Category design is a
business strategy
In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessmen ...
and discipline that helps companies create, develop, and dominate new categories of products and services.
Category design extends beyond a
leadership team's narrower focus on products,
company culture
Historically there have been differences among investigators regarding the definition of organizational culture. Edgar Schein, a leading researcher in this field, defined "organizational culture" as comprising a number of features, including a s ...
and
business model
A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, soci ...
s. Taught in academia as a
business and
market strategy
Marketing strategy allows organizations to focus limited resources on best opportunities to increase sales and achieve a competitive advantage in the market.
Strategic marketing emerged in the 1970s/80s as a distinct field of study, further build ...
,
it is explicitly deployed by
disruptive innovation companies like
Uber
Uber Technologies, Inc. (Uber), based in San Francisco, provides mobility as a service, ride-hailing (allowing users to book a car and driver to transport them in a way similar to a taxi), food delivery (Uber Eats and Postmates), packa ...
,
Airbnb
Airbnb, Inc. ( ), based in San Francisco, California, operates an online marketplace focused on short-term homestays and experiences. The company acts as a broker and charges a commission from each booking. The company was founded in 2008 b ...
and other start up brands. Business magazines such as ''
Harvard Business Review
''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, Ma ...
'' and ''
Inc.'' have published articles on the value of category design.
Marc Benioff
Marc Russell Benioff (born September 25, 1964) is an American internet entrepreneur and philanthropist. He is the co-founder, chairman and CEO of Salesforce, an enterprise cloud computing company. In September 2018, Benioff acquired ''Time (mag ...
is an aficionado.
History
Category design was first proposed in the book ''Play Bigger''.
The book lays out a justification for why category creation is an important strategy,
and includes a step-by-step guide to applying design thinking to category creation:
* discovering and defining a category problem,
* creating a clear story (called a
point-of-view) that explains and sells the category idea,
* defining a category blueprint,
* driving the category strategy across a company's
stakeholders (mobilization),
* shaping customers' thinking (lightning strikes).
The concepts tie back into recent writings about how our brains work, particularly
cognitive biases as described by
Daniel Kahneman. Good category takes advantage of cognitive biases such as the choice supportive bias and groupthink bias.
After the book was published in June 2016, Mike Maples, a founding partner of
Floodgate
Floodgates, also called stop gates, are adjustable gates used to control water flow in flood barriers, reservoir, river, stream, or levee systems. They may be designed to set spillway crest heights in dams, to adjust flow rates in sluices a ...
, published articles supporting the concept.
The book, "Play Bigger" was co-authored by Christopher Lochhead, Dave Peterson, Al Ramadan, and Kevin Maney.
The 6–10 law
Data research shows that "category kings" (companies that dominates a market category) that go public when they are between six and ten years old create most of the value among all VC-funded tech companies. Companies that go public sooner than six years old often lose value; companies that
IPO
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
after ten years old create little value for
shareholders. The reason is thought to be that categories take around six years to develop, and most of a category's growth happens in that six to ten year timeframe. After ten years, a category is established and growth slows, so
share price
A share price is the price of a single share of a number of saleable equity shares of a company.
In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.
B ...
s level off.
This was discussed in a ''
Harvard Business Review
''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, Ma ...
'' article titled "How Unicorns Grow".
See also
References
{{reflist
Business terms
Marketing strategy