Category design: why creating a new market beats competing in an existing one

Executive overview

Most entrepreneurs make an unconsidered decision to compete in an existing category with a better product. The data is decisive: in tech, one company captures 76% of total market value — everyone else fights over 24%.

The category makes the product, the brand, and the company — not the other way around.

Category design means designing a new market space, not just a better solution. The goal is to frame, name, and claim a problem in a way that creates new demand, rather than capturing existing demand from competitors.

The 76% rule and why competing is a losing default

• In every tech category studied (US venture-backed companies, 2000–2015), one company earns ~76% of total market cap
• Everyone else competes for the remaining 24%
• Most entrepreneurs enter this dynamic without realising they chose it
• The choice is: capture existing demand (fight for 24%) or create new demand (compete for the category itself)
• Category designers compete against the status quo, not against rival products

The better trap

• Launching a "better" version of an existing product into a known category almost never works
• Threads: massive distribution, free product, billion-user parent brand — cratered because it was Twitter, just better
• Amazon Fire phone: Bezos launched a better smartphone; nobody bought it
• Red Bull Cola, Microsoft stores: legendary brands that failed by pasting their name on an existing category
• The reason: when a problem is well understood and a solution already exists, there is no need for a new solution, even a superior one
• Problems create categories. You must either solve a new problem or reframe an existing one in a meaningfully different way

Frame, name, and claim

• The first law of category design: thinking about thinking is the most important kind of thinking
• Most people use reflexive thinking — reacting from existing mental scaffolding, assuming the future is a continuation of the past
• Category designers use reflective thinking — questioning assumptions, rejecting premises, designing a different future
• The practical exercise: backcasting (Mike Maples, Floodgate) — stand in a future where everything has gone right, then look back and ask what you had to do to get there
• This breaks the forecasting trap, where your reference point is always the present (an extension of the past)
• Reject the premise: John Bielenberg's design exercise — build a bicycle that cannot be ridden — forces genuinely new thinking by removing the constraint

Languaging: the strategic use of language to change thinking

• Old language anchors people to old thinking; new language creates new mental scaffolding
• Otis elevator: nobody wanted a "safety elevator" until Otis called it the "vertical railway" — suddenly people could imagine a new kind of building
• Starbucks: impossible to charge $3 for something that costs 10 cents unless you rename it; "double grande latte" is invented language that created price permission
• OpenAI: "large language model" and "training data" are net-new terms that created new thinking categories
• The company that creates the languaging for a category wins
• A point of view (POV) is the category design tool for framing, naming, and claiming a problem — written for customers, not about the product

Category expansion and the Gong mistake

• Early-stage category dominance requires picking a tight niche and executing brilliantly
• But a startup's biggest barrier to future growth eventually becomes its own category
• Gong dominated revenue intelligence but failed to expand and frame the broader revenue category
• Clari set the agenda for the whole revenue space; Gong is now either a niche player or a Clari copycat
• The rule: continuously expand the category vision or someone else will frame, name, and claim the bigger space
• Two exit options once stuck: (1) stay niche and get diminished, or (2) compete for the bigger category — but only if you move first

Damming the demand

• Category designers don't attack competitors; they redirect demand toward a new framing
• Spinning: "why risk your life on a road bike when you can take a class?" — dammed demand from cycling
• Peloton: "why drive to the gym when you could do it at home?" — dammed demand from Spinning
• Neither attacked the incumbent; both reframed the problem
• The from-to (Frodo): category designers lead the world from the way it is to a new and different way
• Net-new categories can also expand total demand (electric guitar didn't kill acoustic guitar — it grew the overall market)

Product market fit is backwards

• "Product market fit" encodes the wrong mental model: fit your product into a market
• What you actually want: design a market category for your product
• Categories are about customers and their problems; branding is about your product
• Threads achieved product market fit faster than any product ever — and still failed
• The tech industry is full of product bigots who believe the best product wins; the data says it doesn't

Positioning is for the 24%

• Modern positioning = telling a compelling story about your product relative to competitors
• By definition, you're positioning against competition — and that means you've already decided to fight for 24%
• Category design doesn't compete at the product-to-product or brand-to-brand level
• Positioning has become "category design for the cowards" — carving a niche rather than owning a space

The magic triangle

• Legendary companies get three things right simultaneously: product, company, and category
• Category design is not anti-product — products fail because they don't get category designed
• All three are equally important; neglecting any one is a structural weakness

Lightning strikes vs peanut butter

• Most marketers spread budget evenly across the year (peanut butter) — rooted in 50-year-old reach-and-frequency thinking
• With 60,000 marketing messages per day, reach and frequency can't create standout moments
• Lightning strike model: concentrate effort into 1–3 high-intensity moments per year, targeting super consumers where they already gather in the digital world
• B2B: 1–2 lightning strikes per year. B2C: 2–3. Large companies: up to one per quarter
• Ripped from Hollywood's movie launch model — matter intensely for one week rather than be irrelevant all year

Super consumers and word of mouth

• In most categories, 8–10% of buyers drive the majority of profits and are the zeitgeist of the space
• These super consumers are who others look to for best practices and aspiration
• Word of mouth is the most powerful form of marketing — and has never appeared in a marketing plan
• The full go-to-market sequence: identify super consumers → find where they gather digitally → craft a POV that reframes their problem → show up as educator, not seller → generate WOM that scales
• Category design is the only business strategy whose primary execution focus starts with WOM

On being different

• The future belongs to people designing exponentially different things, not incrementally better ones
• Most people are rewarded for sameness; category designers are rewarded for distinctness
• Legendary entrepreneurs are "visitors from the future" — they're driven insane that the present hasn't caught up to the future they can already see
• VCs who invest in early-stage companies are looking for founders who can articulate a different future and have the obsession to build it
• Now is the greatest time in history to design and dominate new categories