Christopher Lochhead is a co-founding partner @ Play Bigger Advisors with Dave Peterson and Al Ramadan. Along with his co-authors, he has developed a discipline called category design, revealed in the book Play Bigger – How Pirates, Dreamers, and Innovators Create and Dominate Markets. Previously he served as Chief Marketing Officer of Mercury Interactive, a $1B software company that was acquired by Hewlett-Packard in November 2006 for $4.5B. In 2001, he co-founded strategy consulting firm LOCHHEAD with Dave Peterson. In 1998, he was the founding CMO of Internet consulting firm Scient. Before that he was head of marketing at Vantive, a pioneer in customer relationship management.
Chris, how did you guys get the idea to write this book? What compelled you to give us your secrets?
Dave, Al and I are former entrepreneurs and operating guys turned coaches. Over the years, we’ve had a lot of fun helping companies by being our blunt selves, by helping them wake up to the new opportunities presented by what we call category design.
We like to say that we’re not theoretical, nose-picking consultants. This book is the result of work we’ve done together over the past twenty years and more – we noticed certain patterns, and decided to share these insights with everyone. I personally wouldn’t be here if it hadn’t been for two books I read – one by David Ogilvy, and the other by Geoffrey Moore.
Our goal is to help CEOs, CMOs and executive teams to create an unfair competitive advantage through this new, strategic approach called category design.
What is category design, and what does it mean for business performance?
The best companies don’t just invent something to sell us.
They are not making products or services that just incrementally improve on whatever came before. They don’t sell us better. The most exciting companies sell us different. They introduce the world to a new category of product or service—like Clarence Birdseye creating the very idea of frozen food a century ago or Uber defining on-demand transportation in recent years.
These companies replace our current point of view on the world with a new point of view. They make what came before seem outdated, clunky, inefficient, costly or painful. They give us new ways of living, thinking or doing business, many times solving a problem we didn’t know we had – or a problem we didn’t pay attention to because we never thought there was another way.
These companies exert a gravitational pull on their markets, and end up with the lion’s share of the value. Recent research shows that it’s a winner take all game. Our research shows that the category leader – we call them a category king – commands 76% of the market cap of the category.
Let me explain.
First you come to terms with the fact that companies and products don’t live in space. They live within a container in a customer’s mind. That container is a category.
Categories have become the organizing principle for customers for centuries. Customers use categories as mental “tags” for new products and companies. These tags make it easier for people to understand new products and offers.
In times of uncertainty and change, our brains are governed by more than fifty different cognitive biases that push us toward decisions based not on facts and logic, but on instincts that can be at odds with facts and logic. It’s a shortcut system in our brain — a way to make decisions faster and easier, especially when overwhelmed by too much information (see below).
And that’s exactly the mode of thinking that our brains turn to when faced with exactly the kind of over-stimulated, methed-up, crazy-ass marketplace we have today and will have in spades in coming years.
Most customers need to buy into the idea of the new category, before they consider buying a new product. You have to think cloud file sharing is important before you ever compare Dropbox to Box.com. You have to know what a SUV is before you start test-driving Ford Explorers, Chevrolet Tahoe or Toyota Sequoias.
So how does an entrepreneur or an established senior executive create a category?
On a high level, most entrepreneurs essentially do two things – they go to work on a legendary product that’s predicated on that insight around the problem and they go build that product and we’ve never met an entrepreneur that didn’t think they had an amazing product and the best product. Their marketing screams – “look at our awesome product that does all this cool fucking shit faster, better, cheaper, blah, blah, blah.”
What they don’t realize of course is that nobody buys a solution unless they have a problem.
Successful entrepreneurs and innovators start with a brilliant market or technology insight. They see a “missing” in the world and strive to fill it. They identify a new problem or an old problem that can be solved in a new way. Then they embark on a mission to solve the problem.
Think – Jack O’Neill – the creator of the surfing wetsuit, who famously said, “I just wanted to surf longer.”
But, unfortunately, the gravity of building a great business and technology take over and prevent even some of the smartest entrepreneurs to take the next step and design the category that fits that insight.
