As advisors who work with company leadership teams on category design, sometimes we’re like personal trainers – the company is in good shape and knows what it wants to accomplish, and uses us to get in the best condition possible to win its market category.
But a lot of times, we’re more like physicians and therapists. A company comes to us because it has an issue, some discomfort, a chronic pain. We work with the leadership team to understand what it is, and put together a category design program that can help.
Over time, we’ve realized there are a handful of conditions that we most commonly see and that category design can address. Here, then, are seven conditions that category design can address.
Condition 1: Build-it-and-they-will-come syndrome
Cool product but tepid demand.
Some companies, often those started by technical founders, build an amazing product – and are so proud of the product that they understandably want to tell the world everything about it. But these founders may have a hard time telling potential customers in plain language why they NEED such a product.
Common symptoms: Sales can’t get past early adopters; investors wonder about product-market fit; marketing over-emphasizes features and struggles to get buyers interested in the core idea; analysts put it in the wrong category; investor decks leave VCs underwhelmed because they don’t see a problem worth investing in..
Category design Rx: Category design starts by setting the product aside and deep dives with the client about what PROBLEM the company wants to solve. Once you can precisely describe the problem, potential customers better understand how the product solves it – moving them closer to buying
Outcomes: Clearer communication with potential investors, customers, employees and partners; easier fund-raising; a more convincing sales story to tell; insight into who to STOP selling to; analyst clarity about the company’s category.
Condition 2: Spinning strategic compass
Many possible directions; not enough agreement.
Startups usually begin with one product, one mission and a clear goal. As companies scale, hire new leaders, make acquisitions and start new product lines, the mission and goals can grow branches. Leadership team members have different ideas about where the company should go next.
Common symptoms: Unaligned leadership team; confusion in the ranks about strategy; mixed messages to the public; no clear “flag on the hill” to charge toward; strategic initiatives that are constantly re-examined, underinvested in, or perpetually put on hold.
Category design Rx: The category design process should include six to twelve members of the leadership team, doing the work together and taking in everyone’s viewpoints on direction and strategy. The process gradually leads to one strategic narrative that everyone on the team buys into – a category point of view (POV). The company has a new strategic story to be guided by – a clear flag on the hill that every part of the company can march toward.
Outcomes: Alignment at the top; clear message to employees about the company mission; clear communication to and increased credibility with the marketplace and investors; confidence in decisions to invest in or shut down product lines or business units, make acquisitions or enter into strategic partnerships.
Condition 3: Category jail
Stuck in a crowded space; can’t get out.
When buyers and analysts don’t understand why a company’s offering is different, they stick that company in an existing, familiar market category, which can mean it gets grouped in with dozens or even hundreds of other companies. That’s a terrible place to be. Investors see the company as a me-too. Potential customers barely see it at all.
Common symptoms: Ineffective marketing messages that rely on arguing on specs like faster, cheaper, bigger; investor indifference; analysts always placing the company in a crowded category; potential customers evaluating the product with the wrong criteria; too few in-bound sales.
Category design Rx: If the company is stuck in a category, the discussion turns to how to get out. The first step is uncovering what unique problem the company needs to aim at in order to move out of a crowded category and into one it can define and win. The key to category design is understanding and expressing why the company or product is different. Category design moves the company into a favorable position in its own unique category..
Outcomes: Clear differentiation; analysts move the company to an appropriate emerging category; faster sales cycle; better sense of mission; investors understand why the company is different and make investment decisions faster, often on more favorable terms.
Condition 4: Chronic fatigue syndrome
In need of re-energizing.
We’ve worked with a number of companies that have been successful for a long time – 10, 20, even 60 years – but need a next act. There’s nothing terribly wrong, but the sense of mission and forward drive seem to be stuck in a low gear.
Common symptoms: Slowing growth; a sense that competitors are catching up; harder time attracting top talent; a product that only incrementally improves; fear that the company is losing its place in the zeitgeist.
Category design Rx: Category design takes a client company through a discussion of the “adjacent possible.” Categories that exist are in the “possible” and categories that are not yet viable land in the “not yet possible.” In between is a thin band: the adjacent possible. Exciting new products and services are born in the adjacent possible. Many fatigued companies are stuck in what was possible yesterday. Category design helps the company find a new version of itself that pushes out to the adjacent possible. Identifying and going after a new market category in the adjacent possible injects a new sense of urgency and energy into a company.
Outcomes: Renewed purpose; a compelling narrative; de-positioning competitors; restored growth; improved morale; revenue acceleration.
Condition 5: Impractical futurism
Too far ahead with a big idea.
Many brilliant founders can so clearly see the future, they believe it’s already here. They build a product that’s directionally right, yet the technology doesn’t quite work well enough and/or potential customers don’t yet grasp why they’d want it. While these companies can often get funded, the big risk is running out of money before the future happens.
Common symptoms: Very exciting idea that’s very difficult to build; seems like science-fiction to the public; can’t sell beyond early adopters; high burn rate; fawning media attention that doesn’t translate into revenue.
Category design Rx: This is also an “adjacent possible” discussion, but the opposite of what fatigued companies experience. If the company is too far out in the not-yet-possible, category design turns the conversation toward how to create a category that lands in the adjacent possible today. Then, together we lay out a path for getting the product and the public from today’s offering to the future offering. This is what Jeff Bezos did when starting an online bookstore and then taking us to a new future of buying everything online.
Outcomes: A clear product roadmap; easier sales; company-sustaining revenue; bigger subsequent rounds of funding; a compelling story that helps the public understand how we get from where we are today to where the company wants to take us.
Condition 6: No time to lose
Need a boost to win a heated race.
Some companies find themselves in a category that will obviously become huge, but there’s still no clear category winner among many contenders. The company needs a competitive advantage to increase its odds of winning the category while de-positioning contenders. It’s like the old cartoon character Popeye, needing to down that can of spinach and get a boost to win the fight.
Common symptoms: Internal sense of alarm about winning the category; paranoia about competitors; potential customers waiting for a clear winner before buying; VCs continuing to fund the many contenders.
Category design Rx: When the market thinks there are many viable competitors in the same space, it usually means no single company has yet clearly defined the problem to be solved and developed the dominant design for the solution. The category design process helps conceptualize the category, write its story, and set the category rules in a way that gives the company a better chance to win the category over time.
Outcomes: Rising visibility of the company; competitors falling away; in-bound demand; analysts identifying the company as the category leader; less competition for customers and more outright wins.
Condition 7: Fundraising story anemia
About to seek funding or IPO but need a stronger narrative.
A clear story that describes creating and winning a differentiated category can make the difference between a so-so round of funding or an IPO and a great one. We’ve run into many companies that know what category they’re building yet have difficulty putting together a powerful investor deck or S1 that tells that story.
Common symptoms: Investor deck or S1 that doesn’t seem differentiated; potential investors need to ask a lot of questions before understanding the business case; investment bankers or VCs giving a valuation lower than the company believes is right; valuation based solely on past historicals and not on the future vision.
Category design Rx: Category design is a process that seeks to discover and then clearly define a category-creation opportunity and story. A category design POV gives the company a story to tell that is logical and easy to understand, and differentiates the company. In our experience, such a compelling story can add millions to a funding round and even billions to an IPO.
Outcomes: Valuations increase; VCs quickly grasp why they want to invest; category design language flows into the S1 and brings in more investors; investors feel they’re buying into an important category of product or service, not just the company.