How to Dominate any Market by creating a Category - with Chris Lochhead, author of Play Bigger

0:00 so if you want to win in any market you've got to stop playing the game that your competition is playing you've got to stop playing their game instead you have to create your own category and you have to go on to dominate that category now it doesn't matter if you're a one-person startup if you are this 1% online business or if you're a hundred billion dollar behemoth the rules of category creation and category domination still apply you have to

0:24 create your own category or otherwise you will be subject to the rules of the game that your competition is playing and you don't want to be there because you will not be able to win that game so you want to dominate you want to create your category and you aren't a win in that category now I got to interview I had the privilege of interviewing Chris Lochhead who is the co-author of this book play bigger which actually defines

0:45 how you create categories and how you go on to dominate these categories Chris Lockett is a marketing legend he actually served as chief marketing officer for multiple publicly traded companies so this guy is a marketing legend literally is a legend and he's probably forgotten more about marketing than I have ever learned about marketing so make sure to take plenty of notes from this interview this interview is a gem and I'm sure you will enjoy it so

1:11 let me go ahead and press play my interview with the legend of marketing Chris Lochhead so well thank you and you rid of over a thousand books right yeah Wow business books are everything business in person to up there not fiction doesn't count so in the area that your podcast is you've read over a thousand books yeah Wow you know one of my favorite expressions of late is you know what you put into your brain is

1:41 what you get out of your life and you've put a lot of awesome this is a PG podcast right it is normally but you know that's okay it's a guy can try to be good I was about to say the S word but you put a lot of good stuff into your brain ya know I and I enjoy doing this so as I was saying like this is something I'm passionate about so I would never interview you if I hadn't read the book

2:11 if we weren't if I don't even heard it would be no fun for me so well because actually I ended up listening to one of your interviews yesterday as I was preparing for this interview and I was it was very obvious to me that the interviewer had not even read the books I was kind of like oh man this is not I need to find another interviewer has read the book yeah most of them at least

2:33 from what I can glean have not actually read the book they don't and it just kind of and I'm like you when somebody comes on our show legends and losers I read the book you know I read a book and you know I'm Dyslexic and I read the book yeah well sometimes I do that too but you know I I because I'm visual I will write in the margins and underscore things and I you know my books all end

3:06 up looking like this you know and have all this stuff in it and stuff yeah and you know if highlighters falling out of them and stuff because to me a books a tool right and so I want to go into it and and underscoring it and making notes and all that stuff helps with my retention and so dive into it yeah I actually I make mine maps because I'm a very visual learner as well so every

3:30 book I read I'll put my notes together and put them in a mind map so I can see the whole spread yeah complete I can see I can get perspective of that I'd never get when I'm even reading or when I'm listing that I have to do that process for me to be able to see the whole book well and the fun thing about your show were you it's you doing your I don't know if you call it a review or what you

3:52 call it because it's move it's way more than review and that's the thing it's sort of you I don't know that I've ever heard anybody do it quite the way you do it because it seems like you're a reviewer of the book on one hand but on the other hand you're an interpreter of the book and you're almost a bit of a motivational speaker yourself and so you know or whatever a bit of a guru or

4:15 whatever you want I don't know I mean that in a very laudable a think so and so you you fuse these three things together and you know I might say here category because you're at one you know telling me about the book I was most recently listening to your Michael Phelps one house like yeah what others can't or won't I was like that's awesome and you know and stuff like that but then you stop and you're a now and you

4:43 and you're sort of recounting of what's in the book and then you sort of do some interpretation and then you do like a little motivation what are you doing in your life to you know can't or won't and stuff and so it's this yeah you're a new category of I don't even know what to call you cuz you're not a book review or a book experience sharer I don't know yeah no that's so the problem and and I

5:06 feel like we're already talking about though know what we wanted to talk about here but that's category design the cool thing when I still and I listen to your show is like okay I don't at some point this guy's clearly I mean far from dumb at some point when he reads play bigger it's got to occur to him that he is an intuitive category designer because he that's what he's doing it's you're a whole new genre of show

5:33 that's awesome I love it and the reason I like as I was reading the book it was like wow you guys had conceptualized the things that I don't think well maybe these were topics of conversation maybe in some bits and pieces but you put it all together especially the part where you said you know you are solving a problem that someone else might or you were solving a problem that you've seen and it's not been solved yet so for me a book review

6:04 never did it because it was so lame or even a book summary the way it exists today it's so lame because it's almost like someone just hired a college grad to write an English interpretation of the ideas without really giving it perspective without really building the whole picture behind it so so so wait a minute I just I just love you know because I've spent thirty years you know working on category design right and so I love meeting intuitive category

6:35 designers and so let me see if I can unpack this a little bit with you man so obviously our guy who loves to read I mean and loves knowledge and all I mean clearly right so but you still even though you've read over a thousand books you have to have some way of figuring out do i or don't I want to invest in this one right so therefore I got to believe you're as my friend Eddie you

6:56 who by the way you should have on his book super consumers this is the one with all my notes on it comes on fire and I we haven't introduced using credible credible guy I'd love to because you you became a super consumer in his words of not just books but book reviews of one sort or another so that you could discern or decide right mm-hmm yeah and so then you had what every innovator entrepreneur and if they are

