Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets

by Al Ramadan

The key to each has to do with creating, developing, and dominating new categories of products and services.

But Sensity, which by 2015 had signed up GE and Cisco as partners, wasn’t trying to beat them by making better sensor-loaded LEDs. It planned to win by marketing something different, focused on the network and data.

Legendary companies create new categories that 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 the smartest pirates, dreamers, and innovators on the planet, disruption is never the goal. Creation is the goal.

Category kings take it upon themselves to design a great product, a great company, and a great category at the same time. A category king willfully defines and develops its category, setting itself up as the company that dominates that category for a long time.

From time to time, the technology industry gets caught up in hype about soaring valuations of start-ups. But like disruption, valuations are an outcome, not a strategy.

“Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.” As you’ll see, he’s describing category kings—the companies that take all the economics out of a category. Thiel goes on to say, “All happy companies are different: each one 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.

Category design involves creating a great product (along with its experience), a great company, and a great category at the same time. It is a broad, deep discipline that impacts every part of a company and its leadership team.

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 analyzed the total value created by every technology IPO from 2000 to 2015, and found something remarkable.11 We found a consistent “sweet spot” window. The data show that the best time for a company to go public is when it is between six and ten years old. Oracle, Cisco, Qualcomm, Google, VMware, and Red Hat are among the many enduring category kings that went public in the sweet spot window.

Your number one job is to change the way people think. Your product, your company culture, your marketing—everything has to be aligned with transforming the way potential customers think. If you change the way they think, they will change their buying behavior. More important, if you are the company that changes the way people think, people will see your company as the category king, and you will win the majority of the customers.

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.

Category design is the mindful creation and development of a new market category, designed so the category will pull in customers who will then make the company its king.

Enduring companies that build powerful flywheels create and expand categories over and over. As we’ll get to later in the book, Amazon.com has been a master at creating new categories at the same time as it creates a new product while also making sure the company fits the category.

Finally, as we alluded to earlier, new technology has made it possible to create categories faster than ever. Speed as a competitive weapon has always mattered, especially in technology.

1999: Salesforce.com’s “No Software” campaign conditions the market to desire a new category of cloud-based applications. In doing so, CEO Marc Benioff exemplifies modern category design.

Category design is the discipline of creating and developing a new market category, and conditioning the market so it will demand your solution and crown your company as its king.

Category design drives the company’s strategy to become a category king. The strategy has to start with the CEO and her leadership team identifying the right category to create, making sure the product and company fit the category.

Category design involves product and ecosystem design. That includes creating a blueprint that generates a belief that you have the solution to an urgent and giant problem. It means developing an environment around your product that wins loyalty and gratitude for the product and company.

Category design is part of company culture. It is directly connected to the kind of company you build, the type of people you hire, and the type of community around the company including investors, partners, analysts, and journalists. It is the company’s point of view on the world.

Category design is about creating a powerful and provocative story that causes customers or users to make a choice. The story evokes something different from what came before, not just better.

Category design is marketing, public relations, and advertising when it is all focused on conditioning the market to desire and need whatever you’re giving it. The goal is to condition the market to have an aha that changes people’s consumption, usage, and buying decisions. This is much more than messaging and branding.

Too many CEOs believe that customers will buy when they learn about the features of their breakthrough innovation. But a product and a company don’t float in space. A product and a company exist inside a category. If you don’t take charge of the category, someone else will, and then you’re royally screwed. Position yourself or be positioned.

You have to help them move from the way they used to think, to a new frame of reference. This is what it means to condition the market. You have to first define and market the problem—and only then can you help people understand that you can solve the problem better than anyone else.

But when the category demands a product, the product doesn’t have to be perfect right from the get-go.

Once the cloud-based sales-force automation category revealed the problem, the market demanded any viable solution.

WHAT’S THE PROBLEM THEY DON’T YET KNOW THEY HAVE OR CAN’T YET SOLVE?

Origami identified “marketing signals.” Airbnb identified “community-driven hospitality.” Les Paul identified “electric guitar.” What’s your new thing that never existed before but that your customers will feel they must have?

After you come up with an aha of an initial market or technology insight, and after you discover and define the right category, you have to craft the story about the category that you’ll tell.

A POV tells the world you’re a company on a mission, not a missionary company looking to make money any way it can. It frames the new problem that your category identifies, and sets you up as the answer. When someone can articulate your problem, you believe that person must have the solution.

To reach people’s emotions, a POV has to sound the way people talk. It has to be simple, direct, visceral. Language matters!

The story about your business is more important than the facts about your business. Sound outrageous? Maybe, but the brain research proves it’s true. People relate to and remember stories—even people who make a living analyzing facts.

It tells the world why this category and the company creating it are different. Different sticks. Different forces a choice between what was and what can be. A POV built around better is about comparing your offering to the thing customers already know.

A great POV takes you outside the better wars and sets you in a different space all your own. A well-executed POV gives the company an identity and culture. It becomes the invisible hand that guides your priorities. It results in the right kinds of employees joining the company, the right kinds of investors funding it, and the right ecosystem building out around it—and, by the way, repels those you don’t want hanging around.

A great POV is not just the right story—it’s the right story for its time. The POV has to take into account the state of technology and the mindset of society. An entrepreneur might have a brilliant vision that’s exactly right for a decade from now.

A great POV pushes people just enough into the future, while giving the world a view toward what lies beyond.

“You’ll attract the employees you need if you can explain why your mission is compelling: not why it’s important in general, but why you’re doing something important that no one else is going to get done,” Thiel wrote in Zero to One.

Point of view development is intricately tied to category discovery and expression.

If you want to know the right time to get serious about category design, it’s usually when the forces of gravity grow strong.

They secured a position as a category king, then put a flywheel in motion that helped them continuously grow their category potential, all the while guided by a powerful point of view.

A category king builds an ecosystem, and the ecosystem in turn adds momentum to the flywheel. In the Google and Facebook flywheel, users are a material part of the ecosystem.

Design yourself, what you can do, and your category together. Designing yourself might involve developing a personal set of beliefs and a way of conducting your life that fits with what you do and the category you address.

Design the “product”—that is, your offering to the world—by developing your skills. And design the space around you so it fits your capabilities but also challenges you. A company’s value largely depends on three factors. First is the potential market for the category it’s in. Second is the position of the company in that category, because the king takes most of the economics. And the third factor is performance—proof that the king can deliver on its promises to the category.