Startups change the future so they MUST be different, rather than better. Christopher Lochhead shows us how category designers realize that different is believable from a startup, but better is not. Any powerful startup idea pre-supposes an exponentially different future, which means your startup MUST change the way the people think about the future rather than incrementally improve on the products they already use. Different forces a choice rather than a comparison. And different sticks, while better gets lost in the noise. In this lesson of greatness, we cover the specific steps involved in applying category design to your startup.
Christopher Lochhead:
Why do I, as an entrepreneur, want to begin category design at the beginning? Because you want to be 80% of a multi-billion dollar market that you created, that you design, and that makes you almost impossible to catch.
Mike Maples:
This quote by Christopher Lochhead is a key lesson of greatness. Legendary startup founders design categories and not just products and companies. Let's talk about why.
Mike Maples:
If you've been listening to this podcast, by now you know that legendary startups involve extraordinary teams building breakthrough products that change the future. But few realize that there's a third lever to pull on the path to greatness, creating a category. To add to the confusion, lots of people struggle to understand what a category even is in the first place, much less how to design one. It's easier to get our minds around the capabilities of our product or the team we're building. Category design could be confused with getting the right marketing slogan or the right three letter acronym like CRM or ERP, or some other type of message that will hopefully resonate. Or we make the mistake of believing it's a message you use to describe your business after you've achieved product market fit.
Mike Maples:
But it's far more than that. Let's talk about why that is and how you can leverage category design on your startup's path to greatness. You'll recall that I always emphasize that a startup is not a company. It's a team of founders trying to create a breakthrough that leads to a someday dominant company that changes the future. Traditional marketing people don't think this way, though. They think like traditional company marketeers. They map and segment a market, and then they try to steal share from other competitors in that market. Think Coke versus Pepsi, for example. Conventional startup founders tend to think this way too. They think about why their product will be better than those of their competitors.
Mike Maples:
But breakthrough startup founders are time travelers who discover a secret to a radically different future that will rock people's world. Then they must come back to the present and convince early believers to embrace their secret and co-create that new future with them. In order to succeed at bending the arc of the present to a different future, they must teach the world to think differently about what the future should be. They must create a new category that transcends the products of today rather than a better product that's an improvement over what's available today. They must start a movement based on a provocative point of view that becomes a future market.
Mike Maples:
For example, Steve Jobs didn't discover segment or size or analyze the markets for smartphones and tablets and portable music players. He saw a different future and designed these categories by teaching the rest of the world how to think about them. Elon Musk did the same with electric cars. So how can you get category design right? Let's start with what a category is in the first place. Where do categories come from and why are they so important? Categories manifest everywhere, on the crowded supermarket shelf for colorful products all trying to vie for your attention and your money. Market maps that you might see on a market research slide show all the companies vying for success in a crowded market of segments and sub segments. Even the individual line items within a budget vie for the CFO's attention and spend.
Mike Maples:
Notice how these examples all have a common thread, a battle for attention. So here's the problem we need to solve. All of us, including your future customers, employees, and any potential believers live in a very confusing and noisy world. Your startup won't have a chance to get people to remember much about you and why you matter. So you have to be really clear on what you want people to know about you and only you, why it matters and why they should join your cause. The way to do this is not to talk about jargon, buzzwords or what Christopher Lochhead calls why my carbondingulator is better. Category design is about avoiding the comparison game. It's not about being the best. It's about being the only.
Mike Maples:
Category design is not how you design the product or your team. It's how you condition the minds of the people you want to persuade to move with you to a different future. Just like items on the shelves in a crowded supermarket, categories occupy specific containers in people's minds. The container that your product occupies is your category. If you define this container well, you will be the only business that occupies it. If you define it well, the container will feel big and important and urgent to the people who you want to care about you. If you define it well, people will believe they should allocate big budgets to your container rather than small budgets allocated for others. This is true for both corporate budgets as well as share of wallet for consumers.
Mike Maples:
Category design sometimes feels more like a black art than a science, but it's not. So let's talk about the science of why our brains need categories. In order to deal with information overload our brains, push us to make decisions that feel comfortable based not on facts and logic, but our instincts. Brain science research and behavioral economics show there are many important biases that drive our brains and our instincts. I can't list them all in this episode, but here are three big examples. The anchoring effect, in which early information affects how we think about all information that comes later. Group think, in which we tend to believe things because other people do. A similar biases, the conformity bias. We often believe similarly to others in a group, even if it goes against our own internal judgment. Choice supportive, in which once we choose something, we tend to believe it will always be better even if it's not when the future facts unfold.
Mike Maples:
This is why conditioning the mind of those you want to persuade is the essence of category design and is core to creating greatness. So how do you create a category? Christopher Lochhead and his coauthors described the process in their book Play Bigger. There are four main steps when you're starting out. Step one, identify your founding insights and use them to identify your difference. If your startup is going to be a breakthrough, you need to identify the most important way it breaks free from the present. How do you want the world to think differently about a problem? How do you want to introduce them to a different future, not just a better product? How is the world you are proposing radically different from the world that is?