7:22 successful category designer has which is you have this aha where you find these reviews wanting and to quote the Big Lebowski you say this aggression will not stand man if there's no book reviews that turned me on and are giving me what I want then I'm gonna have to do it yes exactly is that what happened that's exactly what happened there was no passion in those things there was no excitement in those things there was no

7:48 story behind those things that were just plain vanilla freaking reviews by some random dudes who had no business doing a review of a book like this at the Phelps book and and you're like a kid you're like a kid and I mean that in a like a kid on Christmas kind of a kid you know that you have that enthusiasm like you're telling me how awesome this book is and why and like the things you're really getting out of it and why I

8:14 should be getting these things that is like wow this is I thought I don't even know what this dude this dude is not is the guy's a whole new category thank you thank you I really appreciate this is yeah this is this is fun and yeah clear clearly yeah it's awesome it's really awesome and no surprise you're attracting a big following thank you thank you and I'm actually excited to Jim jump into the ideas of the book and I have a

8:46 bunch of other people I want to introduce you to to as well I want to introduce you to my friends at 800 CEO Reed you know oh well I I know off the I know off 800 Syrian I don't know those people but I'd like to understand the business for sure yes so they are a fascinating company and it actually goes to the book play bigger which is if I said to you you could build a category King in the

9:14 online book business most people would say that's not freaking possible because Amazon is you know one of the greatest category kings of all time well 800 CEO Reed is a category king the category is obviously a very small focused one but it is in business books and they have gotten to where they've gotten because they are they view themselves as a platform for community between authors and readers and they specialize in you know bulk buys and

9:48 working with authors to get their books promoted and that deep relationships with fellows great stuff and so here they are they're an online bookseller but because they focused on a on a a category position that is very nice oriented and one that requires a unique set of insights around you need set capabilities they've been hugely successful so a they're interesting from that perspective and be given what you do you guys need to know each other because you're talking about a lot of

10:20 the books that they're selling and I don't know if there's got to be something for you guys to do I don't know what it is I would love to talk to them so they're great people yeah I would love to talk to them I would love to collaborate or do whatever necessary to and I and I gotta believe they get a big kick out of you doing something very unique thank you thank you thank you I

10:38 really appreciate that so so let's I mean you you talk about two different kinds of category builders here there is one 800 see or read there's something I'm doing which is very different from the kinds of businesses you deal with you're talking about billion dollar businesses multi-billion dollar businesses you're talking about hundred billion dollar enterprises and they're building categories in a in a rather different way maybe or or and that was that was the thing that was going on in

11:04 my as I was reading the book as when does this really when does this discussion start when you're when you're starting a business when you're creating a business and Steve Jobs or whoever to be take as an example you know Steve Jobs later on as you said when he was developing the iPad or when he was promoting the iPad he was clear that this is a category but initially in the early phases of the business he was just hustling to make things work

11:32 right so how when do we start to become aware or I guess once you become aware that's it now you have to think about it now you become now this becomes a part of your thinking process but is there time when you say okay now I should focus on building a category so the answer is it from the start mm-hmm that's the short answer yeah and I'm gonna say something that's gonna sound a modest but I'll say it

12:02 anyway they're our top tier venture capitalists in Silicon Valley today who when an entrepreneur reaches out to them and says I want to come in and meet with you and you know assuming the the venture capitalist is interested those VC say yeah let's we'll meet on next Thursday or whatever it is but you need to read play bigger before you come in and you need to have some answers to some of the questions about how you're

12:26 going to design and dominate a category and if you're not going to do that don't come in and see us and there are three questions that they must answer right yes sir talk about those three questions because they are fundamental like as I was thinking about those questions I don't think I had all the answers right away but they caused me to think deeper bigger more about this idea yeah first question whoa and these are what you

12:52 call days three questions from eight days three questions yes so he's one of the four co-authors and one of the three co-founders of the company so there's a book play bigger obviously and there's a company called play bigger advisors that Dave Al and I co-founded and I actually I don't know if you realize many I retired last year shortly after the book came out and David now bless them they continue forward and I'm doing some other things we

13:16 talked about if you like and you know I'm still deeply connected to those guys as you might expect but anyway so yeah Dave's three questions number one what problem do you solve mm-hmm and can you kind of you know explain that to me very clearly and very simply right number two if you solve that problem perfectly what category are you in what's it called what is this and number three if you become the category King and you take

13:47 76% of the economics which is on average what the category King gets and we can talk to you about you know and talk about that if you like how valuable will your company be what will company be worth so one would problem you solve two if you solve it perfectly what category are you in and three if you become the category king and take two-thirds of the economics in that space how about you all do you think you'll be so when when

14:15 you're starting off you may have the answers but also likely that you may have the wrong answers for a while this is a journey in some ways right this is a discovery process this will you may not have the right answers right off the bat but it will evolve right it will absolutely evolve you know there are some instances where companies lock and load and it goes boom and it just it goes right and so the definition in the

14:43 category or the category name remains as such for some meaningful period of time but then there are a lot of other that evolved to your point so for example today these things we call each other on we call smartphones well when they first came out most people called them wireless phones and for a while they were mobile phones and interestingly

15:15 enough of course if you think about an Android or an iPhone today phone is not really doesn't do them justice because it's a mainframe computer in your hand and then some right and so it could very well be that in five to ten years from now the word phone won't be in the category name of these things today we call smartphones and so so you're absolutely right as technology changes as as our desires and needs and wants as people in consumer

