Main illustration: Jason Yim
We hear it all the time: companies pitching themselves as the Uber of this and the Amazon of that. But rather than going after someone else’s rules, shouldn’t you create your own?
In this era of ever-increasing digital disruption and innovation, category design can be the ultimate business strategy for brands wishing to stand out from the crowd. And one of the biggest advocates behind the movement is author, columnist, and advisor Kevin Maney.
As a tech journalist, Kevin has been witnessing the evolution of the tech industry for more than 20 years. According to him, winning is not really about beating the competition – it’s about inventing a whole new game. And that’s why he co-wrote Play Bigger: How Rebels and Innovators Create New Categories and Dominate Markets with startup advisors Al Ramadan, Dave Peterson, and Christopher Lochhead.
The book aims to help companies apply category design to open new markets and create new demand. Kevin has written and co-authored books such as Unscaled: How AI and a New Generation of Upstarts Are Creating the Economy of the Future, The Maverick and His Machine: Thomas Watson Sr. and the Making of IBM, and The Two-Second Advantage. But it was Play Bigger that fittingly ended up playing a bigger part in his life than he anticipated. As the book took off, more and more people approached him to help them define their own categories, and now, with his partners at Category Design Advisors, he’s doing just that.
In this episode, we sit down with Kevin to talk about the inner workings of category design: what it actually means and how companies can leverage it to grow.
If you’re short on time, here are a few quick takeaways:
- When you create your own category instead of pursuing market share in someone else’s, everyone has to play by your rules because you’re the one that put them out there.
- The hard part is knowing what problem your company solves. Once you know that, you can easily align around that and position yourself as the solution to that problem.
- Even better than solving a problem that nobody else is solving is solving a problem people don’t even realize they have. It’s hard work – you have to make them aware of both the problem and the solution – but the payoff is huge.
- However, the important thing is not necessarily to become the first company in the space, but to be the one who gets chosen as the dominant player and captures all that value as the market takes off.
If you enjoy our discussion, check out more episodes of our podcast. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice. What follows is a lightly edited transcript of the episode.
Liam Geraghty: Kevin, you’re very welcome to the show. Delighted to have you with us today. I wanted to start by getting a handle on what category design in marketing actually is. And luckily for us, you literally wrote the book on this stuff. It’s called Play Bigger, How Rebels and Innovators Create New Categories and Dominate Markets. It’s a great title. I know you co-authored this book with Al Ramadan, Dave Peterson, and Christopher Lochhead. Where did you get the inspiration to write this book in the first place?
Kevin Maney: Thanks, Liam. Thanks for having me on, first of all. And well, there’s a little backstory. Al Ramadan had started a company called Quokka Sports back in the 1990s during the dot-com boom and I was a columnist for USA Today writing about technology. I’ve been a journalist and author in this space for like 30 years, and I really liked what Quokka was doing. Basically, it was inventing the idea of sports on the internet and using data to help tell the story of sports, all this stuff that’s commonplace today. I started writing about Al and Quokka, became friends with Al, and really liked his thinking, especially about sports and the digital universe and all of that.
“You should think in terms of creating a new category and win that, rather than going into somebody else’s category and try to grab market share”
It turned out that Quokka was about 10 years too early. It was trying to give us online sports when we were still dialing up modems and barely able to download a photograph. But over the years, Al went onto other positions in companies, and then he became an advisor to startups, and he teamed up with Chris and Dave, both of whom are Silicon Valley veterans and former CEOs and CMOs and founders. The three of them had this firm called Play Bigger and were advising startups. Their basic concept was this idea that if you’re going to think about starting a company in this day and age and you really want to be successful, especially in digital markets where it tends to be winner-take-all – I mean, you’ve got an Uber, you’ve got an Airbnb, and you can barely name the second or third place company in each category – it would make sense that you should think in terms of creating a new category and win that, rather than going into somebody else’s category and try to grab market share.
That was kind of their founding idea, and they had a bunch of scattered things that they were doing with startups through that period. And then, Al invited me to dinner with these guys and introduced me, and they talked about what they were doing. By this point, I had written like half a dozen books about technology and business, and they wondered if there was a book in this kind of thinking. And I knew enough from the context of what was going on in digital markets and such that I immediately said, “That’s really interesting thinking. I think it’s right. Let’s keep talking about it and pursue it.”