Mike Maples:
A quick comment here on why you want to be different and not better when you're a startup. Different is believable. When you're a startup, you're asking for someone to believe something they didn't previously believe. If you are better than what they already know, it's not very credible. Why would a startup be better at something that's already known and established as good enough? Startups are more believable when they're not trying to improve or replace something, but instead are trying to persuade someone to believe something new for the first time. Different forces a choice rather than a comparison.
Mike Maples:
If everyone in the world is selling bananas, you want to be the first person to sell an apple. By doing this, you force a choice and not a comparison and this is vital to category design in the early days of startup success. Category designers do not want to be compared to others. They want all others to eventually be compared to them. Different sticks, better does not. In the end, only different people make a difference. The same is true for your startup.
Mike Maples:
Step two is to create your category design blueprint. We want to make sure to map the entire ecosystem that will animate your category. Who are the players that need to help you evangelize the category in addition to the customers? Who are the players who will be threatened by the future you are proposing? What will they try to do to stop you?
Mike Maples:
Step three, define your provocative point of view. A strong point of view provokes people to move in your direction because they embrace it. The classic example is Marc Benioff with Salesforce. He didn't market that he can handle customer records faster at more scale than other CRM systems. He marketed the benefits of cloud versus on-prem. Keep in mind, your point of view always should draw distinction between the world that is and the world you're proposing should be without naming your competitors in a specific way. Even had a sign that you might remember that said, "No software," to emphasize his point of view.
Mike Maples:
Step four, mobilize your movement. You want to get all of the people who matter in your ecosystem to move toward the future of your design. In order to illustrate these steps, I'm going to offer an example that might surprise you. Clarence Birdseye, the pioneer of frozen food. In the early 1900s, if you wanted to buy fruits or vegetables or fish at the supermarket, you had to buy them when they were in season, or you had to buy foods that were salted or smoked. But one day Clarence Birdseye noticed Eskimos catching and preparing fish on the ice. They would ice them under thick ice and store them in their igloos. He was intrigued by this idea of flash freezing and wondered if it could be done with fruits and vegetables as well.
Mike Maples:
So he experimented and discovered that he could, but he didn't stop at inventing a machine that flash froze fruits, vegetables, and meats. He designed a category embracing the four steps of category design. First, identify your founding insights. For Birdseye, the fundamental insight was that you could flash freeze fruits and vegetables just like with fish. That meant that they could be preserved for longer and offered throughout all four seasons rather than just when they were in season.
Mike Maples:
Second, create your category blueprint. Having the right idea for flash freezing by itself wasn't enough. He had to map the entire ecosystem. For example, he had to find a way to keep his food frozen in supermarkets. He also had to keep it frozen and transit to them in the first place. He needed a blueprint for the entire category, not just one part of it.
Mike Maples:
Third, define your startup's point of view. Birdseye's offering overcame the limitations of local and seasonal food in unprecedented ways. He claimed the food would be as gloriously green as any you will see next summer. He told customers they didn't have to buy into the limits of seasonal and local products anymore, and that they could have an appealing and often more nutritious alternative to canned, salted and smoke foods as well.
Mike Maples:
Fourth, mobilize your movement. Imagine what it took Birdseye to make his point of view a reality. He had to invent a machine to flash freeze food. He had to develop packaging to keep it fresh. He even had to convince the railroads to create specifically designed cars that would keep it fresh in transit. Then he had to convince supermarkets to acquire freezers and put it in their isles. He didn't just appeal to customers. He mobilized the entire ecosystem toward the future of his design. Next time you walk into a supermarket and see that frozen food aisle, you could pay your respects to one of the greatest category designers of all time.
Mike Maples:
As we consider the success of Clarence Birdseye, it should be obvious that category design is so much more important than just coming up with the right marketing messages and slogans. Categories are designed in a comprehensive way. So what does that mean for you? Getting category design right is about more than messaging, and you should think about it from the first time you have your startup insight, not as an afterthought when you've achieved product market fit. So the question I'll leave you then is a simple one. What unique space will your startup occupy in people's minds?
Mike Maples:
Thanks for listening to this lesson of greatness. If you found this episode insightful, you might also enjoy my recent interview with David Sacks. In it, we talk about how startups are movements, which is an important understanding to master when you start to design your category.
David Sacks:
To make your startup interesting to the world, it has to be a movement for change. I think the best startups are movements for change. They want to change the world in some way.
Mike Maples:
You can find a link to that interview in the notes for this episode, or find it in our archives at greatness.floodgate.com. I appreciate you listening and I'd love to have you subscribe wherever you get your podcasts so you don't miss an episode. If you like the show, I'd be grateful if you could leave us a review on Apple Podcasts. Until we catch up again, I hope you never let go of your inner power to do great things in whatever matters to you. Thank you for listening.