15:45 habits change but most importantly as the thinking about problems change categories can either evolve and in many cases they get redesigned so as the thinking of the problem evolves in some ways now let's let's let's maybe make it a little clearer for our listeners because one of the fundamental ideas behind this whole whole idea of building

16:17 a category is understanding that we have to focus on the problem like we have to own the problem as the category rather than the solution as the category to start off right yeah one of my favorite expressions for anything about that is there's there's too many solutions looking for a problem right and so entrepreneurs innovators of any kind they they fall in love with the solution with the product and we get we get trained in the business world we get

16:49 trained in universities we get trained and you know I don't want to underscore a certain place or whatever but in case studies that we read that the best product wins and that if you have a legendary product and you can build a legendary company to deliver that product and service that product and so forth you win yeah and while that's possible it's highly unlikely because

17:21 almost you can almost guarantee that the world is not gonna see the solution the way the innovator entrepreneur inventor does listen my mother thinks I am the best looking man on planet Earth okay but you are man and I have a face for radio right and so so nobody sees that you know the product or the innovation the

17:51 way the inventor or entrepreneur does right and so if you take a step back with what category design really is is the most when you study the legendary innovators over time here's the big aha and you know the three of us had spent plus or minus 30 years on this individually in the last decade together plus or minus on it together and there's over half a million dollars of primary research data science research in the book and so here's the AHA when you

18:20 study the legends yes they build a legendary product and please don't take anything I'm saying is that you should not do that you should legendary products are really important and more important probably today than ever yes you build a legendary company and hopefully an innovative business model we've seen a lot of great innovations in the last decade or so in business model innovation that's that's making a big difference both to companies and consumers but here's the interesting so

18:45 you get two levers product and company the legends pull this third lever called category that is to say they teach the world how to think about a problem and therefore a solution in the way they want the world to and so for example you mentioned Jobs when he launches the iPod he stands up on stage he puts up a slide that's got the iPhone on one end and the iMac on the other and he says we believe

19:16 there's room for a third category of device now let me tell you why and he begins to have a conversation that you could think of as a point of view where he eat underscores the shortcomings in both devices phone and laptop particularly around content consumption and communication in this new emerging at the time it was 2009 if my memories right digital social mobile world right and we all agree with them and instead

19:49 of buying two products from them we now buy three yeah and that's what legendary category designers do they open up our thinking to consider a problem in the way that they want us to and so another way to think about of any is that everything we believed were conditioned to believe and so so the legends conditioned us to think about problems and solutions in a way that we they want us to and as a result they get positioned as the leader

20:19 in a whole new space because once the world sees a problem they can't unsee it and so if you want to start building what we call the category design lens start paying attention to the context of things and what stuffs called so for example one of the greatest category names of all time what's an aspirin called painkiller painkiller is a

20:51 legendary category name right right because Wow I have pain and I want I don't wanna get they didn't call it a pain get rid or they didn't call it a pain smoother they didn't call it an ache either I mean I know these all sound ridiculous and I'm being a little bit ridiculous on purpose but the point is they could have called a lot of other stuff they were smart enough at bear to call it a pain killer yeah right and yet

21:22 these these pills that we take to make ourselves better over the long term for our long-term benefit those are called vitamins vitamins in the strength and there's no direct correlation between my life and vitamins really so like I don't know we I guess my point is I hear a lot of CEOs say we got to figure out our much more of a painkiller than a vitamin

21:53 yeah yeah and as you said I mean once the world sees the problem it's very hard to unsee it and it is our job as entrepreneur to evangelize that problem to actually take it to the world and tell them that hey there is this problem here you may not have known but let me talk to you about it and Marc Benioff did it for a long time with Salesforce I'm still doing it he's still doing it because

22:24 it's true like what he's evangelizing is a real problem and he's he's made a ginormous business out of a problem that initially people didn't even know it existed correct and actually I would even take it a step further the way he proposed the or the new computing paradigm at the time was completely absurd so if you take if you you know it's definitely time transport machine

22:54 we're back in 1998 1997 in the very early days and the early founding of Salesforce at the time even small businesses they had their own applications that they ran on their own computers inside their own businesses whether you were Citibank or whether you were you know Manny and Chris's donut shop that's what you did right you had your own computer your own software your own data your own network etc so that's 1997 so Marc Benioff shows up and says

23:27 hey I'm here's what I want you to do I want you to go to this Web site and enter in all your customers name all the all your customer information and then I want you to put your forecast data for each of those customers into this website that is run on in my house on my servers and on my disk drives okay and oh by the way you're also you don't get

23:59 to buy my software because that was a paradigm at the time you gonna just rent it you're gonna pay me a monthly fee per user and so think about this for a second the chief information officer of a fortune 500 company in 1997 says you want me to give you all my customer data on life Cass data all the names addresses phone numbers of all my sales people all my sales management and you're gonna run it

24:23 on your stuff and I don't even ever get to see it go F yourself and that is what the world most of the world said mmm-hmm but Mark was a very smart category designer and he didn't say what I just said what he said was no software and he did what legendary category designers do they evangelize a problem and so he started to talk about how expensive it

