Category Creation

By Geoffrey Moore

Author – The Infinite Staircase: What the Universe Tells Us About Life, Ethics, and Mortality

Category creation is a critical success factor for start-ups bringing to market a disruptive innovation that calls for a new ecosystem, to support a new class of use cases, funded by a new budget line item.  If the category does not form, the start-ups have no place to hang their hat.  They can acquire early adopter customers via a bespoke project approach, but they cannot scale any further without help from the rest of the marketplace. 

Similarly, established enterprises in mature categories also need to find new venues for growth if they are to break free from their value-investor-set market caps and create net new shareholder value.  Whether through acquisition or in-house innovation, they, too, can have the challenge of category creation.  So, in both cases, companies need to reengineer the marketplace in order to realize their ambitions.  The question is, what would make the marketplace want to lean in?

Marketplaces are made up of ecosystem players, be they partners, competitors, or an installed base of customers.  All these constituencies keep their eyes out for disruptive developments that could either benefit or jeopardize their future performance.  The early adopters are typically motivated by the benefits, seeking a first mover advantage, while the early majority normally takes a wait-and-see approach, thereby creating a chasm, which in turn can be crossed wherever there is an urgent customer problem that is resisting standard solutions and thus warrants taking a novel approach to solve it.  If the category does show it is getting traction, then all those wait-and-see pragmatists will begin to feel threatened by FOMO (Fear of Missing Out), and that is what creates a tornado of demand that puts the category permanently on the map. 

Okay, so there is reason to believe that under the right circumstances, markets will support the creation of a new category.  That said, we should not underestimate the power of inertia.  Markets do not welcome transformational changes with open arms.  Indeed, their default move is to deflect most attempts.  What we need is a proven playbook.  Fortunately, there is one, written some forty years ago, written by an old boss of mine, Regis McKenna.

The Regis Touch

It is hard to overstate the impact that Regis had on high-tech marketing, especially in its early days when it was trying to break free from advertising as its primary medium.  At the time, the tech sector was just emerging, the bulk of spending was in B2B markets, the focus was on automating core business processes, and every buying decision entailed considerable risk, not only in terms of the product and vendor’s staying power but also in terms of the impact of the business processes themselves.  As a result, advertising per se was not sufficiently informative or credible to drive purchasing.  Regis saw this and, with the help of a talented set of consultants and communications professionals, developed a public-relations-led approach that successfully launched hundreds of new products and created dozens of new categories.

The key to his approach was a framework called the infrastructure model that organized the various audiences and constituencies that make up a marketplace in what one might call a ladder of communications:

Here’s how it works.  The goal is to convert prospects into customers.  In B2B markets, those prospects organize around three centers of interest—the technology itself, the impact on productivity, and the financial returns.  These prospects get their information most directly from the media, the technologists from the technical press, the end users these days from social media (no such thing, of course, back in the day), and the executives from the business press.  The agents of the press, in turn, get a lot of their information from opinion leaders, be they the industry analysts for the technical press, the influencers for social media, or the financial investment analysts for the business press.  Those opinion leaders, in turn, get their information from their engagement with the marketplace itself, be they customers, partners, or competitors already involved with the disruptive innovation.

The point is, any claims about the disruptive innovation are verified and validated by working down this model, which means any communications program should organize around working up the same model.  Skipping over any one of these audiences and going straight to the prospects directly—the way advertising does—is bound to fail because you have not got your references lined up and sufficiently informed to support and endorse a high-risk buying decision.  Product launches and category creation initiatives, therefore, work up this ladder of communications, rung by rung, starting in the executive suite, moving from there to the product organization, and from there to the go-to-market team.  That team, in turn, needs to start with educating the ecosystem players, typically with talks and panel sessions at industry conferences, then connecting with the opinion leaders, typically via one-on-one briefings that end up being two-way dialogs, and only then out to the media that will engage with the target prospects.

