Category Design

Design the market category, not just the product—category kings earn 76% of the value

Christopher Lochhead
How to become a category pirate

Category Design

"In tech market categories, on average, one company earns two-thirds, 76% to be exact, of the total value created as measured by market cap and or valuation... The aha here is when we make the unquestioned, unconsidered, undialogued decision that we didn't know that we made, to compete, we have unwittingly said, 'We're going to fight for the 24%.'" — Christopher Lochhead

What It Is

Category design is a business strategy where you don't just build a product—you design the market category that product lives in. Unlike traditional competition where you fight for market share in an existing category, category design creates new demand by reframing problems in ways that make your solution the only logical answer.

The core insight comes from data: in technology markets, one company (the "category king" or "category queen") earns approximately 76% of the total market value. Everyone else fights over the remaining 24%. This means the strategic question isn't "How do I win market share?" but rather "How do I design and dominate my own category?"

Category design differs from simply being "first to market." Myspace was first to social networking; GeoCities was first to personal web pages. Being first to ship a product with certain features is not category design. Category design is about getting the world to agree with your definition of a problem, which then leads to your definition of the solution.

How It Works

Category design operates on a fundamental principle: problems create categories, not products. You either have to:

  1. Solve a new problem the market didn't know it had
  2. Reframe an existing problem in a radically different way

The key distinction is between creating demand versus capturing demand. Traditional marketing captures existing demand—people already want X, so you convince them your X is best. Category design creates demand—you show people why they need something they didn't know they needed.

The Category Makes the Product: Gojo Industries didn't just make better soap. The wife realized bar soap was disgusting, so she reimagined the problem not as "how do I wash my hands" but as "how do I wash my hands without a disgusting bar of soap?" That led to liquid soap. Then they asked "how do I wash my hands without water?" That led to Purell hand sanitizer.

76/24 Economics: In most technology categories, the category leader takes approximately 76% of total market value. This means:

  • If you compete in someone else's category, you're fighting for 24%
  • If you design your own category and win, you get 76%
  • The strategic question shifts from "How do I compete?" to "How do I design a category I can dominate?"

How to Apply It

  1. Focus obsessively on the problem, not your solution - Spend more time understanding and articulating the problem than showcasing your product. Your customers care about their problems, not your solution.

  2. Reject the premise - Don't accept the current way things are done. Ask "What if we ignored everything about how this market currently works?"

  3. Use backcasting, not forecasting - Instead of standing in the present and asking "How do we get to the future?", stand in your envisioned future and ask "What did we do to get here?"

  4. Frame, name, and claim the problem - Create new language and categories that position your solution as the only logical answer to a problem you've helped define.

  5. Compete against the status quo, not competitors - Category designers don't compete product-to-product. They compete against "the way things are now."

  6. Design for 76%, not 24% - Before committing to a strategy, ask: "Am I fighting for someone else's 24%, or building my own 76%?"

When to Use It

Category design is most valuable when:

  • You have a genuinely innovative product that doesn't fit neatly into existing categories
  • The market is not yet defined or is in early formation stages
  • Existing categories undervalue your innovation because people can't see the problem you're solving
  • You're a startup competing against incumbents and can't win on their terms
  • You want to build a category-defining company, not just a successful product

Category design is NOT appropriate when:

  • You're optimizing an existing successful product (incremental better is fine here)
  • You're in operations or infrastructure where stability matters (air traffic control should be incremental better)
  • The problem is already well-defined and your differentiation is execution, not problem-framing

Source

  • Guest: Christopher Lochhead
  • Episode: "How to become a category pirate | Christopher Lochhead (Author of Play Bigger, Niche Down, more)"
  • Key Discussions:
    • (00:12:23) - Core explanation of category design and the 76/24 economics
    • (00:18:54) - Gojo/Purell example of category creation
    • (00:21:52) - Why legendary innovators don't compete at the product level
  • YouTube: Watch on YouTube

Related Frameworks

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