24:53 was to have in-house software and really importantly many not only did he do category design on what he was up to by calling it cloud computing ultimately it's not what it was in the beginning to the point we we talked about earlier it was called software as a service or SAS for short and it evolved into into being called the cloud but that said he didn't say any of this stuff I said he said why would you want software in-house and he

25:25 invented a term for that CSAP was not running around saying they sell on-premise software mm-hmm so Benioff was really smart he created the term on-premise and it was a descriptive term so it wasn't a derogatory term that could get written in The Wall Street Journal that's not you know most marketers make the mistake when they're having a dialogue with their market to just rail on the competition he didn't do that he said well they are on-premise

25:55 working in the cloud and then he over time made on-premise equal you know who's gonna say something totally inappropriate but equal bad let's just call it that right and so the more he and Bute and hey well you don't want on-premise software yeah well you know that's like having genital disease right and so I try cleaned it up in my head it

26:25 took me a second and and so and so that was also very powerful so what he did was he he continuously made this what we talked about in the book he's from two arguments with the market he said well the way it is is this way today can't you see the problem with that don't you think it should be this way and the more he got people to see you know what it is expensive to run software in-house and

26:52 once I upgrade it or once I change it I can't upgrade it and why why do I want to be in the business of running data centers I'm a bank or I'm a distribution company or I'm a manufacturer I'm or whatever I am and so forth and so over a period of 15 years the world starts to agree and by year six seven eight there's a tipping point that happens and then the rest of it just plays out and

27:15 and now today there's nobody if you and I showed up on Sand Hill Road to the top venture capitalists in the world in the tech industry and tried to say we want to start a on-premise application enterprise software company they tell us they you know get the F oh yeah so he what's he more Benioff there and what as you say the legendary category as I understand and they are continuing to do

27:46 is they're changing they're fundamentally changing the way people think not about the solution but first about the problem the solution just comes along for the ride and that's a very profound change of thinking that entrepreneurs need to have because as entrepreneurs by the way I used to be an engineer I'm a physicist I'm an engineer so my fundamental tendency is to build stuff my fundamental tendency is to make solutions not to go and evangelize

28:17 problems like that doesn't that's not who that's not the way I see the world and but this is a huge shift in the way in a way I have to think about what I do and not only the art but also the way as entrepreneurs we have to think about how we approach the world how we approach telling the story yes and that story yeah yeah that that story matters

28:49 a lot because the story is what frames people's thinking about the problem in the solution and problems create categories and if everybody says well don't have to be the first mover no no I want first mover advantage or or or should I be the second mover of that whole discussion and it's the first to get all three right we call it prosecute the magic triangle a company product in category mm-hm right my good buddy Paul Martino was a

29:22 co-founder of a early social network called tribe hmm and he was on he was on an episode of legends and losers recently so the story's fresh in my mind and he he they were two years ahead of Facebook you know and so they had they had you know the huge time to market advantage but Zuckerberg got all three right product company in Category and you know tribe just didn't get it right

29:54 and it still exists today in a very small niche I think he said they're burners you know the people who go to Burning Man I think there's there's like a burn or community on tribe all right well it's a small that's a niche well that's what happens when the category king emerges and takes all the economics right you either go out of business or you find you know you say okay we're gonna be the social network for burners

30:21 yeah and that's yeah that's exactly the the thing I mean the fact that category Kings will dominate the economics of any any category in that way and I think Peter Thiel kind of initiated that discussion when he was talking about 0 to 1 in the sense he said I want you to be a monopoly but I mean what you guys are saying is this is how you become a monopoly in some ways because you become the category kink

30:49 and when you are the category king you almost become monopolistic and in what you do yeah I mean it depends on the industry in the category it's a little bit different but it sure if you said is does Microsoft have a monopoly in office productivity software you know Office Word etc the answer to that question is yes and they've they've had that monopoly for the better part of 30 years it's it's an extraordinary feat of of

31:15 category design and entrepreneurship and innovation and so in my opinion they they they deserve it if you if you achieve that if you achieve a google-like position of facebook-like position or listen if you are the category king you know I have a good friend who retired at 40 from a career in real estate and he was at century 21 he was a number one century 21 sales rep on the west coast and he dominated California and in

31:49 his neighborhood he was the category king we you know have those kinds of numbers unless you're not and his name's Tim Road and he he rewired or if you will redesign the category of realtor in minty California I can explain why if you care but but my point is the category King principles apply from Google and Microsoft to tim road and and in between he yeah and I would love to

32:21 explore they're different I mean we've been talking about one end of the spectrum though multi-billion dollar Giants but let's talk about the other end of the spectrum there people are building a personal brand based business or maybe more lifestyle based businesses or as something along those lines where just like your friend Tim Road it's it's he's building a category he's and I think you guys talked about he's hey its positioning himself yeah I mean one of

32:49 the mantras in the book you might remember is position yourself or be positioned right that is to say if we don't tell the world how we want to think about in this case a problem in a solution or just make it even simpler our business or ourselves for that matter then they're gonna make stuff up mm-hm and you might like what they make up and you might not like it you know Muhammad Ali famously said if I don't

33:19 tell him I'm the greatest how are they gonna know I did not know that he said back right and so yeah and so ultimately that's what it's about in the case of Tim he wasn't doing an innovation that was at the level of a Google it wasn't a breakthrough technology and certainly it wasn't gonna scale to to make a difference to literally billions of people over time and be one of the most valuable companies in the world that

