I. Brief Summary
This was given to me as a company swag by a potential investor. Category kings and category design was highly valued at this organization. I found nothing novel about this text, but category design matters. It pays off to be different versus competing for being the best. Better leads to a faster horse. Different leads to a Model T. Of course, it is not as simple. If considering how to use category design within your organization, it has some useful guides on where to start.
II. Big Ideas
- Category kings are all around us. Want a ride to your friend's place? Most likely Uber or Lyft comes to mind. These are category leaders in their areas. Category kings take it upon themselves to design a great product, a great company, and a great category at the same time. IKEA, Netflix, Salesforce, Slack, Atlassian, Alibaba and Amazon are some of the category kings.
- The most exciting companies create. They don't sell us better. The most exciting companies sell us different...They replace our current point of view on the world with a new point of view.
- Disruption is a by-product, not a goal. Legendary companies create new companies create new categories than generate a gravitational pull on the market. Customers rush to a new category because it makes sense to them. In some cases, people leave an old category behind, and their departure sucks the life out of it. In that way, sure, new categories disrupt old categories. But for smartest pirates, dreamers, and innovators on the plane, disruption is never the goal. Creation is the goal.
- Category king literally owns the problem it is solving. Customers are too wedded to it. Microsoft spent $10 billion on Bing yet never made a dent in Google's share of search. It's almost always futile to try to unseat a category king that's not screwing up.
- Category kings are equivalent to Peter Thiel's monopolies. In his book, Zero-to-One, he mentioned, “Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.” Thiel goes on to say, “All happy customers are different: each on earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.” By Thiel's definition, category kings are the happy companies.
- Once a company wins a position as category king, a flywheel of benefits opens a gap between the leaders and the rest. The leader, for example, has the best data. As the leader amasses data, the data becomes an unfair advantage—a gap that the followers can't hope to close. The best employees want to work for the category king. The best partners want to sign deals with the category king. Outside developers want to develop for the category king. The best investors want to put in their money and the best investment bankers want to work on the IPO. The economic power of a category king just builds and builds.
- In business, the odds are stacked against any one company becoming a category king. A company can do everything right yet fall victim to outside forces it can't control. This is where the discipline of category design comes in. Category design involves creating a product, experiences, a great company, and a great category at the same time. Category design is also not just marketing. Category design is a company-wide strategy.
- Jawbone came up with cool innovations that created a brand-new product category, but it failed to develop and dominate the category it created. Being first to invent something can be fantastic, but it doesn't mean squat if you don't define and develop the category. Jawbone is one proof point. Facebook wasn't the first social network. Tesla didn't make the first electric car. But they both made something different from what came before.
- Category design consists of: product design, company design and category design. 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. Company design is the purposeful creation of a business model and an organization with a culture and point of view that fits with the category. The goal is a company/category fit. Category design is the mindful creation and development of a new market category, designed so the category will pull in customers who will make the company its king.
- Winning companies today market the problem, not just the solution. Uber initially built its new category around a simple, clear problem: taxi service usually sucks. Once the public understands the problem, people latch on to the most popular solution. Given all the product and service choices people must make, it can get too burdensome to research every offering. Se we pick the leader. Some of the biases that lead to making the choices are—Anchoring Effect, Choice Supportive Bias, Groupthink Bias and Conformity.
- If you are a consulting company and your customers get nuked...you don't have anybody to consult to.
- As Clayton Christensen pointed out in Innovator's Dilemma, listening to customers leads you to constantly build better, but never to be different. And different is what creates new categories. Better leads to a faster horse; different leads to a Model T.
- The wealth goes to the kings.
- The most skillful players essentially better their odds over time.
- The first inventor is an innovator to be thanked. The first to define and develop a category is a category king to be followed.
- We've heard CEOs sing the refrain: “We make shit and sell shit and everything else is bullshit.” Well, good luck with that. While you're making shit and selling shit, someone else will define your category and steal it from you.
- Category design builds the profile of the space while drawing attention to the company creating it.