Crafting books built on deep focus, meticulous research, and an unabashed love for the entrepreneurial world, Christopher Lochhead - the author of Play Bigger - is a top entrepreneurial mind worth listening to. Sitting with Breakthrough Radio host Michele Price, Lochhead dug into actionable advice on the past, present, and future of market positioning.
The Highlander Effect
In today’s world technology is transforming every facet of our lives, and has a noticeable business impact as well. Many of entrepreneurs, regardless of industry, look to tech leaders for guidance.
Tech industries are largely “all-or-nothing” in wealth distribution. According to Lochhead’s research these markets award 76% of all market value to the market leader. And because other industries are following suit, this model becomes theirs.
That’s a staggering number. It means that launching a new product or service into an existing marketplace is not only hard but comes with a numerical disadvantage. Entrepreneurs need to be aware of it, and account for it for from the beginning.
They need to take stock of their options thoroughly. One option, Lochhead argues, is creating a new market space where they can rule as king and enjoy the spoils. For new companies, this may be a more viable way to succeed than fighting the economics of an existing market.
Nature vs. Nurture
In Lochhead's book, category equals market space. Creating a new category means a new or changed set of rules of engagement. Changing the perspective of customers isn’t an easy task, however. The existence of a new category cannot be entirely engineered.
When bringing a product or service to market, startup founders have a chance to alter the DNA of the market. Through creating a variation that hasn’t existed before, they have the power shaping the understanding and discourse of an issue or solution in their favor. Thus, creating a new category means a new market space they can rule supreme.
Lochhead explains that legendary entrepreneurs didn’t try to fight the economics of existing markets. Instead, they stacked the decks to benefit them by changing the mindset of their customers.
Business Isn’t Baseball
Many entrepreneurs believe the world will recognize their value and accept them as the leader in the category. But this “build it and they will come” approach rarely works.
One of Lochhead’s examples is how tablet devices came to market. Microsoft created the tablet as a new device, but Apple was the one who won the customers. Why?
Microsoft launched tablets into an existing market space, marketing it through its features. Apple introduced the iPad as a new device instead.
Most of the existing market already knew and used features on their phones or laptops. Apple created a whole new one to place the same features in a new context. And the customer proved Apple’s aim to become a category design right.
Category designers teach the world about the problem they’re solving in a new way. They do it by shifting their customers’ perspective and aligning it to their own vision.
Furthermore, Lochhead mentions that when creating the automobile, Ford named it “horseless carriage."
He needed to explain to his customers what his product was first. Once they understood, he could shift to his own dictionary and educate the market. This resulted in a new category that he, as the sole contender in the space, could shape and rule.
It’s NOT Disruption That Makes Successful Startups
Even educating and mentoring the next generation of startup entrepreneurs has its own categories. And from time to time someone comes along and challenges the market space into changing.
What if you learned from the previous generation of business leaders is wrong? What happens if you divert from the “tried-and-true”? Instead of being educated you start educating, and shape the conversation.
Lochhead argues that aiming for “disruption” is a mistake that far too many startup founders make. He says: “[disruption] is not a strategy; it’s an outcome”. His take on the process is viewing it as a shift in the existing understanding of the market and buyer behavior.
“Products and companies don’t float in space - they exist in market categories....more and more we’re living in a winner-take-all world," he says.
As the markets change, so should businesses, but we rarely see the latter when we look at the big picture. Trying to be better, faster, or cheaper than the competition is the wrong way. Entrepreneurs should start focusing on their deeper differentiators. Create your own vision, don’t try to alter someone else’s.
Maximizing Your Potential For Success
Lochhead’s research concludes that businesses need to align the “magic triangle”: product, company, and category. Those who do experience a vastly different success curve than those who don’t.
For one thing, it’s bigger. In a new space, massive growth can happen because there are no boundaries set by existing concepts. Established market shares are taking away from growth.
Of course, the existence of category design is not a guarantee. But it’s necessary to maximize the potential for success. Moreover, it's doable by startups starting from scratch. In fact, it’s much easier for them to think about category design from the start.
When defining the solution, Lochhead says, "define it through difference, not through comparison. Set up for conditioning the market for a new way to think about the problem you’re solving."
The implications of such an approach are far-reaching and deep-resonating. Market spaces are ecosystems with many participants. They all orbit around the category king like planets do around the much larger celestial bodies in their solar system.
Elon Musk giving away Tesla’s patents is one example of category design. Instead of fighting a battle against the establishment, he not only created his own but also ensured that the runaway success. He invites competitors and other components of the new ecosystem to rush in. He can afford to: the system is centered and standardized around Tesla as the clear category king.
Wake Up, Neo
The analogy with the Matrix kept resurfacing in my head ever since reading his book ‘Play Bigger’.
An entrepreneur’s adventure in creating their own category is challenging but also equally rewarding. Neo experiences the same thing in the movie.
In the end, he learns that he does not belong in the Matrix, and he’s able to win by stopping to play by its rules. He is an “anomaly”: something they don’t understand and thus cannot defeat.
By setting out to create your own category you defy being defined by the success or vision of others. You have the power to alter the fabric of the market. Teach buyers a new way of looking at issues. When they understand and ready to adopt, you’re right there to provide them with the solution.
Catch the full interview on Breakthrough Radio.