Lessons of Greatness: Design your category
Christopher Lochhead: Why Legendary Startups create Categories
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Now, it’s go time with Christopher Lochhead.
Introducing Christopher Lochhead
Whenever I get stuck on a marketing problem, the first person I always call is Christopher Lochhead. Even though he started from humble beginnings as a dyslexic paper boy who got thrown out of school at 18, he's the best mind in marketing I know today. His podcasts, newsletters and books on marketing and category design are must-reads for people who embrace the philosophy of using marketing to create movements that change the future. And as you might expect, he also has a colorful personality. He's been called a human exclamation point, the quasar, as well as off-putting to some. I personally consider him one of my favorite people in Silicon Valley and a great friend.
📎 Chrisophter Lochhead’s links:
Find Christopher Lochhead’s book Play Bigger here
📚 Christopher Lochhead’s recommended readings:
The Business Case For Becoming A Category Creator In 2021 (And Why Most People Ignore It)
Campbell's Soup & How To Design A Category Breakthrough In The Roaring 2020s
Why Every Marketer Should Be Thinking About Category Creation
The Magic Triangle: Why Category Design Is The Single Point Of Failure
Positioning: The Battle for Your Mind by Al Ries and Jack Trout
Crossing the Chasm by Geoffrey Moore
Superconsumers: A Simple, Speedy, and Sustainable Path to Superior Growth by Eddie Yoon
✨ Follow Christopher Lochhead @lochhead on Twitter.
🎙 The Full Episode
Listen on Spotify
Listen on Apple Podcasts
Read the full transcript of the episode here
Teaser below:
🌟 Highlights from the Episode
Golden Line
“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.” —Christopher Lochhead
What is Category Design?
It's a management discipline centered around the ability to create and dominate markets. And here's the big aha. I would posit to you that virtually every marketing book, discussion, and course is fundamentally flawed. I'll take a step back. One of my most favorite expressions is thinking about thinking is the most important kind of thinking. And so, every marketing book, or almost every marketing book, course, discussion, et cetera, assumes a context or a lens that never gets discussed. And that context or lens is, what we're doing when we're marketing is we're fighting for share, market share, in an existing market. And branding is all about promoting our brand so that people looking for a certain type of service or product have affinity with our branded product.
First of all, it's not what any of the legends did because when you study the legends, they did the opposite of that. And here's the aha. It's one skill to compete for share in an existing market category. It's a whole other skill to design, redesign or create the market category itself. And what I would posit to you is the most legendary entrepreneurs in history do not want their product, service or, frankly, even themselves to be compared to what came before. Marketing in its traditional definition, branding in its traditional definition, is by default a comparison game. Steve Jobs wanted everyone to be compared to him. Sara Blakely wanted everything that came after to be compared to her. They are a demarcation point. And there's a distinction between capturing demand, which is what most people mean when they talk about marketing, and creating the demand. And that's what the legends did. And that's what category design is about.
And here's the aha. Brands are about companies and products. Categories are about customers.
“Category creation / Category Design is the strategic discipline for creating a new market segment and dominating it over time.
Category designers introduce the world to new ways of living, working and playing.” —Why Every Marketer Should Be Thinking About Category Creation
Different forces a choice, Better doesn’t
It's a new design. The problem is thought of in a completely new way and the solution is thought of in a new way. And therefore it's a new category and it stands as distinct. And what legendary category designers do is they force a choice, not a comparison.
Airbnb is a great example. Their tagline for a while, and I may be off a few words, but this was essentially their point of view, which is "Don't just go there, live there." They might not have said it quite that way, but their whole POV centered around live like a local when you're there, as opposed to stay at a hotel. They are driving the world from the way it is now to the way they want it to be.
Now on its surface, you could look at it and go, "Why the hell would I want to rent somebody's couch as opposed to stay at Chateau de La Ding Dong in Paris. This sounds terrible." But when you wrap the idea in a provocative point of view, it's like, "No, no, no, no, you're not renting somebody's couch. You're living like a local," right? And the fact that you don't have room service is a benefit, not a liability.
They see things differently and they don't necessarily disrupt or attack an existing industry. They teach the world how to think about something in a completely new way. And as a result, they create a massive new market category that today with Lyft or with Airbnb or any company that does this, ultimately they do start encroaching on the old territory of the incumbents.
But they do it because they've created a whole new paradigm and that's how they've competed as opposed to having a "We're better than them. Compare us to them." And if I say to you, "Well, we're better than Marriott. We're better than Marriott. We're better than Marriott," we're back at pink unicorns. And for entrepreneurs who think they've truly created a breakthrough product or service, you can't talk about an exponential breakthrough with incremental language. You need new language to communicate what this is. Henry Ford comes out and says horseless carriage, right? It's a provocative point of view. He's creating, he's designing a new category of transportation. Before horseless carriage, everybody was fine. And he comes out and begins to evangelize a new possibility, right? And he creates a whole new future. And by saying horseless carriage, he's purposely, he's not saying, "Oh, our thing is five X faster than a horse or requires less maintenance than a horse or doesn't shit in your face while it's driving you around." He doesn't do any of that. That's a comparison game, right? He says, "Horseless carriage. We're the future of transportation."