33:47 wasn't a game he was playing but inside a game he was playing called being a local realtor he played bigger haha by redesigning the category and this is how he did it the axiom at the time in the real estate business was if you want to be a successful realtor you kind of got to cuddle up to the community and you sort of got to do everything possible to get known in the community and joined to

34:08 this club and then that Club and sit on this thing and you know all that stuff and then the other thing that you got to do is you got to sort of go door to door and you got to say hey Manning my name is Christopher and I'm a realtor in the neighborhood and I'm a member of this club in that club and maybe I go to this church or whatever it is and I know you

34:26 may not be thinking about selling your house but I just wanted you to know I'd be happy to do a free evaluation for you any time give you a sense of the market you know all this stuff so there's all these things that you did to do sort of an appraisal and and do all these things to kind of cuddle up to people so that in the event that one day a year from now or whatever man when Manny's

34:47 thinking about selling his house he's going to call Christopher and those types of tactics well Tim said F all that hmm he said I only want to deal with people who are serious about selling your house and he went a huge step further I am gonna rewrite the criteria in my market for how you select the realtor and so his point of view which became his tagline was called Tim Road and start

35:17 packing and he would do a lot of advertising television advertising and so forth and he would say when essentially when you were ready to sell your house call tim road and start packing and the thing that he wasn't saying that was speaking even louder than what he was saying was if you're not serious go after yourself you're not don't call me call me when you're serious about selling your house and so a lot of his clients became like people

35:44 who've been with two and three agents and it hadn't worked and and then he would do all the same emarketing like you know he would he would stand on a the top of a bridge with a bungee cord around his leg standing there on a suit and briefcase and jump off the bridge and scream you know call Tim Road and start packing and you know all this crazy stuff that he would do but my point is he was a category designer and

36:07 that he were reframing the problem and he said he positioned himself around if you want to sell your house fast I'm your guy and he became number one in the nation yeah and so you know he's not doing the innovation that Google is when they make people rethink about what advertising means but the principles of category design remain the same which is a legendary innovator conditions a

36:39 market to think about a problem in a solution in the way she wants them to and once they do that by bone all right on and I think one of the things as you were talking about it he was conditioning the market to think or he himself said himself so that he was different rather than better he was not running their race he was running his own race yes designing his own race to run and when

37:07 yeah very good this is a huge trap that that entrepreneurs and innovators of all sorts of any fall into which is in our mind because we're competitors we want to show the world we're better like you know like boxers right you and I go in we're gonna box each other we want to show the world who's a better boxer and you're gonna try and knock me out and I'm gonna try and knock you out and one

37:29 of us is going to do that and and at the end of it they're gonna say well Manny was the better fighter right and in the interview I'll sit there and say well certainly tonight Manny was the better man no no and so this bit better sort of idea gets baked into our head and our school system is built on that who had the best grades mm-hmm so from the beginning of our lives were evaluated in

37:54 the context of who's better than Who what nobody thinks about is better than who at what yeah we're conditioned by society to almost not be different we're conditioned by society to not stand out exactly and and we're also conditioned even more so that the way to be successful is to be better than everyone else mm-hmm so if I want to get picked

38:25 first for the play I want to be the best actor if I want to be the you know president of the math club I have to be the best math student if I want to be the starting pitcher on the baseball team etc right I have to beat other people at this game and so here's what happens when people go into business they play the game that's there and they fall into a unconscious decision to do

38:54 the same thing well here's what you find many when you spend years analyzing studying the greatest innovators entrepreneurs of our time what you realize is that's not what they did as a matter of fact they went out of their way to make sure the world would not compare them to what came before hmm and here's my evidence of that Picasso he starts off his career and I'm

39:28 not a painting expert but I'm a category design expert okay he starts off his career he's a very talented painter but he's just painting landscapes and whatever he's painting and it's not till he starts hacking the painting up into these what he calls cubes and rearranging everything so he takes the boob and sticks it where the ear should be in the etc etc all right well when he first shows that to people what do you think their reaction is probably they

39:58 are not yeah it's it's it's this is the work of a four year old mental patient right and and he says well see that's where you're wrong you can't compare me to what came before because there was Renaissance art there was this art and there was that art he says this is cubism mm-hmm and it's a whole new category of art and you can't look at it

40:30 the same way that you look at a a realistic painting of a fruit bowl so here's my point for Picasso to become Picasso many he's got to change the world's definition of art hm and once that happens he's the category king of cubism and arguably the most famous painter of our time certainly one of the top three to five but and how many other cubist

41:01 painters can you name I don't know right and that's what Bob Marley does with reggae music and that's what the Ramones do with punk rock and you know that's ultimately what Elvis does with rock and roll etc etcetera etcetera and they talk about these new genres of music you know that's what the early crossover popular artists in hip-hop you know Run DMC and those early bands that sort of came out

41:32 of the the cult scene and then went broke across right etc etc and so this happens in all facets of life but in businesses you start to look what you discover is if you really believe you've got something that's innovative that's powerful that's really valuable wouldn't you want to wouldn't you want to define for the world how they should look at it why would you want to be compared to what came before and interestingly

42:04 enough if you look at you know we talked about smart phones and jobs right that category was well on its way Steve Jobs reimagined the category and I would and everybody today says oh well the iPhone was just a better product than the BlackBerry mm-hmm well really here's what I would argue to you first of all I was a dedicated blackberry user and the primary use case for the BlackBerry was email mm-hmm and I guarantee you if you

