What is Category Design? (And Why Does it Matter?)
Originally introduced in the book Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets, category design is a discipline that many of the world’s most successful companies in history have used to differentiate themselves, break through the noise, and transform their industry.
It’s a framework and philosophy that encourages companies to be incredibly intentional about the market category their product falls into. Instead of allowing analysts, customers, investors, and journalists to place them into existing market categories where they don’t feel they belong, category design empowers companies to proactively take control of the market category their product will compete in.
The discipline of category design is something investors look for today. As Sequoia Capital partner Jim Goetz said, “We seek mission-driven founders who can build a great company and category at the same time.”
While every founder knows it’s important to design a great product and design a great company, many still leave their category up to chance.
Founders may think that a good product alone is enough to win their market. However, they fail to intentionally think about the market category their company falls into and end up competing head-to-head in crowded market categories where it will be nearly impossible for them to overthrow the established market leaders. Instead of vying for the top position, why not create your own category?
Let’s take a look at category design in action.
Gainsight and the Customer Success Category
When Gainsight launched in 2014, they engaged with top tier analysts to get advice on which market category they should position their new platform in. The analysts advised them to take a challenger position in existing categories like customer support and customer relationship management (CRM). But none of these categories felt right for the problem Gainsight believed they were solving.
While more and more companies were making the internal discipline of customer success a priority and while the number of people with “customer success” in their job title was increasing rapidly, Gainsight had observed that there were no purpose-built tools focused on serving those companies’ specific needs and no company focusing on this fast-growing community of professionals at all.
Gainsight didn’t want to position themselves as a next-generation CRM or customer support platform and compete head-to-head for market share with established market leaders. Why would they? Their product wasn’t better or even comparable to these solutions — it was totally different.
So Gainsight capitalized on this opportunity. They created the Customer Success software category, championed the Customer Success profession, and built the leading Customer Success platform to serve the Customer Success community. They were acquired six years later for $1.1 billion.
A well-executed Category Design Strategy is how companies first create new market categories, then secure their position as the market leader of that category.
Why There’s Never Been a Better Time to be a Category Creator
We believe there’s never been a better time to be a category creator. The opportunity to create new market categories comes during periods of great change and today, the world is changing faster than ever.
Today’s founders have an incredible opportunity to step up and solve the problems that are emerging from all these changes that are underway. Instead of just building solutions that are incrementally better than what already exists on the market, they can build solutions that are both exponentially better and different. They can break free from the competition by introducing innovative solutions that empower customers to embrace new ways of thinking, working, and solving problems. They can create entirely new market categories for their solutions to fit into.
The founders who do this are the founders who are remembered as change-makers, revolutionaries, and visionaries who were bold enough to challenge the status quo, inspirational enough to get people to believe in their vision, and resilient enough to see the journey through to the end.
The world doesn’t need more copycat products with slightly better features. The world needs more bold visionary founders willing to step up and lead their customers into a better future, and to create new market categories that can better serve them. This is the era of the category creator.