We wrote a book titled The Category Creation Formula. It comes out, from HarperBusiness, on Feb. 24 and is available for pre-order.
So the title raises the question: What is the category creation formula?
As we at Category Design Advisors worked with companies on category design over the past decade, we learned more and more about market categories, why they exist, and how category designers see new opportunities. Eventually, we realized there is a category creation “formula.” Once we put it to use we discovered that it is a simple and powerful generator of creative thinking about category design.
This is the formula:
ƒ(category) = context + missing + innovation
And here’s what all that means:
Context
Context is what’s changing or has changed for the audience that you (and your company) want to address. And we mean the whole context. Advances in technology such as AI are an important part of a context shift. New technology can open up new ways to solve old unsolvable problems. Technology can also create new problems that didn’t exist before and now need to be solved.
But context can also include economic conditions, changes in societal norms, or geopolitical upheaval. It might include wars or pandemics that, for instance, disrupt supply chains or cut off markets.
Context is the place to start a strategic category design discussion. Yet in our experience it is almost never where a company leadership team starts a strategic discussion.
Thoroughly understanding the context around your audience is key to discovering a new category to create. Get your team together, set aside your marketing messages and product development roadmaps, and instead spend a chunk of time diving deep into the changes swirling around your potential customers.
The greater the changes in context, the more opportunities open up for creating new market categories. The 2020s have brought on, for better or worse, the most significant context shift in generations. The arrival of powerful AI alone is an enormous technological context shift. The 2020 COVID pandemic profoundly changed our relationship to work and workplaces. Geopolitical realignments are roiling markets, economies and supply chains.
Missing
Missing is what will become evident from the context discussion. This is the magic of the formula. If you thoroughly understand the context, then you start to see what’s missing – something that does not yet exist but that could solve a new problem that the context has created, or solve an old problem in a way the new context makes possible.
You will realize the world is desperately missing this solution, and people will need it whether your company builds it or not. Once that missing thing comes into focus for your team, it will inevitably lead you to the…
Innovation
Innovation – which is the product or service that must be invented to address what’s missing. This is where your team’s unique expertise comes into play. What is the innovation you could build? How will it work? How will it solve for the missing in a way nothing else does?
Once you put those elements together, your team will see a category waiting – needing! – to be created.
The category creation formula leads to the most impactful categories of products and services because it surfaces a product or service the world needs. Such products or services are must-haves, not just nice-to-haves.
The category creation formula is an outside-in, market-driven way of landing on a strategy. It helps you first see the category to create, then understand the product to build to win that category.
If you don’t do any other part of strategic category design with your team, just take this formula and work it through together. In our workshops, we sometimes write the words context, missing and innovation atop three columns on a whiteboard, and then fill in the columns as observations surface in the discussion.
We’ve heard of some companies putting the formula up on a conference room wall so it informs every product and strategy conversation.
However you do it, keeping the formula top of mind will do wonders for how you develop your product, motivate your team, and tell your story.
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To order the book: https://www.thecategorycreationformula.com/
To talk with us about your category strategy: https://www.categorydesignadvisors.com/book-office-hours/