An important part of category design is what we call setting the rules for a new market category. 

The company that successfully sets the rules retains a long-term advantage. Anyone else who comes into the category is forced to play by the rule-setter’s rules. If they don’t, they’ll run afoul of customer expectations.

But here’s the thing: a company has to be intentional about it. Just letting the rules happen means you may not stay in control of the rules, and so you’ll lose one of the key levers that can help you win a category.

The Uber Rules

Uber, from its very beginning, showed how intentional rule-setting works to a company’s advantage.

Every entrepreneur should flip through Uber’s very first pitch deck, presented to investors in 2008 – the year after Apple introduced its iPhone. (That pitch resulted in a $200,000 seed-stage investment. By the time Uber went public, it had raised a total of $24.7 billion in 25 rounds of funding.) 

Uber’s deck starts out much as we advise any company to begin its pitch: by laying out the problem to be solved. Basically, the problem was that taxis suck and taxi monopolies control the market. 

Beginning at slide 5, the deck presents the rules for this never-before seen category of transportation service. They include: you have to be a member to use the service; a mobile app matches a client and driver; the app shows you how long you’ll have to wait for a ride; the service is pre-paid cashless billing so you don’t have to pay on the spot. 

Then on slides 9 and 16, the Uber deck rolls out what is probably the most interesting rule for the category. Slide 9 shows an integration with Google Maps. And 16 is a category design thing of beauty. It says: “Cars hover in statistically optimized positions.” And it shows a map of where cars should be.

If you think about it, in 2008, when only a small percentage of people had iPhones, a ride-hailing app could’ve ended up looking and acting in any of dozens of different ways. Uber’s design was not obvious or predestined. But Uber’s founders thought a ride-sharing service should have an app that would show cars on a map, find a ride with a click, and have the ride pre-paid through your credit card. Uber laid out all those rules during its first attempt to raise funding. 

The rules have since been an enormous factor in Uber’s dominance of its category. Uber officially opened for business in 2009. By the time Lyft came along in 2012, the market category of ride-sharing had momentum, and customer expectations had been set – by Uber. 

If you remember, when Lyft – originally Zimride – first started, it tried to differentiate itself from Uber by emphasizing that rides were a fun social thing (you’d meet new people sharing cars!) and made drivers affix a pink mustache to the front of the car. 

Before long, Lyft had to abandon those elements and play by Uber’s rules because that’s what customers expected. Lyft had no choice but to make its service and its app look and act much like Uber’s.

Today, if you go anywhere in the world and use an on-demand car service app such as Careem or Grab or Gett, it will look and act much like Uber’s. Those companies had little choice. They had to follow Uber’s rules or risk failing to meet customer expectations. 

That’s the power of category rule-setting. First, it makes everyone else look like a follower. Second…the rule setter stays in charge of the rules. As technology and the market change, the rule-setter can update the rules, and then the other players again have to follow. 

How Do You Become a Rule-Setter? 

For starters, you can’t set the rules if someone else is already the category’s rule-setter. To put it another way, it’s almost impossible to go into an established category that has an established category leader and take over the rules. Instead, if you go into someone else’s category, you’ll end up meeting customer expectations by playing by the category leader’s rules.

The way to become a rule-setter starts with creating a new market category. If you’re creating something that didn’t exist before – as Uber did – you have a blank canvas. There are no rules yet, so you can try to set them.

To do that, you have to be explicit about the rules. The way we do that in category design is in the category point of view (POV). First, we work with a client company to identify the category to create, and once we all clearly see that, together we craft the POV. 

The goal of the POV is to clearly articulate why the category needs to exist and what it should look like. Part of describing what it should look like is describing how the product or service should work. 

All of that puts the rule-setting in motion for the company. Give the POV to the product team, and it understands what to build, and in the process of building the product, that team will solidify and deepen the rules. 

The POV and product inform sales and marketing on how to talk about the product, and as they spread the message, they are also telling the customer base about the rules. 

In time, the customer defines the category by your rules. Users come to believe a product in this new category must work in a certain way – the way the rule-setter makes it work. Then it becomes hard for anyone else to come into the category and play by different rules.

We can see how this has played out in all sorts of categories. Apple established the rules for the smartphone market when it introduced the iPhone in 2007. Today you can buy a phone from all sorts of companies, but almost all of them look and act like an iPhone – and the Android operating system plays by the iOS rules. Different form factors have a rough time cracking the market, and older models that didn’t play by the rules – like the Blackberry – got kicked out.

Tesla has set the rules for electric cars. Zillow did it for real estate sites. Google for search. Microsoft for slides and spreadsheets. 

The ability to set the rules of a new category is the ultimate power play in business. If you’re not writing the rules, you’re playing by someone else’s rules. So, the question is: Do you want to be a rule follower, or do you want to set the rules for everyone else?

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Schedule an office hours slot with us here to jam about setting your category rules!