How Game-Changing Subcategories Drive Business Growth

My new book, Owning Game-Changing Subcategories: Uncommon Growth in a Digital Age, is now available wherever books are sold. In a series of blogs, I will detail the big ideas from the book. These are:

1. Growth by subcategory creation
2. Digital’s role in accelerating subcategory competition
3. Rosy and gloomy bias affecting organizational decisions to commit to a new subcategory
4. The role of the exemplar brand
5. Brand communities

I’ll start with the first big idea: the assertion that the only way to grow (with rare exceptions) is to create, position, and own a new “must-have” defined subcategory. This subcategory must change how a customer experiences the brand or creates a new relationship with the brand. To generate a growth platform, you need to create game-changers like Chobani, Tesla, Enterprise Rent-A-Car, Dollar Shave Club, Airbnb have done.

About two decades ago, Peter Drucker argued in an interview that innovation should not be the goal.  Rather, an organization should aspire to be a change leader.  That is what the drivers of a new subcategory are: change leaders.

Identify or Create Must-Haves

A “must-have” does not have to be functional – it can be a personality or attitude.  Airbnb has created entrepreneurial hosts, as opposed to owner/managers, who are in it from more than just a financial transaction. They join the platform because they are passionate about their role as a host. It is an attitude, a job guide, an objective and a “must-have.” They aim to make the guest experience special through personal connection, augmenting it in creative ways, and enhancing their property and its presentation.

“The only way to grow is to create, position, and own a new “must-have” defined subcategory.”

The first step, of course, is to identify or create “must-haves” – elements of an offering for which customers will have a high affinity. The existence of a set of “must-haves” (there are nearly always more than one) will create a basis for a core loyal customer group— the cornerstone of a growth platform. Prius dominated its market for over 15 years with a loyal customer base and “must-haves” that included the Hybrid Synergy Drive, outstanding gas mileage, a unique design that helped deliver self-expressive benefits (“I am doing something for the planet”), and excellent reliability.

A “must-have”’ can also involve a higher purpose.  People want to connect with brands they admire and resonate with their own values and passions.  Patagonia shares with its core customer a reverence for the environment.  Avon with its Walk for Breast Cancer and Lifebuoy with its “Help a Child Reach 5” all create energy, visibility and a strong connection with many customers.

Differentiate Yourself and the Subcategory from the Competition

Creating subcategories is not enough — there are two additional tasks. First, become the exemplar brand that represents the subcategory. Then, use that status to build the subcategory’s visibility, positioning it around its “must-haves.” It is like brand building but with the focus on the subcategory and its “must-haves” and not the brand.  It involves moving from “my brand is better than your brand,” which almost never results in growth to subcategory competition.

Second, create barriers to competitors inhibiting their ability to become a relevant option. Barriers could include the committed customer base, “must-have” associations and brand relationships that go beyond functional benefits. Without barriers, even a successful subcategory will quickly attract others that will enjoy the benefits.