Category Creation Playbook

A lot of what would go into a complete playbook is product and market-specific, but there are audience-centric principles that remain relatively constant.  The key question in each case is, what is it about the emerging category that would be of interest to this particular constituency?  With that in mind, here is a brief take:

1. Executive team.  This team will value growth to boost market cap, something that participation in an emerging category can be expected to deliver, but it may well be reluctant to take transformational risk to achieve it.  If this team is not 100% behind the effort, don’t start, as every other rung on the latter ultimately calls for investments that this team must endorse.
2. Product team.  This team has to be all in for a wild ride—and usually is.  You have to pressure test their claims nonetheless, as they can often get over their skis, promising more than they can deliver within the window that matters. 
3. Go-to-market team.  This team requires maturity and patience.  The big sales commissions won’t come until the category enters the tornado, so for now, the focus is on creating a market, not harvesting it.  That means paying deep attention to developing the ecosystem, including bringing along the installed base, helping to engage and enlist partners, and (oddly enough) encouraging competitors.  The last one is important because, ultimately, a category is defined by a set of competitors, not just one company, so for a healthy growing category you need to have peers that are winning too—hopefully in target market segments that are distinct from yours. 
4. Ecosystem.  These are the people your go-to-market team is engaging with.  The sales team has the installed base, the business development team, the partners, and the marketing team, the competitors.  The goal is to get everyone speaking from their own perspective to reinforce your story that something big is underway.  One item of note: With respect to competitors, marketing needs to develop a narrative that has room for more than one winner while at the same time staking out turf where your own differentiation makes you the obvious choice.  What you do not want to do is bad-mouth the other team’s products—that will create anxiety that will cause everyone to wait and see some more.  So, save your sharp tongue for when you get inside the tornado—that’s the no-holds-barred battleground where a well-placed elbow can make a real difference.
5. Opinion leaders.  The goal here is to get conceptual endorsement for the claims you will be making via the media.  Opinion leaders need to maintain their independence and do not want to shill for you or anyone else.  What they do want to do is look intelligent and have something differentiated to say.  What they want from you is enough context to do their job and no interference thereafter.  In addition, opinion leaders want to share their opinions with you, in part to influence your future investments, and so it is just as important to listen and ask them questions as it is to present your own story.  With respect to your presentation, demos can be useful, but repurposing a customer sales pitch is not, as this audience is not going to buy your product but rather is going to opine on the reasons why other people might.
6. Media.  This is the means by which you will communicate with the three prospect audience types—the technical team, the end users, and the executive sponsors.  Each has a preferred media type—industry press, social media, and business press—and each of these types wants to be treated in its own special way.  The technical press wants to talk about the product itself.  They want facts, love demos, and like to talk to specialists more than generalists.  They also are often happy to beta test products or get any other kind of advanced notice as to what’s coming next.  Social media wants to talk about the applications of the product, and the ways in which it will impact end users’ lives.  So demos can work here only if they are in service to an end-user story as opposed to a run-through of all the features and functions.  The business press wants to talk about the “size of the prize,” the impact of the new technology on productivity, how it will reengineer bottlenecking processes, and thus how much trapped value it will be able to release.  Demos are wasted here, but PowerPoint can help a lot.
7. Prospects.  When category creation is the focus, it is important to engage the three types of prospects in the right order.  If the technology is outrageous, you need to start with the technical audience first just to earn the right to talk to anyone else.  If it is not outrageous, then the executive sponsor needs to be your first port of call.  The reason is that the other two audiences will actually be willing to meet with you to learn about the latest and greatest thing, but they will have budget, not permission to get new budget, if the executive sponsor is not on board.  So a typical path through a major account would start with an executive from your company having a conversation with the prospective executive sponsor at your target customer, which would lead to a referral to the technical team to test your bona fides, and then on to the end-user team, to validate your productivity claims.  Proof-of-concept projects are necessary at the very beginning, but one of the major milestones in category creation per se is to generate enough marketplace acceptance that future prospects will forgo these tests.

To sum up, category creation is an outbound communications effort to orchestrate a coalition of the willing across a laddered set of constituencies, each with its own set of interests.  The goal is to build an inbound path of verification that reinforces the new category’s right to existence.  Trying to shortcut the outbound process by skipping over one or more audiences will defeat the purpose, as any doubts raised this early in the game result in lost momentum that can never be recovered.  There is no magic here, but patience and discipline are required.

That’s what I think.  What do you think?

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