“If everybody comes into this category, they have to play by your rules because you’ve managed to get the rules out there”
And we started getting together, the four of us for, these two or three day stretches at Chris’s magnificent house in Santa Cruz, California. We’d spend part of the day riding bikes around, or they would go surfing, and part of the day just hammering out these ideas. We started to put a lot of discipline around our thinking, bringing in other concepts from brain science and from other economists who were doing work outside their categories, and it all started to come together around this idea of helping companies see and spot a new market category that didn’t exist yet, but that the world actually needs, and then pointing the strategy at that and using language and words in a narrative to define that new category in a way that is beneficial to the company defining it. So, if everybody comes into this category, they have to play by your rules because you’ve managed to get the rules out there.
We put all this together in a book called Play Bigger and it has been the most successful book I’ve ever been a part of. As the book sales started to take off, we just started to get this phenomenon of CEOs and Venture Capitalists and others calling us and saying, “Please help us do what you wrote about in the book.” I thought I was going to continue to be a journalist and author, and instead, I got into this business of helping companies do what we wrote about in the book, and now it’s most of what I do. I mean, it’s been a really fascinating turn of events in my life, but it’s also been truly satisfying and an amazing adventure.
A new space, a new language
Liam: Let’s do a bit of a deep dive into category design. How exactly do you define it?
Kevin: Well, we define it as a discipline. It’s like experience design or product design. We want, and in fact, this is already happening, other people in the world to start defining themselves as category designers. The idea is that every company starts with the idea of product design. I mean, you’ve got an idea of something to build, and you go and build that.
Another important factor in creating a company is what you’d call company design – you’ve got a product and now you’ve got to figure out what kind of people to hire, what kind of culture to have, where you’re going to be located, how you’re going to operate, and all those kinds of things. Most companies pretty much stop there and go on with life. And part of our point is that, if you can have another person, like a chief category designer, whose job is to constantly keep an eye on the space you’re going into, and define and open that space in people’s minds so they need this thing that you’re creating, that’s very powerful.
“Category design is that discipline of seeing new strategic spaces and putting the language around that space to define it”
Category design is that practice, that discipline of seeing new strategic spaces and putting the language around that space to define it so your company knows exactly what it’s doing, what kind of products it needs to build, the way its sales deck should be presented, the way you talk to potential investors. All of that should center on that language, on how that category is going to evolve over time.
And then continue to make sure the company stays on that path rather than veering off into something else or listening to customers too much and doing little things that the customers want. If you understand that there’s a category that the world needs and you’re going to try to fulfill it, stay on that path and really drive the category thinking through the company.
Liam: So, who are we talking about here? Who will be some notable examples in this space?
Kevin: Keep in mind, the book came out five years ago, and we’re primarily working with pre-IPO startups, so a lot of these things are sort of in the works. It’s early to see a lot of superstars, but we’ve had a couple of big successes. Chris, Al, and Dave, who originally had their Play Bigger firm, early on when the book was just coming out, and before I got involved, they were working with Qualtrics. Qualtrics was a survey company at the time, and they changed Qualtrics’ idea about experience design and experience measurement and created this new sort of space, this new idea of what they were.
Now they’re completely identified with that, and Qualtrics ended up getting bought for like $18 billion by SAP, which then, by the way, it’s turned around and put Qualtrics out into the public markets again. It’s been an enormous success. And even the CEO, Ryan Smith, will gladly talk about how category design played a huge role in what they became.
A more recent one that I got involved with is an IPO that happened in June by Sprinklr. Sprinklr had been around for like 10 years, and they’d been in this space of measuring social chatter and what was going on out there for marketers to understand their reputation and to know if something was wrong with the way people were perceiving your products. And they were struggling.
“It’s not like we studied the market and came to this understanding. They already knew this, they just didn’t know how to put it all together”
There were a lot of point solutions that dealt with different kinds of channels. They had a product that measured customer experience data, but it was sort of purpose-built that did it across channels and did it for the entire company rather than different departments. And they had been going to market as like, “We’re competing against this company and this market, and this company and this market, this company and this market.”
