed behind the bar, because they have a tasting area, they had this very sort of dark ruby almost blood ready looking whiskey and I’m sort of trying to read the label anyway. Long story longer. It’s whiskey that has been aged in port barrels.

 

John Rougeux: Oh really?

 

Chris Lochhead: And I love port and I love whiskey and I’ll tell ya, man, is this ever good? I, I’m, I’m going to buy a case of it. It is absolutely outstanding. And so right now my favorite go to is Wayward Whiskey aged in port barrels.

 

John Rougeux: Nice. So does that count as a new category of whisky or is that just a differentiation?

 

Chris Lochhead: It’s new to me. I don’t know if it was, if it’s, if it’s been a longstanding category. I had never heard of it. So, um, I’m guessing it’s new, but I, I I can’t tell you for sure, but it certainly was new to me. I hadn’t heard of anyone else, uh, doing it and, and if you start paying attention, you know, you’ll start to see a new categories all over the place. I just saw one, let me see if I can grab it for you quickly. A new category of jerky. I was in my favorite local uh, local store. Local market. Yeah. Here it is. Ahi Tuna jerky strips, wild caught cut, whole cut. Um, island Teriyaki tuna jerk strips from a company called wildly responsible. So it’s Ahi Tuna, a jerky strips.

 

John Rougeux: So there you go. I’m getting kind of hungry and thirsty just talking to you on this interview. We’re talking right turkey and bourbon, Coke, Pepsi earlier. Lots of good stuff. Chris, thanks so much for all the advice you shared today. I could probably pick your brain for another few hours, but, uh, just what you’ve shared so far has been tremendously valuable. Um, if someone wants to get in touch with you and ask a few questions about category design, learn more about your work, uh, what’s the best way for them to do that?

 

Chris Lochhead: lochhead.com l-o-c-h-h-h-e-a-d dot com.

 

John Rougeux: lochhead.com got it. All right, Chris, thanks again. It was an honor to talk to you. I really appreciate you being on the show,

 

Chris Lochhead: John, I’m stoked to be with you. Thank you so much.

 

John Rougeux: My pleasure.

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John Rougeux is the founder of Flag & Frontier. Connect with John on LinkedIn.

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About the Author

john_rougeux_2019

John Rougeux is the founder of Flag & Frontier. Connect with John on LinkedIn or Twitter.

Recent Posts

Category Design Isn’t Just for Startups

Category design isn’t just a business strategy reserved for startups. Take a SaaS company called Narrative Science. They’ve spent nearly ten years playing in the “Natural Language Generation” space. While they’ve seen some solid success,

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