42:35 tried a blackberry for email for a week there's no way you'd want your iPhone I have big hands the tactile keyboard on that thing was awesome and I would say my big-ass thumbs I hit the wrong letter probably every six or eight times I never did that with my blackberry right the product was awesome mm-hmm and it could very well have been that the common thinking for decades would have been that you would have had to have a

43:04 tactile keyboard like that because I could build an argument I could keep going as to why that is a better technology a better solution right mm-hmm no am i right well right is the subject in this type of thing of interpretation and so what Jobs did was rewrite the rules for what a at that time mobile phone was he reimagined the category in

43:35 the context of a whole different set of problems and solutions he reimagined it again in a world of apps that that rim never could the makers of blackberry right and we all accepted Steve's framing of the problem and therefore his solution and the BlackBerry guys went hey where did the market go a you know but make no mistake Steve Jobs did not compete with the BlackBerry hmm

44:06 Henry Ford did not compete with the horse-and-buggy no yeah right yeah it's it's like as we're talking about it and as I'm looking at it from the bigger picture the history history of humanity is history of people who have designed categories in some ways whether you talk about musicians you talk about of leaders you talk about especially in music it's so obvious every great

44:38 legendary musician created a category of music whether we talk about Pink Floyd whether we talk about the Beatles whether we talk about the Rolling Stones of the Rolling Stones whoever you want to talk about that the number one bands that pop to mind you're absolutely right there's great rock bands and we love that we all love but the ones that we go yeah yeah they're the category kings you know behind me I have a picture of Muhammad Ali yeah well

45:04 we'll see the greatest boxer ever most people know boxing say he was not hmm but he was a category king he was the first athlete to ever stand up for so a social cause mhm and so as a result he became bigger than the sport Yeah right and he create a whole new category there there you know at that level he took a whole new ground certainly never for a fighter you know and so that's why he's

45:37 he's beloved the way he's beloved and of course he was a great character and all that but but part of it for sure it's hard to say how much he breaks through is a whole new category of athlete and he becomes a hero at a whole other level yeah yeah Wow this is this is so much fun this is so much fun because we're talking about all these different paradigms different different walks of life in some ways are different kinds

46:05 of businesses different kinds of people different kinds of things that they do and this is a common theme across the boards where everyone who's winning the game of life is actually creating the game before they start to go and win the game and that's where they're designing the categories to do that and I think that's that's the inspiration for all of us who are listening as entrepreneurs we've got to think very strongly about what category were building rather than

46:32 if we're just trying to do something better yes and I would go alongside that Manny and say that we all got trained in a way of thinking about business that's 180 degrees wrong on this which is we think that products and/or brands make categories and/or companies and here's the truth categories make brands and

47:03 companies and products not the other way around in entrepreneurs intuitively understand this and I'll tell you why I'm not crazy I live in Santa Cruz California and it's a beautiful California beach town and beyond out of my mind that with happiness to live here but anyway that said what's popular as you well know living on the west coast here is this new category of

47:33 beer that is commonly referred to as craft beer now there's so many of these places popping up in Santa Cruz I almost begin anything it might be a law that there needs to be one every so so many half-mile or whatever I don't know what and anyway one opened up a few months ago just in my neighborhood and when they opened up they put a sign out there in a little mall one of the sort of the classic California style a little

48:05 single-level mall and they put up a sign at the front entrance of the little mall and the sign didn't say Manny and Chris's beer pub it said craft beer hmm and so the two dudes and I guarantee it was two dudes I don't know but I'm gonna admit who opened that place somehow intuitively understood

48:36 that they needed to put category before brand mm-hmm and the reason they understood that is if people don't know what you are they don't care about who you are hm-hmm and the what you are is the category here's another way to think about the importance of categories make brands and companies not the other way around Xerox had and has a legendary

49:08 brand no one gives an F because the category doesn't matter anymore kind of means tired well it's a mature category it's on its way down and end of discussion here's one recently this one drove me nuts this drives me nuts everytime it happens so recently Tesla surpassed General Motors as the most valuable automobile company on in America ok and

49:39 on the news everybody goes wow this is crazy people want their mind how can this company that sells you know twenty five cars a year and be more valuable than General Motors and they don't have this they don't have that GM s all STM has all these brands and honor this is crazy people have lost their mind visited at that and they'd understand categories make brands Tesla is the category king in a giant new category that they're designing called the

50:12 electric car and what drives market cap or value of companies you three things number one investors perception of the size and the growth rate of the category is this going to be a big market or is this a big and growing market number two investors perception of your category King this that is to say they know that one company takes two thirds of the economics savvy investors

50:42 understand this they want to bet on that company as early as possible as early as as wise and number three their interpretation of your metrics not necessarily just your financials but there's a lot of metrics that matter in valuing companies that have nothing to do with revenue expenses ebody and margins so number one sizing growth rate of the company number two investors perception of your category King News

51:13 and number three investors perception of your metrics in the context of the first two things all right so said simply investors look at Teslin they go well they are leading the way in a whole new area we believe over time along and Co have convinced us that over time there's a very real chance that the electric car overtakes the combustion car and if that were to happen and