They were six months away from an IPO, and they got in touch with us. They felt like they needed some help in defining the space they were trying to capture, and the more we talked about it, the more we realized that they were the only ones who were unifying all of these measurement systems in one place and using the data across all those silos. Nobody else was doing that.
And again, we draw this from the company. It’s not like we studied the market and came to this understanding. They already knew this, they just didn’t know how to put it all together. So, instead of defining the cells in five different categories like they were doing before, we helped them put language around this idea of a unified CXM, unified customer experience management, and go to the world to say, “this is a new category.”
“By doing that, they de-position the old categories – they’re not seen as competing against those, but as something different”
In fact, there’s this new category that usurps the old one because you don’t want a bunch of these point solutions that all don’t talk to each other. What you really want is one unified CXM system that merges all these together and gives you a complete understanding of what’s going on in your company and market. The idea is to create this new category so that people see them as the ones who created and lead it. By doing that, they de-position the old categories – they’re not seen as competing against those, but as something different.
That language is all over their S-1 and their IPO, and it helped them go public. I think they went public at like an $8 billion valuation, and they were quite pleased with that result. So, that was a way that category design helped the company. Now, a lot of times, it helps a company develop a strategy and a product in the first place. This was an example of a company that had been around for quite a while, had all of the information, had the products, and just didn’t understand the space they could own. And we helped them do that.
Understanding what you’re solving for
Liam: What are the thought processes involved in creating a new category design?
Kevin: Well, that’s a great question. I work with a kind of sister firm to Play Bigger called Category Design Advisors, and my partners and I have worked out a pretty standard way of doing this by now. We do it as an intense week-long workshop with the entire leadership team from the company. We ask that there should be six to 10 people around the table, and the first day is maybe six hours long. We get a conference room, and there are whiteboards and all of this, but this is not a marketing exercise. This is for the CEO and the CFO, but also the Head of Product, the Head of Sales, the HR chief. All those people should be in the room because what we’re going to talk about affects the way all of them should approach their jobs.
“When you ask that question, 90% of companies will tell you what their product does. And we say, ‘No, no, no. That’s not what we’re asking’”
The first question that we start with that first day is, “What problem do you solve?” Believe it or not, that simple question is so hard to answer, and it’s usually a six-hour conversation and a lot of arguing. When you ask that question, 90% of companies will tell you what their product does. And we say, “No, no, no. That’s not what we’re asking. We don’t care what your product does. Tell us what problem exists in the world that is not getting solved any other way, or even better, a problem that people don’t really understand they have until you explain it to them, and that you’re going to solve with whatever you’re going to build. Don’t tell us what you have. Tell us what problem you solve.”
If we start with that, we can make people understand that there’s a problem that can be solved in a new way or a new problem that nobody ever solved before, and make them understand that that’s a missing thing in the world. Now you’ve got people’s attention, you’ve got a reason to be, and you’ve got a product to solve that problem. It’s almost an inside-out look at company strategy. And once we identify that problem clearly and everybody aligns around it, from that point on, the job is actually pretty easy because now we understand the thing that must exist in the world that doesn’t yet exist.
“As soon as that idea gets out there and people understand that it’s a smart idea, the number of companies that go into that space starts to skyrocket”
And you know what? If you guys don’t do it, because now everybody sees that it should exist, somebody else is going to do it. Now, let’s decide what the company strategy is to solve that problem. What kind of product are you going to build? What kind of investment are you going to raise? What kind of people do you need to hire? And so, it all starts to cascade from the problem you’re going to solve, the category you’re going to create.
The battle for dominant design
Liam: Something related to all of this is public psychology. The notion that people have to get comfortable with something before they choose their dominant design is something that economist Paul Geroski wrote about in The Evolution of New Markets. I was just wondering, where does that come into play with all of this?
“The important thing for every company is not to be the first company in the space but to be the one who gets chosen as the dominant design”
Kevin: Well, it’s a huge thing. Are you a Paul Geroski fan? Because I’m kind of a Paul Geroski fanboy. In fact, I think he is one of the most overlooked economists and thinkers. I can’t believe that every start-up founder doesn’t read that book. As you know, Geroski was an economist who used data to study how new categories or markets get created and evolve over time. And as you mentioned, the dominant design is the key thing, right?