You're not comparing a horse and buggy to a horseless carriage because it's a whole new exponential step forward.
“Most marketers and entrepreneurs are fighting for only 24% of their market. And they don’t even know it.” —Why Every Marketer Should Be Thinking About Category Creation
Advice for Founders (in 0-1 mode, no customers, no product)
The first thing I'd say to you is if you don't do category design, you're going to be in a comparison game with the old paradigm. If you don't do category design as a zero to one founder who's only raised a small amount of money, by definition, if you don't tell the world how to think about you, the world will slot you into an existing market category definition, and they will be comparing you like the idiots in the car ad to other people that they think, by definition, have a like product. Then you'll fall into the dumbass trap of I'm going to show you my carbadingulater. And once you see how much faster, smaller, bigger, cheaper, whatever your thing is by way of comparison, "you're going to win," and that's not what happens. And so even in the zero to one phase that from the minute you tell the first person you want to hire, the minute you tell the first angel investor you might want to raise money to, the minute you talk to the first potential prospect, you want to begin to have an evangelism.
“Companies that create a new category typically capture 76% of the total category market capitalization” —The Difference Between a First Mover and a Category Creator
What you're looking for is actually, and this sounds crazy, not so much for them to invest or buy or join the company. What were you really looking for is for a light bulb to go on in their head for them to go, "Ah! The future is streaming, of course." And then ta-da, Marc Randolph goes off and raises money from Reed and the whole thing and all of a sudden you get Netflix, right? But if you'd sat there and said, "This is how people are going to do things in 1997, 1998, 1999," didn't look like it was going to be the case.
You want to be the entrepreneur that is driving that thinking, a demarcation point in language creates a demarcation point in thinking, which creates a demarcation point in value, which creates a demarcation point in spending and usage.
The same mistake that entrepreneurs make in any business: they compete on better, not different.
Recommended Readings
Al Ries and Jack Trout’s breakthrough book was called Positioning. Their fundamental argument is what you're doing in marketing is you're “battling for a position in the mind. And they argued that you wanted to create a distinctive position. And today positioning equals messaging, which is fundamentally a communications exercise.
I also love everything David Ogilvy, the father of modern advertising. There's a swagger and an attitude to the way he thinks about advertising and therefore marketing that I think is really important.
I think Geoffrey Moore's Crossing the Chasm is one of the most important books ever written for business people and particularly for the tech business. And I think if you look at Crossing the Chasm through a category design lens, what he's really teaching you to do is take that 8-10% of the market category that responds and fire them up. So that they go “mainstream”.
A more modern version of a similar line of thinking is my buddy Eddie Yoon, and he's got a book out called Superconsumers. The big aha in Superconsumers is most people, when they look to this, they look at "Well, who are our best? What's our best customers, the 10% of our customers that drive 90% of our profits and what insights can we glean and how can we make more money off of them? And how can we learn things from them so that we can expand the category or create a new category?", et cetera, et cetera. His big insight is it's not the 8-10% of your best customers. It's the 8-10% of the most enthusiastic consumers in the category. And if you get them and they buy into your new vision, the future you're trying to create with your point of view, then the whole category tips.
Words of Wisdom
Don't market the product or the company. Market the category.
For example, Marc Benioff is in year 20 whatever of evangelizing the cloud. Cloud, cloud, cloud, cloud, cloud, cloud, cloud, cloud cloud. And does he talk about their products? Sometimes. But for the most part, he is carrying that flag. And so the legends are always making the category bigger, are always protecting and growing and evolving the category via a provocative point of view. And they let the product stuff take care of itself.
Make the way it is today the enemy and never stop evangelizing the way it could be or should be because that's ultimately, you're trying to create the future of your design. And so you have to continuously evangelize it. And if you believe what I believe, which is categories are about customers and brands are about products or companies, 80% category, 10% brand. Nobody said I was ever good at math.
“…if you want to experience an exponential outcome, if you want to become a category king and reap two-thirds of the category’s economics as a reward, then you can’t compete your way to victory.” —Campbell's Soup & How To Design A Category Breakthrough In The Roaring 2020s
💌 Enjoyed this Episode?
If you enjoyed this episode, we’d be grateful if you could leave us a review on Apple podcasts and Spotify.
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.
“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.” —David Sacks
Questions / Comments / Have a favorite quote or moment from the episode? Send us an email at greatness@floodgate.com
where do we sign up for the 5/26 WaitRoom session? Thank you for sharing your time.
So many nuggets of wisdom. All businesses should listen and implement this.