51:44 they're the category king this companies probably massively undervalued when you value it more than General Motors that's the thinking you can call that crazy you can call it what you want but those are the three things that drive the value of or in this case market caps of companies yeah yeah and I think we can look back at history and we can see this again and again Ford did it and Walmart and Amazon did it and Southwest did it in their own

52:13 ways in their own specific categories they're the built out of a part of the category of building a car company or building a retailer or building a airline company they all stood the test of time by building the categories rather than building a specific product but then some of them lost their way well category violence happens and so the I get asked a lot many how long the categories live and how can I tell if

52:44 they're in trouble and so forth it's a great question and the only way I know how to think about the answer is categories live as long as people's interpretation of a problem lives hmm so I'll give you a cent I'll give you an example in the tech industry for the last 15 or you know maybe even more years many companies have tried to

53:15 replace email with something and there's a lot of complaints about email and email persists right email is a thriving application and everybody will wonders why and the answer to that question is well nobody has come up with a better solution to the way we currently think about the problem people have come up with solutions many of which you could

53:47 argue our better but they're solving the same thing which is how do we have this asynchronous communication and share files and as long as people think about that that's an important way to think about a communication problem email is going to exist and until somebody reimagines the problem and reconditions us or conditions us to think about digital communication in a different way email will continue well does that make sense that makes total sense I was just

54:18 thinking about all the different category Kings are always thinking about they're they're creating it's always about the problem and we start with the problem we aren't with the problem in the sense that's that's that's where we have to focus our energies on on Evangeline on thinking about the new problem and once we think about the new problem then imagine izing the problem rather than just thinking about the solution all the time yeah you said a magic

54:44 there which is evangelized we believe the ii-in CEO stands for evangelist make sense yeah well if you think about it a great example that I love is Sara Blakely the the entrepreneur innovator and category designer of Spanx and here's the genius first of all it's a great product I don't know how if you live with a lady or several but I do and we have Spanx and the house and and here's the fascinating thing so she you

55:15 know the problem is she says is she didn't like the way she looked in a pair of white jeans she wants something that would sort of smooth some stuff out right so this is what it says she says it right on our website so I'm not saying anything out of school here and so she goes to work and she comes up with what turns out is a real innovation that today you know tens of thousands of

55:37 our hundreds of thousands of women love but here's the genius yes she gets the product right she gets a great brand name right her packaging is is great ultimately she gets a great distribution strategy and all yes absolutely product and company a plus here's what she does on category she doesn't call it a girl - dot o hmm she doesn't even call it underwear she calls it shapewear oh okay and so if

56:10 you say that the undergarment category starts when Adam puts the fig leaf over his junk this category has been around for a long time and so for her to be able to convince the world that they should look at and value her product differently she gets them to think about the problem differently and the other awesome thing about her she self funds the whole company she owns the company

56:40 by herself there's no venture capital there's none of that stuff she's a billionaire and she's this amazing entrepreneurial success story of an entrepreneur who like a lot of great entrepreneurs before her essentially starts in the garage and here she is but she was savvy enough to understand I need to teach people to think about this in a different way because if they think about it like a corset or a girdle there's a lot of negative implementations I don't want to be

57:06 associated with that I want to be associated with fun and evening gowns of looking great etc and so that's why she she intuitively understands she needs to distinguish herself she needs to be different and therefore not compared to what came before and she's made you know hundreds of thousands of women happy and she's a billionaire oh yeah millions of women probably and so so I want to make this discussion more personal for me now because what I'm doing and the things

57:35 that we're doing one of the things I am as an engineer this is something that I'm trying to understand how do I evangelize this problem how do I evangelize what we're doing because for me the biggest problem with reading a book is that it's stuck there like all the ideas are in there maybe they're highlighted and stuff but they're never visualized they're never visible and they're never it's you cannot perceive those ideas clearly you don't have a

58:04 level of perception or here's a problem maybe I'm not even able to explain the problem clearly to you right now as we're talking so what is the process of creating this or explaining the problem clearly so that people understand and then going about evangelizing it because it feels like a challenge to me already as I'm talking to you make the mistake if it was easy everyone would do it and

58:35 the people who have done it I've done it intuitively I recently spent some time with a a well-known venture capitalist here in Silicon Valley named bruce cleveland and bruce was one of the very early employees in oracle and he was one of the cofounders of a company called Siebel systems that for quite some time was the category king in customer relationship management software and of course Oracle persists to this day and he was sharing with me how

59:07 he enjoyed the book because it unpacked what entrepreneurs and innovators like Larry Ellison and Tom Siebel we're doing intuitively with the market he said we all sort of understood that this was our strategy but it wasn't sort of declared as such and it wasn't as sort of on the table as such it was more in the air right and it was like the grain in and they honor they understood that they needed like he was somewhat Larry

59:34 Ellison and how there at the time there even was the relational database but Larry was smart enough to understand that the relate most of the relational databases that existed at the time were sold by companies had also sold hardware and so they were tied to those pieces of hardware and so he wanted to give people freedom to move from hardware hardware environment and as a result get some power over those vendors back right he understood this dynamic he so he saw

60:04 this whole in the market so what did he call it a cortical relational database hmm and but boom he crushed everybody because he said well you wouldn't want a proprietary relational database would you you want a portable one and so I guess my point and get to get back to your question the first thing is we talked about the problem when you get underneath that there's an exercise you could think of we call getting clear