This results in many companies attacking new markets in remarkably similar ways by focusing on two dimensions: 1) Build great products (and technology) 2) Build a great company. They believe in their bones that technology innovation and sales prowess are the keys. That’s why you hear some tech CEOs say things like, “We make shit and sell shit. Everything else is bullshit.” They passionately believe that their new technology is better, faster, cheaper, and cooler than existing offerings. They also believe that when enough people see their technology the category war will be won.
What do category leaders do differently?
The greatest category designers in the technology industry never leave category to chance. They take the next step to educate the market to see the world the way they do. They understand that category growth is governed by how fast our brains can change in an uncertain new world. They know that markets can only evolve as fast as perception and human behavior can evolve. They use cognitive biases to their advantage, especially the Anchoring Effect, Groupthink and the Choice Supportive bias. And they time their marketing, go-to-market, sales, and product strategies in concentrated bursts around the different phases of the category lifecycle.
There is an emerging consensus in Silicon Valley that there is too much at stake to leave the category un-designed. Without a category strategy, sooner or later the market will slap a tag on you. That tag will either drive your business forward or into the ground.
This applies to politics as well (laughs).
Savvy technology entrepreneurs, founders and CEOs are proactive about designing their product, their company AND their category at the same time – the Magic Triangle.
These Entrepreneurs and CEO’s intentionally combine company, product, and category strategy together to condition the market to their advantage. They know that companies and technologies need to be viewed in the right context before customers will start buying. They make a case for why their new innovation is different than anything that has come before. It is a strategy for setting the buying criteria for the space.
Think of it as writing the RFP for a new market segment.
And how long does a category last?
Categories evolve in a predetermined manner. We call it the category lifecycle:
In a market’s earliest stage, the number of companies in the space explodes. This is the phase when the new category is being defined and a gaggle of entrants are scrambling to solve the problem. In the middle phase, the number of companies dives as the king emerges and competitors disappear (the king starts sucking up all the economics). In the last phase the number of companies bottoms out as the king dominates and reigns over the market.
Inspired by Geroski’s Evolution of New Markets work, we created the category lifecycle model to explain this phenomenon.
Your book spells out category design as a discipline. Can you give us an outline of the process?
We call it the Category Design Journey:
The components include:
Articulating the founding teams technology or market insights. It puts its finger on the strategic missing you see in the world. That insight or missing that keeps you up at night and the thing that drives you to build a product, company and category to solve it.
Identifying your unique solution to this problem. Your answer needs to be put into the right category container for people to see it and understand why it solves the problem.
Defining your category name. The category name is comprised of the market type, the nature of the problem, and the audience who has the problem. It’s a name that will evolve over time as your category expands.
Defining your company’s point of view. Your POV frames the problem, explains the ramifications for not acting, presents a vision for the future and explains the business outcomes of embracing this vision. Your POV makes it crystal clear what you stand for, what you stand against, and why customers should choose you over the rest.
Detailing your product blueprint and ecosystem map. A powerful category blueprint sets the agenda for solving an urgent and giant problem. This works hand in hand with your category ecosystem, which paints a clear picture on how customers, developers and partners all work together. Category design helps you own the control points that generate fierce loyalty and gratitude for your product and company.
Executing Lightning Strikes to drive go-to-market, marketing, public relations and advertising focusing on conditioning the market to your category solution. Lightning Strikes use both air wars and ground wars to change the way people think. They draw heavily on the brain science research and it is much more than positioning, campaigns, messaging and branding. The Lightning Strike playbook aligns every function of your business to work together to move the minds of your customers and users from the old way to the new way. Lightning Strikes condition the entire market and anchor your targets in your category definition and point of view.
Driving your company culture. Category design 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.
Above all, category design is making all of these components work together, feeding off each other, so each action builds momentum for the category and its leader.
I’d like to end by sharing your “Ten Reasons You Shouldn’t Read the Rest of This Book.” I think it says a lot about why we should be reading this book!
INTERVIEW by Christian Sarkar