Market disruptions and economic uncertainties offer fertile ground for category creation. These conditions generally allow creativity and innovation, the nutrients required for deep thought and research beyond the headlines. That’s exactly where we are in the recovery continuum today.
I wrote a piece last month about PTG Post-Traumatic Growth. In that piece, there’s an image that beautifully illustrates the 4 factors leading to and 5 domains resulting from PTG. In this article, my hope is to take that thinking a little further and attempt to correlate PTG with Category Creation.
Let’s start with Mike Cessario.
Mike was a creative for Netflix who had an ‘aha’ moment after watching the Van’s Warped Tour in 2009. Energy drinks were everywhere - consumption, sponsorship, experience. Then he realized MOST of the concert-goers had refilled their cans with water to fight off dehydration. This led him to create a water brand that the bands actually enjoy drinking while performing. Liquid Death was born.
Squarely targeting the bottled water industry, Mike chose to package his product in a 16.9 oz aluminum ‘tall-boy’ can and fill it with ‘mountain water.’ He aligned his product launch with many disruptors from 2019 including Dollar Shave Club’s CEO, Michael Dubin, Twitter co-founder Biz Stone, and Jen Rubio the co-founder of the luggage brand Away. Mike’s higher purpose was killing plastic. He also partnered with a handful of non-profits that helped him align and annunciate his environmental and sustainability goals.
Today, Liquid Death has a $700M valuation. Their water sells for $0.08/Fl Oz or nearly 8x that of traditional, store-bought bottled water. This is a new category, an overnight success story 10 years in the making.
There are so many additional examples, Netflix to video, Uber to taxi, Airbnb to hotel but those are easy to see. What about enterprise category creation examples?
One of my favorites is Incremental Deposits, better known by Bank of America customers as Keep the Change®. This program allows their customers to round up the change from their purchases and auto-deposit it into their savings accounts. Some estimates state this program handles $10B in annual transactions.
Or how about Best Buy creating Geek Squad, which saw peak revenues at $5B?
So how can we get there?
One CEO put it this way: “I’d love to work on category creation, but who would I give the assignment to? My existing team is running the regular business, and my innovation team is focused on finding new products in our current categories.” In such situations, we usually advise companies to build elite short-term teams focused on category creation. Make it a six-month assignment for high performers from marketing, sales, finance, and operations. Give them the funding they need for research and travel, along with the opportunity to present their findings to top executives. Using this process, GE Healthcare created an ultra-portable, low-cost, easy-to-use ultrasound machine for the Chinese market.
In short, Team Dynamics….
Successful category creators don’t get hung up on who invented a concept, as long as they can find a way to harness it themselves.
First, get the right people into jobs that allow them to look well beyond the markets you currently serve. Second, conduct a market research audit, focusing on whether you’re spending too much on understanding existing trends and your own market and too little on trying to predict future behavior and looking to adjacencies. (Most companies are guilty on both counts.)
Third, think creatively about resources and incentives. Consider establishing a budget for category creation and make it clear that you’re willing to invest in ideas that may not offer big short-term profits but could move the company into new spaces. Finally, remember that risk aversion keeps many companies from creating new categories. Take a hard look at your company’s culture and make sure you’re not one of them—the rewards of launching a new category are simply too great.
Successful category creators have defied the status quo in imagining something that didn’t exist.
Tips (so far) from our journey.
✔Let your customers lead the way - remove any ego.
✔Categories aren't built by only one person or team, so engage your customers and consider creating an advisory committee.
✔Skip the Analyst…for now. Build a community that champions what you offer as an innovative strategy. Thrive on the resources inside that community. Ask.
✔Know your team in and out. This means individual personalities, leadership styles, and their ability to recognize change. Tie that team back to the most substantial catalog of real-time resources you can find.
✔Know your competition better than you know your customers - you may have to declare war, depending on your industry. You’ll need the best modern intelligence (refined, informed, confirmed data), not the best news, stats, and unsubstantiated information.
✔And finally, know your money. Traditional means of finance may not be the smartest approach for category creationists. You’ll certainly blow through bootstrapping and angels - so consider partnering with large companies that have identified a deficiency in innovation or agility. Share the experience and share the reward.
✔Capital comes in many forms. Value community contribution higher than IRR or ROI. The most indispensable forms of capital often come without strings.
If there’s one thing that rings true it’s this: Recognize failure, fail fast, and fail forward - but don’t ever give up, and don’t ever stop learning.
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