If you imagine, in any new market created on day one, there’s like one company because they’re the one who’s basically trying to invent this thing, and it’s worth noting because there’s no market for it yet. And over time, and we’re talking years, depending on the kind of product or market we’re talking about, and as soon as that idea gets out there and people understand that it’s a smart idea, the number of companies that go into that space starts to skyrocket. Everybody’s piling on trying different versions of whatever this is.
And yet, at the same time, the market for these things is almost still nil. It’s just early adopters. It’s not very valuable because nobody really knows what this thing’s going to be yet. If you’ve been around long enough to remember the early smartphone market when there were Blackberries with tangible keyboards, Nokia phones, Motorolas, everybody was trying different versions. There were like five or six operating systems for mobile phones. And as Geroski points out, all this activity is happening, tons of companies piling in and trying different versions, and the consumers or businesses are just watching this and not really buying or testing the waters. And suddenly, there comes a point in time when the world decides on a dominant design.
“It was the moment Apple introduced the iPhone. Everybody looked at it and said, ‘That’s what a smartphone should be’”
And again, if you use that smartphone example, it was the moment Apple introduced the iPhone. Everybody looked at it and said, “That’s what a smartphone should be.” And in fact, because it’s Apple, we trusted that it was going to be around for a while, it was going to work. We could buy into this. And that becomes the dominant design. The moment that happens, the number of competitors falls off precipitously because they don’t have the dominant design or they have to copy the dominant design. And that’s why every smartphone today works essentially in the manner of an iPhone. At that moment, the world decides that now it’s safe to invest in this thing. The market for this thing takes off, and over time, we end up with two or three dominant companies capturing all of that value.
So, the important thing for every company that we work with or any company that tries to do category design is not to be the first company in the space but to be the one who gets chosen as the dominant design years after this space begins. If you can understand what the category is and what it should be, if you can define it in a way that makes you the dominant design and keep at that so that’s the way the world perceives you at that critical moment, you’re going to be the one that captures all that value as the market takes off. That is a huge part of this whole process and way of thinking.
The million dollar problem
Liam: You mentioned Steve Jobs and the iPhone. It just made me think about, on the flip side, what are the big hurdles when it comes to category design? What if people don’t recognize the problem? And I suppose I’m thinking about the iPad in the beginning.
Kevin: The iPad was, in my view, a brilliant job of category design but a little tougher hill to climb because Steve Jobs was telling us about a problem we didn’t know we had. That’s a little harder than a recognizable problem, but it can be very effective. The day Steve Jobs introduced the iPad in 2010, he gets up on stage and tells people, “Okay, maybe you haven’t noticed, but we are now in a digital media universe and we’re all consuming television shows and movies and music and books and news and everything else on digital devices. And there are basically two digital devices that can do this for you. And one is your phone.”
“You have a problem you didn’t realize you had – you’re consuming all this digital media and you don’t have the right device to do that on”
And he puts up a picture of a phone and goes, “And that’s great, except the screen is really small. It doesn’t really do very well for watching a sporting event or a movie. Or you have this laptop, which has a nice big screen, but pretty hard to use if you’re on an airplane, or you’re trying to sit on the couch.” So what he said was, “You have a problem you didn’t realize you had, which is you’re consuming all this digital media and you don’t have the right device to do that on. So we’re going to introduce this new category of product that sits between these things. It’s a tablet. Ours is called the iPad, and it solves this problem that you didn’t realize you had.”
And, I mean, look at all the followers who piled in and created iPads and similar kinds of things. They saw the category, they saw that it exists and that they had to try to build to the design that Apple had created, or to the idea Apple created, so he opened up the space in people’s minds that didn’t exist before. Does the iPad have the success of an iPhone or even the MacBook? No, it does not. But the fact that it exists at all and as big a business as it is, is because Steve Jobs created the category and made us understand there was a problem that needed to be solved in the world that was not being solved by anything else.
Liam: So, then, off the back of that, I’m thinking about all the entrepreneurs, their heads percolating with ideas. What advice or tips would you give to people who want to pursue and create their own category design?
