Category design is a business strategy that helps companies define the terms of competition in their favor.
Here’s an easy way to think about it.
Conventional business strategy focuses on capturing market share from competitors. Think about an army fighting its enemy over a piece of land. It’s a zero sum game where capturing more land means taking it away from someone else.
Category design offers an alternative approach. Instead of fighting over existing turf, category designers seek out unclaimed territories that they can have all to themselves.
That example oversimplifies things a bit. To help you understand this idea in more depth, here are the main principles of category design.
Principle #1: Problem first mentality
Creating a new category means focusing your efforts on solving a new problem – or solving an existing problem in a new way. It’s much deeper than creating a “better” product or going after a market niche.
Principle #2: Business-level approach
Category design is more than a marketing campaign or a product differentiation play. It changes the way your entire company thinks about what it’s trying to do and how it plans to get there. Every department will be affected by the effort. For more, read this post on why category design is a whole-company effort.
Principle #3: Long-term play
It can takes years of effort before your efforts to build a category can pay off. That’s because changing the way buyers think about a problem can take time. The process doesn’t ever really end, either. Companies that develop new categories invest in product and market development for years.
Principle #4: New ways of measuring value
Since building a few category centers around a different way of doing things, value is measured differently. Category designers don’t compete on price or features. They compete by offering a new approach that competitors can’t address.
Examples of category design
Here are a few examples of companies that have designed new categories.
Terminus: account-based marketing
Marketers have always dealt with ineffective marketing efforts. Plenty of advertising dollars have been used to reach people who would never end up as customers. But Terminus developed a new way of solving this problem. They didn’t help marketers get more leads (hoping that some will convert). Instead, Terminus helps marketers reach only those accounts that are likely to be a good fit.
Tesla: (modern) electric cars
No, Tesla didn’t invent the electric car. That happened over a century ago. But Telsa did re-design the electric car category. Before Telsa, electric cars were for buyers who cared about fuel savings above all. They were alternatives to fuel-sipping economy cars. But Tesla changed that. Their electric cars are alternatives to luxury/sport cars. And they are sold to buyers who value performance and conspicuous environmentalism.
Salesforce: cloud-based software
Salesforce is the best known examples of how to design a category. When Salesforce launched in 1999, enterprises bought software through the “on-premise” model. It meant buying expensive, time-consuming servers located in their offices. As a result, database-driven software (like CRM) was out of reach for small business. By offering CRM software that was accessed through the Internet, Salesforce solved the problem of software delivery in a new way.
Benefits of Category Design
If executed correctly, category design can deliver outsized profits. Research published in Harvard Business Review supports this. Consider this 2013 study by Eddie Yoon and Linda Deeken. They found that of the Fortune 100, just thirteen companies were category creators. However, those thirteen companies generated 53% of the Fortune 100’s incremental growth and 74% of its growth in market cap.
For more evidence, take a look at the technology companies pursuing category design today. That list includes Gong, Drift, Gainsight, Narrative Science, Terminus, WebPT, BombBomb (where I’m currently working), HubSpot, and plenty others. These are all companies who are carving out new markets and redefining the terms of competition.
History of Category Design
The idea of creating something “different” is nothing new. However, only recently has category design developed into a formal, documented discipline. Here are the books that helped make this happen, and the big ideas they introduced:
- Positioning: The Battle for Your Mind, by Al Reis and Jack Trout (1981). Companies should intentionally shape the way buyers think about their products.
- Crossing the Chasm, by Geoffrey Moore (1991). Companies that introduce new concepts to the masses need to follow a specific path.
- The 22 Immutable Laws of Marketing, by Al Reis and Jack Trout (1993). “If you can’t be first in a category, then set up a new category you can be first in.”
- The Innovator’s Dilemma, by Clayton Christensen (1997). New technologies often find more success when applied to “different” applications – instead of trying to be “better” versions of what came before.
- Play Bigger, by Al Ramadan, Dave Peterson, Christopher Lochhead, and Kevin Maney (2016). Category design can be executed by following the blueprint established by the authors.
- Category Creation, by Anthony Kennada (2019). More tactics for category designers to have at their disposal.
Since this a new discipline, expect to see even more written about it soon. In fact, I’ll be publishing The Newcomer’s Guide to Category Design in conjunction with G2 this fall. To receive a copy, subscribe to my category design newsletter.
Difference Between Category Design and Category Creation
The terms “category design” and “category creation” are often used interchangeably. But in my view, they mean different things.
“Category creation” is a transactional term. When a category is becomes a G2 grid or a Gartner Magic Quadrant, then the category has been “created.” It’s an official thing that has worked its way into our language.
“Category design” is transformational. It refers to the process of showing the world a new way of looking at a problem and a new way of solving it. While “category creation” affects what happens on review sites, “category design” affects the minds of your buyers.
How to Execute Category Design
An in-depth review of the category design process is too long for this post. But here is a high-level overview of how it’s executed.
- Define the problem. Understand the fundamental problem you’re trying to solve and who you’re solving it for. This provides the foundation for everything else. (Check out this guide for more on this).
- Develop a category “point of view” and category name. These tell the story of why your category needs to exist and what buyers will experience from using it.
- Update your messaging and product roadmap. The content you use on your website, marketing collateral, sales decks (and so on) must support your category story. Your product roadmap must also support your vision for the category.
- Evangelize your category. You must share your vision for the category with the world. Do this in your advertising, blog, webinars, podcasts, and anywhere else the world will hear from you.
- Execute lightning strikes. These are concentrated campaigns that break through the noise. They get your audience to pay attention to your category. Lightning strikes can be PR campaigns, marketing stunts, conferences, product launches, or anything else that causes people to think differently.
More Category Design Resources
We’ve only scratched the surface on category design. If you’re interested in learning more about this discipline, take a look at these resources:
- Read Play Bigger. This is a great starting point for anyone curious about category design.
- Listen to the B2B Growth Show. I host the #categorycreation series, where I share lessons from other category designers and my own work on category design.
- Listen to Lochhead of Marketing. Christopher Lochhead is one of the co-authors of Play Bigger. His podcast provides provocative insights you won’t get elsewhere.
- Check out the Category Design Advisors blog. My friends Mike Damphousse and Kevin Maney have great content there.
- Subscribe to my category design newsletter. I’ll send 1-2 emails a month that will help you become a better category designer. Subscribe here.