When Netflix’s streaming services were unveiled, it didn’t just introduce a new product; it defined an entirely new category. This innovative leap wasn’t merely about filling a gap in the market but about envisioning a solution that consumers didn’t even realize they needed. Netflix’s ability to identify and solve pain points in traditional media consumption — limited selection, inconvenience, and lack of flexibility — illustrates how innovation can lead to the creation of new categories that redefine industries and consumer behavior. This is the essence of category design — a strategic approach that shapes not just products, but entire companies and markets.

The Three-Legged Stool

The book Play Bigger states that a good category design depends on three critical components: a great product, a great company, and a great category.

Product Design: This involves crafting a product and user experience that precisely addresses a market need. The product should aim to exactly match the new category’s requirements.

Company Design: Building a company around the category involves creating a business model, organizational culture, and brand identity that resonate with the market’s expectations. This alignment fosters a strong company/category fit, essential for long-term success.

Category Design: At the core of category design is the deliberate creation and nurturing of a new market category. This means you should be able to market your category in a way that attracts customers and builds your reputation as the clear market leader in the said category.

All three components — product design, company design, and category design — must harmonize and reinforce each other. When executed effectively, they generate a powerful momentum akin to a flywheel effect, propelling the company toward sustained success and dominance in its category.

Leaving category design to chance or ignoring its strategic importance risks forfeiting the opportunity to establish yourself as the category king. As history demonstrates, the category king reaps the lion’s share of economic rewards — from market share to profitability — leaving competitors scrambling for remaining scraps. Evident from the picture here, Netflix is still the market leader in streaming services, 17 years later since it first started offering streaming.

Companies that prioritize category design seize control of the narrative, influencing how consumers perceive their offerings and defining the competitive landscape. By actively shaping the category, these companies position themselves not just as market leaders but as architects of market demand itself.

In conclusion, category design isn’t just a tactic; it’s a strategic imperative that guides every facet of business strategy. It’s about creating a compelling vision, designing products that resonate with that vision, and structuring a company culture that supports and reinforces it. Embracing category design means embracing the opportunity to not just compete in the market, but to define and dominate it.