60:36 about your photos you're from twos so if you take the way it is today in your category so the paradigm the pricing paradigm the distribution paradigm the customer experience paradigm the whole thing the business model paradigm this is the way it is and you write you detail that out in a list and we can we then recast that we say those are the from five years from now we want the world to go oh yeah that's how it used

61:01 to be and then we write out the corollary to how we want it to be and we call those the twos mm-hmm in the book we call them the photos for short for fun so here's what happens when you get clear about your photos the problem starts to get clear and then you think about okay well how do we want to language the problem because it turns out languaging the problem this is one of the keys here and

61:24 so you've had to work on this thing called a point of view mm-hmm and the point of view is a simple story that you tell that frames the problem and positions the solution so one of my favorite examples of this is the creation of the TV dinner category hmm so this is a great innovation and I just love it that the the Swanson company sold you know turkey and poultry and so

61:56 forth and they a big season for them of course was Thanksgiving in America and so they had this dilemma which was we want to be able to sell as many turkeys as possible but that essentially means we have to over over buy and over over all have too many so that we don't lose any sales right and so they said well what are we gonna do with all this leftover turkey as opposed to throw it out and they begin to work on a product

62:25 idea that becomes the TV dinner mm-hmm and so a very innovative way to think about it but how are you gonna sell and market leftover turkey dinner because that's what it is so you know in the 50s frozen food was taking off and it started in the 30s if I'm not mistaken we talked about Clarence Birdseye in the book right that the category designer of frozen food and so they think okay well

62:58 what we could freeze this stuff and rather than just freezing turkey they're gonna slice it up and they're gonna put it with gravy and they're gonna put it with stuffing and some a little dessert in this net and they're gonna sell it in this thing well at the same time television is taking off and so they position the product for the busy family to watch TV in front of to watch at eat food in front of the TV right and so

63:24 they have headlines in their early ad stuff that say like how to catch the early early show with an easy easy dinner and how to fix a scrumptious turkey dinner in minutes and so they're they're framing the problem called if you want a scrumptious turkey dinner that takes two days for Thanksgiving well now but boo and they tie it to this emerging thing the TV it's a time thing it's a convenience thing and and it's in its

63:52 own tray it's self-contained I can literally put it on my lap and watch the TV and have dinner and busy families can have a butt boom right and so that's how that's how they frame the problem and all of a sudden they take a giant problem in their business what do we do with these turkeys they come up with a very innovative product idea mm-hmm and they think well on one hand the world could think of this as a selling

64:18 leftover turkey instead how to fix a scrumptious turkey dinner in minutes and a whole new category is born because they condition the world to think about creating fast food at home in a whole new way that they the world didn't this was a problem the world didn't have nobody was saying how do I fix the scrumptious TV dinner in minutes yeah there's a problem the world didn't know they had until they found out that they had and once the world sees the problem

64:45 the contents hits then Swanson to this day is the catagory King and TV dinners Wow this has been so much fun there's been so much great learning for myself and I'm sure for our audience as well so I want to I want to close this interview but before we do that please tell our listeners how to find you how to get hold of you find your book and all the other things that you are up to now that

65:13 you're retired well the big thing I'm up to that I'm retired is I launched a podcast and I'm having a great time with it you know when the book came out I got a lot of contact from people all around the world you know it's an amazing thing you in this case you know four guys me and three buddies go to work on trying to synthesize much of our lives work together to put these insights together

65:40 in a way that other people can benefit from them I mean we were used to doing category design but sort of as you I'm sure I understand and have probably been through in your own life when you go to teach others what you do is a whole other thing right anyway and so I I just get kept getting contacted from people around the world who who are reading the book and they had questions and and many of them said you know we

66:10 want more and so legends and losers my new podcast is my attempt at more and we talked a lot about category design and marketing and entrepreneurship but the thing we're really trying to do is have an authentic raw conversation about how to build a legendary business in a legendary life when when you think about most business kind of media stories books whatever we concern we consume

66:40 they're about the business they're not very much about the people so we try to incorporate those two things because most of us want to build a legendary business because we want a legendary life and the two things are inextricably linked and yet very rarely do people have authentic dialogue about that so that's a big part of what worked with legends of losers and the other part as per the name is we all learned more from our losses that are waiting and yet you

67:07 know when you hear the big interview with Steph Curry from the from the the Warriors after he wins the basketball MVP and they ask him about his life in his career in aw stuff you know the impression you can get is that well you know he's this magical creature that got this extra organ next to his liver called awesome at basketball and I don't have that and I loved watching them but like this has got zero relevance to me

67:33 and so I guess my point is that can we have an authentic dialogue around how to build a legendary life and legendary business and talk about how the loss is open us up to actually learning what we need to learn and ultimately hopefully becoming legendary in our lives and in our businesses and so that's what legends and losers is about and then of course category design is a big part of it be we talk a lot about entrepreneurship and

67:59 marketing in those context and so that's the big thing I'm doing in my retirement other than trying to spend a lot of time with my family and I'm a surfer and we try to keep active and enjoy this beautiful part of the world that we get to live in awesome awesome and well thank you very much Chris thank you for taking the time to do this I appreciate it very much this was a lot of fun and a lot of great learning as

68:26 well so thank you honors all mine Manning speak to you soon