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Category Design:
The 76% Advantage

Christopher Lochhead
The Godfather of Category Design
CATEGORY DESIGN
The Data

One Company Takes 76% of Value

76%MARKET VALUECategory LeaderEveryone Else: 24%
"When you make an unconsidered decision to compete in a market, you've unwittingly said: we're going to fight for 24%. You have to create demand instead of capture it."
  • Analysis of every venture-backed tech company (2000–2015) published in HBR
  • Category leader earns two-thirds (76%) of total value, not just market share
  • The delta: create demand vs. capture demand
  • Most entrepreneurs choose competition without knowing they made that choice
Framework

Category Design vs. Product Innovation

Better ProductDesign the SpaceCATEGORYLEADERSHIP(76% value)
  • Product innovation: compete in existing category with better features
  • Category design: redefine the problem, create new language, shift thinking
  • First-to-ship ≠ category creation (MySpace, GeoCities prove this)
  • Category design is the highest form of differentiation
76%
value to category leader
24%
for all others combined
Core insightThe company that designs the space and gets meaningful agreement on a new definition of the problem wins. Category design is about making the market, not taking it.
The Mechanism

Language Creates New Thinking

  • Otis Elevator: Reframed from "safety elevator" to "vertical railway", opened minds to skyscrapers
  • Starbucks: Invented "grande" and "vente" to charge $3 instead of $0.25 for coffee
  • OpenAI: Created terms "large language model" and "training data" to define the AI category
  • Gojo Industries: Shifted problem from "how to wash hands" to "how to wash hands without disgusting soap" → liquid soap → hand sanitizer
The languaging rule

Don't use old language for new things. New languaging creates new mental scaffolding. The company that creates the languaging for the category wins it.

Listen to the words

One of the core tenets of category design: listen to how people describe the problem. The words reveal the thinking. Change the words, change the thinking.

Playbook

Two Moves to Category Design

  • Spend more time on the problem than solution. Talk to customers about the problem, not your solution. Most founders obsess over product.
  • Use backcasting, not forecasting. Start from an imagined future state and work backward. Ask: what has to be true for this to work? This reveals the real problem.
  • Create a point of view. This frames, claims, and names a new problem, the bridge between where market is and where you're taking them.
  • Get agreement on the problem set, then the solution set. First make the market agree on a new way to think about the problem. Then propose your solution.
The founder's edgeFounders obsessed with the problem, not the solution, will outthink and out-create everyone else. This is the difference between good companies and category leaders.
Contrarian

Category Design Myths

✗First to market winsINSTEAD →✓ First to design the category wins. Otis wasn't first to build elevators. He created the category.
✗Better product = more salesINSTEAD →✓ Better problem definition = exponential advantage. Most companies compete on features in a known space.
✗You need new language that confuses peopleINSTEAD →✓ You need language that bridges current thinking to new thinking. Meet people where they are, then move them.
✗Everyone legendary competed harder than everyone elseINSTEAD →✓ Everyone legendary broke and took new ground. Bob Marley didn't become #1 reggae musician, he created reggae's category.
Based on Christopher Lochhead's episode on Lenny's Podcast. All ideas on this page are from the episode.Watch on YouTubeFollow @lochhead on X
GO DEEPER IN THE EPISODE
05:08 Why Chris shares his negative criticism on his website11:58 A simple explanation of category design18:00 How Purell mastered category design23:07 What Gong got right (and wrong)29:01 The “better trap” and why it’s crucial to avoid it38:51 Reflective thinking vs. reflexive thinking44:45 How Lomi created a revolutionary solution for food waste48:50 The “Frame It, Name It, Claim It” framework49:08 The concept of “languaging”54:00 Examples of languaging59:19 Spend more time on the problem than the solution1:01:37 The power of “backcasting”1:07:33 The truth behind building legendary brands1:10:39 The problem with product-market fit1:16:11 Chris’s spicy take on positioning1:19:20 “Damming the demand”1:24:49 Laws from Chris’s book The 22 Laws of Category Design1:29:46 Word of mouth: the most powerful form of marketing1:34:05 Chris’s closing message to listeners1:39:01 Lightning round
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