A British Freakonomics-type lecturer keeps popping up in my TikTok feed. In this video, he’s talking about why business-class seats on flights out of London City Airport rarely get filled up.
On the face of it, he notes, that fact doesn’t make sense. City Airport is much closer to London’s center than Heathrow. It’s smaller and easier to navigate. Lines are shorter. It should be a better alternative for a time-starved executive. So, what gives?
The TikTok guy concludes that most business-class flights get booked by assistants or travel departments. So the safe, mainstream choice for them is to put their boss on a flight out of Heathrow, because everybody flies out of Heathrow. If a flight gets canceled or otherwise messed up, the boss might get mad at the airline, but he or she isn’t going to fume at the assistant or travel agent, “Why did you book me out of Heathrow, you moron!?”
But let’s say the assistant or travel agent goes against the mainstream and books out of City Airport. If something goes wrong, the boss is likely to blame not the airline, but the person who made the unconventional choice to book out of City Airport.
To the assistant or agent, it seems safer to choose what everyone else chooses, even if a better option exists.
Oddly enough, that made us realize something about category design. Why doesn’t every company want to do it, even though it is demonstrably a better choice than just building a product and hoping it finds a market?
Category Design Isn’t a McKinsey Offering
It’s because category creation and design is still an outlier choice. It’s not “mainstream safe.” Category design is not an offering on McKinsey’s menu. Business schools don’t make it a required MBA course.
Most boards aren’t pressuring CEOs to adopt category design. Boards pressure CEOs to adopt AI because EVERYBODY is adopting AI. Boards fear NOT doing what everyone else is doing. They like mainstream stuff. They don’t like outlier stuff.
Many, many CEOs, founders, investors and boards find it safer to point at some existing multi-billion dollar market and say, “We can make one of those, and we can make one that’s better than the others in that space.” It’s easier to understand. Easier to sell to investors. It’s a known thing. Thousands of companies have a good business by scraping a little market share out of a big category by making the “better” argument.
That’s the safe choice. Like booking out of Heathrow instead of City Airport.
The Category Design Insight
On the other hand, companies that embrace and implement category design are outliers. Oddly enough, that’s a feature, not a bug. If every company had a category design strategy, it wouldn’t be a disproportionate competitive advantage.
Anyway, every company can’t create and win a category, otherwise the whole economy would be thousands and thousands of market categories of one company, which would be chaos. It would be like having thousands of different sports, each with just one team.
It takes a certain kind of ambitious outlier leader to try to break out and create an entirely new category of product or service – something the world doesn’t yet understand, but will come to badly need. It means seeing what no one else yet sees. And that’s way harder than entering an existing market with a “better” argument.
The payoff, though, is so much greater. Category creators and winners are the companies that change the way we live and work. They generate the most value. They lure the best talent. They are the companies we all talk about – companies such as Airbnb, Salesforce, Amazon, Tesla, LinkedIn.
Yet, because category design is an outlier strategy, it can be harder for a leader to decide to do it. Like choosing City Airport over Heathrow, if it doesn’t work, you get blamed. Your board will be skeptical. Run-of-the-mill investors won’t get it.
The courageous business leaders get it. The cautious don’t.
Which one are you?
–
Want to make your category strategy one that’s courageous? Book an office hours slot with us here.