The 101 of category design - Step 3

December 13, 2022
The 101 of category design - Step 3

The Magic Triangle

The magic triangle combines product design, company design, and category design. Each side of the triangle is essential. They dramatically improve your chances of becoming a category king or queen.

Product Design

Build a product that solves the problem of the category. So it's not about the product-market fit but product-category fit.

Company Design

Create a business model and an organization with a culture and point-of-view that fits the new category. The goal here is company-category fit. It means you have engineered the right business model and missionary team for the problem you are looking to solve.

Category Design

The creation of a new market category. The goal is to win over popular opinions and teach the world to abandon the old and embrace the new.

Use this exercise to think about how The Magic Triangle applies to your company and category.

Product Design

"Great products alone rarely become category queens."

To find out if your product is carving out a new category, answer “true” or “false” for the following statements:

  • “The only thing that matters is having the best product.”
  • “My products are competing in existing market categories.”
  • “My products are the “next-best” alternatives to existing products.”
  • “My products are better, faster, smarter, stronger than competing products.”

If you answered “true” for any of these statements, you’re not on track to design a radically new and different product category. And it’s likely because you don’t have a unique POV to frame, name, and claim a new and different future for customers.

Company Design

Answer the two following questions to think about whether or not you’re innovating on the company/business model side of The Magic Triangle:

1. Do I make money when good things happen to my customers/consumers/users?

Examples of good things happening to your customers:

  • Netflix charging per month (with no late fees) versus Blockbuster charging per rental (and making money off late fees) was a business model innovation.
  • Salesforce charges companies a subscription fee instead of selling higher-ticket, one-time products (the status quo in the late ‘90s and early 2000s).
  • Tesla refusing to partner with car dealerships and sell their vehicles at fixed, easy-to-understand prices was a third.

2. Do I make money when bad things happen to my customers/consumers/users?

Examples of bad things happening to your customers:

  • Bank of America charges people when they overdraw their bank accounts (overdraft fees). In contrast, Ally offers multiple forms of overdraft protection (like declining payments and giving people 14 days to add more money to their accounts).

Category Designers look to make money in fundamentally different ways than other businesses in their industry. They innovate in the gaps between the category and where it should be and add value in places others fail to see.

Category Design

Your company needs a category to market itself within. What you are trying to achieve is Maximum Viable Category. Or, as we call it, MVC. This is different from a Minimum Viable Product, or MVP. Minimum Viable Anything is a waste of time—and sets you up for playing a comparison game in the market. Instead, you want to create a NEW and DIFFERENT category/market, which you now have free reign to market WITHIN.

To achieve MVC, ask yourself these questions:

  1. What new niche within an industry where I have strong interest/expertise hasn’t been created yet?
  2. Is this niche compelling?
  3. Do I have data or insight telling me a strong headwind is blowing in this direction?
  4. Is this niche specific enough to customers?
  5. Am I drilling into what precisely this new and different problem is?
  6. Will customers “get it?”
  7. What POV will educate them, so they do “get it?”
  8. Does this niche have growth potential?
  9. What might the world look like if this niche becomes the new and commonly accepted way of doing things?

Once you’ve determined where there is an opportunity to CREATE (not “compete”) a new and different future for customers/consumers/users, of course, be smart about product development.

  • Create an alpha version.
  • Expose it to a few people you trust—ideally, your “Superconsumers.”
  • Make improvements.
  • Add features.
  • Launch a beta program.
  • Expand the number of people using/testing the product. Etc.

And then, once you’ve refined the problem, you are solving and the radically different solution you are creating for the world, launch a Maximum Legendary Product in a new category that differentiates your breakthrough product. If you successfully prosecute all three sides of The Magic Triangle, you will unlock your data flywheel and be well-positioned to avoid  The Better Trap .

In the next lesson, we’ll dive into specific steps to steer clear of this trap.


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