“If you’re talking about what you’re doing as being better than someone else, I guarantee you, you are entering somebody else’s category”
Kevin: Well, the first thing is that if you’re talking about what you’re doing as being better than someone else, I guarantee you, you are entering somebody else’s category. You’re trying to tell people that ours is faster, has three more knobs, whatever it is. You’re basically making an argument to grab some market share from someone else. I mean, lots of companies are successfully doing that, and that’s fine, but in our universe, in our way of thinking, the better strategy is to create something different instead of creating something better.
And different means thinking through the problem you’re solving. Is there a problem to be solved that nobody else is solving? Or a new problem that people aren’t quite yet understanding that they have that you can solve for them? Make people aware of that problem, why it’s not being solved, why nobody else is capable of solving it, and why you are the one who understands how to solve it. If you approach a market or your strategic thinking that way, it will lead you to the kind of product you should build and the kind of company you should build to make sure that product succeeds. It’s a straightforward answer, but I do think that that’s a very important way for founders to think.
Socially responsible capitalism
Liam: It’s great advice. And I’m wondering, have things changed in this space since the book came out? With everything that’s gone on since COVID started, have you seen any kind of changes there?
“This discipline is going to increasingly be a part of the way every company and investor thinks”
Kevin: I don’t think that a lot has changed about how it works. One thing that has changed for us is that the world has picked up on category design. Now, there’s like a small group of people that identify themselves as category designers who get together regularly over Zoom and talk about this. They invite us once in a while to join. This is actually becoming a thing that people think about. Sometimes we’ll get emails from companies saying, “We read the book, we rolled our own category design project, and we’d love to tell you about it because we’re just proud of it.”
The idea that people are doing this without us even touching them is really amazing. My coauthors and I believe that this is going to grow, that this discipline is going to increasingly be a part of the way every company and investor thinks. I mean, big venture capital firms like Sequoia and Floodgate, General Catalyst, all these guys have caught onto this and will actually tell their portfolio companies to think this way or to get the book or to talk to us. It’s spreading. And that’s the biggest thing that’s happened in my world as this has gone on.
Liam: Brilliant. To wrap up, what’s next? Do you have any big plans or projects for 2021?
Kevin: I’ve always been an author and journalist and I’ve always liked how writing has continued to help me think about the way things work, the way markets and businesses work. I’ve had this great collaborative relationship with Hemant Taneja, who runs General Catalyst, and we wrote one book that came out right after Play Bigger called Unscaled, which is about how AI and all these technologies we’re inventing today are going to change a bunch of different industries. We followed that up with UnHealthcare, which came out last year, about all these technologies that are changing healthcare. We very quickly responded to the stuff going on with the pandemic and how that was changing things.
“Conscious capitalism has been talked about quite a bit over these last few years in response to things that companies like Facebook or Amazon are doing to the world”
And we just completed a third book that we worked on together, Intended Consequences. It tackles this idea of responsible innovation. Responsible innovation and stakeholder capitalism or conscious capitalism have been talked about quite a bit over these last few years in response to things that companies like Facebook or Amazon are doing to the world. If you were a founder and said, “I really want to build a responsible innovation company, I really want to build a company that has a business model built around that so it’s not just an interesting, nice idea that we throw out the first time there’s pressure on margins.” How do you do that? How do you think that through, and how do you build that kind of company? How do you build that kind of business plan? What are some examples of companies that have done it before? That’s what this book, Intended Consequences, is about. It’s due to come out in January.
And in conjunction with that, General Catalyst is helping to fund – I’ve been a part of this with some other people from companies like Stripe and American Express – a nonprofit called Responsible Innovation Labs to continue to think about this topic and continue to help founders understand how to build these kinds of companies because we think this is going to be important for the world. So, get capitalism and technology behind changing things for the better, rather than changing things for the worse.
Liam: For sure. And lastly, where can our listeners go to keep up with you and your work?
Kevin: I have a personal website, just KevinManey.com, where you can see what books I’ve written and that kind of thing. But more importantly, if you’re interested in category design, categorydesignadvisors.com is our company’s website and we’d be happy to hear from you.
Liam: That’s great. Kevin, it’s been fantastic to talk to you. Thanks for coming on.
Kevin: Great, Liam. Thank you. I appreciate it.