Category Creation is Key to Markets, Not Quadrants

Jerome Pineau and I discussed his category creation book in 2023. In another post, I outline some key questions Jerome aimed to address. What were his answers? This article aims to outline them and entice the reader to engage more with my conversation with Jerome, his book and other resources (including a recording of a wonderful 2020 webinar on the topic I did with my CCgroup Analyst Relations (AR) colleague Zoë Crichton). These resources also include my post on the market menagerie. It’s useful to contrast these approaches with the more typical AR approach of careful alignment to existing categories (a great example of which is the excellent webinar from The Skills Connection summarized here).

Category creation is essential for companies to stand out in a market rather than just compete. It is about defining and creating demand. This has been shown to bring greater success to companies in the form of a more significant market value share, generating 76% of the market’s value. Companies like Netflix, Amazon, and Salesforce are examples of successful category creators. The process can be scary, but it can be an accelerator for companies looking to create something original, especially in uncertain times.

Jerome stresses the benefits of category creation in collaboration with industry analysts and AR in the conversation. Getting insights and framing the problem requires internal coordination and industry analysts’ involvement. Category creation is about creating something fundamentally original. Utilizing external market entities is ongoing, collaborative, and exploratory, requiring input from analysts, customers, investors, and channel partners to build a collective oral history. Companies must vet category creation with analysts early to de-risk the new idea significantly. These analysts can also provide great benefits in terms of informing creators and amplifying their points of view. jerome steps through eigth key ideas.

  • First, Jerome and I talked about the creation of categories and its benefits. He defines a category as a market, and companies that create their own categories are essentially saying that they want to be different rather than competing. Category creation is about defining and creating demand, which is highly successful for companies in the form of a more significant share of market value. Essentially, category creators generate 76% of the market value, which is why names like Netflix, Amazon, and Salesforce are so memorable.
  • Second, we emphasized the competitive advantage of category creation in dominating the market. He points out how once a company creates a category, it often becomes impossible to compete with them. He cites examples of companies like Airbnb, Netflix, Amazon, and Salesforce. He mentions how creating a category is not simply about filling a gap but creating something fundamentally distinct. He also suggests that thinking about reports and evaluative reports like the Forrester Waves and the Magic Quadrant is not the best approach to category creation. Furthermore, we discussed the company’s challenges in category creation and how it can address them. Jerome notes that companies often accidentally discover category creation, and it can take up to 18 to 36 months to get a foothold in the market.
  • Third, Jerome discusses the importance of problem-solving as key to market category creation. We discuss how it starts with identifying a problem and providing a solution to the market. He explains that during times of economic and political instability, category creation can be an accelerator for companies looking to create something new rather than competing for diminishing demand.
  • Fourth, Jerome drills into three key variables that make a category valuable. These variables include market size, analyst concurrence and eventually receiving recognition from analysts like Gartner. Additionally, he breaks down these three pillars to success when creating categories: category design, product design and company design. Jerome details how analysts can significantly assist in these areas, such as helping with analyzing the product roadmap or assisting with category design. We also touch on an organisation’s internal struggles when defining a new category. This can require internal evangelization and change management. Additionally, we stressed the importance of company-wide coordination when creating a brand-new category.
  • Fifth, I asked Jerome about the importance of aligning internal resources while creating such a category. Winning the argument about the new category is ongoing, and analysts’ involvement is crucial for success. It is vital to explain and explain the benefits to analysts to prepare themselves and their clients for developing the new category. Category creation success is marked by the appearance of competitors using the same semantics and taxonomy put out in the market. This should not be considered negative but a sign of success. Recognizing signs of success throughout the process is highlighted to ensure that people are making headway in creating such a category.
  • Sixth, Jerome discusses the signs and signals that indicate success in category creation before the category becomes formalized in a report. Some of these indicators include using the same taxonomy as competitors, analysts’ research using the same terms, increased inquiries from potential customers, and using category language in customer reviews. He also emphasizes the importance of organisational change management and its ability to collaborate with industry analysts. The speaker urges organizations to consider resources, risk tolerance, and the long-term nature of category creation when embarking on this journey.
  • Seventh, we detail the specifics of a successful category creation approach and how it can de-risk a new concept by vetting it with analysts early on. We discuss how co-creating a category with external market entities is crucial. It is an ongoing, collaborative, and exploratory activity that requires input from analysts, customers, investors, and channel partners to create something more resilient with deeper roots. Jerome emphasizes that category creation is not about being in an echo chamber and thinking about how great one is. Rather, it’s about finding the right analysts and collaborators, enlisting them in the category creation process, and building a collective oral history. The aim is to find the right category disciples who will help evangelize the new category to the world.
  • Finally, Jerome emphasizes how category creation requires tools to support the process thoroughly. He encourages leaders and companies to think differently, not just about category creation, but also about how analysts can help them succeed in this area.

For the whole conversation, go to:

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As the head of CCgroup's analyst relations team, Chapple directs programs that increase the value of relationships with industry analysts and sourcing advisors.