B2B Growth: Your Daily B2B Marketing Podcast
B2B Growth: Your Daily B2B Marketing Podcast

Episode 1683 · 5 months ago

Why Category Design is a Marketing Superpower with Christopher Lochhead (1 of 2)

ABOUT THIS EPISODE

In this replay episode (part 1 of 2) John Rougeux talks to Christopher Lochhead, 3-time Silicon Valley CMO and host of the Legends and Losers Podcast.

Conversations from the front lines of marketing. This is be tob growth. Welcome in the Thursday show, I'm your host, Benjie Block, and today on B tob growth we're gonna switch things up just slightly. Now, most of you know, on Friday's I provide a throwback episode. We have two thou episodes in the archive, and so as I was doing research and kind of looking back through old episodes, I came across a few episodes on category design, and this was actually a conversation I've been in several times over the last week or so, whether it's on Linkedin or zoom calls, talking about the power of category design, some of the frustrations when they went to consider it, and so as I'm looking back through the archive, I came across a two part conversation that we had had with Christopher lockhead. When I think of category design, he's the first name that comes to my mind. I don't know who you think of, but he is a three time Silicon Valley CMO. He's an author and he's the host of the follow your different podcast, and so would encourage you to go check that out. He's also got the newsletter authority on Category Design called category pirates, and if you go to their linkedin page, I think it's awesome because it's listed as an alternative medicine and I just found that funny. I got to good chuckle out of it. So I want to throw it back to this conversation, but it's in two parts because the conversation is lengthy and it's insightful and I know it's going to be good for our audience to tune in. I got so much out of this re listening and I'll probably read listen to it again. So today why category design is a marketing superpower with Christopher lockhead. Let's jump in. Hi...

...everyone and welcome to another episode of the Category Creation Series on the BDB growth show. I'm John Ruggie. To kick off this twelve episode in the category creation series, I have just three words for you. Follow your different. That's what our guest, Christopher Lockhead, wants us to think about when approaching category design. Now, if you don't know about Chris, you absolutely should. Not only has he written the book that every aspiring category designer needs to read, called a play bigger, but he's also the host of a top thirty rated podcast. A number one Amazon best selling author and a former three time silicon valley CMO with at least one IPO to his name. Chris is also an advisor to over fifty venture back startups. Wow, not only is Chris Super Accomplished, but he's an ultra nice guy and we had a really fun conversation. Now, Chris's Advice on category design is pretty extensive, so we've broken his interview into two parts. This is part one, and here's what you're going to learn from Chris in the next thirty minutes. Number one, why Chris thinks category design is at marketing superpower. Number two, why the category kings tend to capture seventy six percent of a marcus economics on average, and number three, what the three pillars of a legendary company are. Sound good, then let's fire up part one of our interview with Chris Lockett. Chris, welcome to the show today. So great that you could be with me today. John, thank you for having me on. I'm stoked to be here. Yeah, yeah, you know, as a student of category design, just getting to interview you is is pretty humbling. It's a huge honor and just yeah, I can't thank you know for taking the time to be with me. Well, I can't thank you enough for having me and I'm a student of category design to well, I think it's safe to say that you're a little bit further ahead of me, but you know, we've got a lot of talk about in that in that regard. But you know, before we dive into things, I got to ask you, Chris. You're at this book with a few others called play bigger, and one...

...of the authors described you as the Bruce Willis of CMOS, or like the Bruce Willis if you were a CMO and a die hard movie. So I would ask you, is that your superhero? Is that your action hero of choice, or that kind of thrust up on you? It's funny. I forgot that. Yeah, Kevin Mayne wrote that, which is very fun I guess. I mean my superhero as a kid and even today as an adult, that I related to more was always Batman, and Bruce Willis was not, was not famous when I was a kid, but it's hard not to love, particularly the first die hard movie. You haven't gotten any glass in your feet in your marketing career, though I hope you know I've gotten a lot of glass with my feet in my marketing career and I've had a lot of people shoot at me and call me names and try to kill me and wish ill upon me. So I relate to that part of it and I've left a lot of blood, sweat and tears on the on the marketing start up battlefield, so to speak. Right well, you know, speaking of blood, sweat and tears, you've you've built a major consulting company called science during thecom boom. I think you went hired a couple thousand people in just three years. Helps later, you help reposition macromedia before Dobe made that acquisition and you even turned software company called Mercury interacted from a one billion dollar company to a five billion dollar company. So maybe to give us some context for the interview today, can you just give me a little bit more about your your thirty years of marketing experience and have that brought you to where you are today? Sure so, as you said, you know, I've done three tours of duty as a public company, tech, a CMO in Silicon Valley, and I got started pretty early on John. I got thrown out of school at eighteen for failing out and being stupid and so I, like a lot of entrepreneurs, you know, for me entrepreneurship was not away up in the world necessarily, but a way out, you know, a way out of a life of struggle. And I think for a lot of entrepreneurs we...

...start a company because it's no one else will bet on our future, because there's no evidence that betting on us makes any sense at all. And so, you know, in a lot of ways entrepreneurship is a way to bet on yourself. And so I very early on bet on myself and started my first company at Eighteen, and then by the time I was twenty eight I was here in Silicon Valley and I was ahead of marketing for a publicly traded software company, of firm called the Phanto at the time. And, you know, just onward and upward since then. And then at by thirty eight, after we sold mercury to Hewlett pack or you know, I just decided it was time to hang them up and front. Since then I've been doing some advisor board consulting type stuff and then, as you know, most recently in the last couple years, have kind of reinvented myself as an author and a podcaster. Yeah, and you've written a couple books that are pretty widely circulated, at least among the crab that I speak to. Niche down and play a bigger. Can you give me a quick can I run down of those two? Yeah, the both books are about this concept, this new strategy and business called category design and play. Bigger is more for, if you want to think of them this way, biggie entrepreneurs, that is to say, I raise a bunch of money, I'm trying to grow really fast, I'm trying to design a new category that I can dominate and become the next CISCO, Google Orle Facebook, except and then my can book, Niche Down, is about the same concept of category design but applied to, if you will, a small entrepreneur. I just opened a pizza parlor, or I'm a flower shop, or I'm a restaurant or, as we have here in I live in Santa Cruz California, we seem to have a new craft group hub opening every fifteen minutes in town. So for those entrepreneurs who, you know, save up a little bit of money, maybe borrow a little bit of money from their uncle Steve or whatever, and on her hanging out...

...of shingle so niche down is for smallly entrepreneurs. Hain't a category, and play biggers for biggie entrepreneurs and how they can do the same thing. Okay, yeah, so you've written two books, you've had a pretty long marketing career, louts of different experiences and I believe you have been referred to this kind of a sense. A in the marketing space said how you describe yourself? For we call you something else, Chris. Well, some people have pejorative things to call me, but I mean, look, I don't know that that's for other people to decide. I'm I'm a guy who, like a lot of marketers, like a lot entrepreneurs, you know, got into business because it was a way for me to bet on my future when nobody else would, and so I had nothing to lose. And I've learned a lot of things along the way, some from reading, some from mentors and, of course, a lot from trial and error, and you know. So, look, I think I'm just like a lot of marketers, you know. We get out there in the world and we're trying to design and dominate new category and build break companies, and I love technology, you know, and I came to Silicon Valley from Canada and, like a lot of immigrants you know, Silicon Valley has been an amazing place for me. And so the a ha though for me in this regard, John, is, you know, my whole career I was the youngest guy in the room, you know, because I started in eighteen. I was the CMO of a Public Company at two thousand twenty eight and I never thought I would be doing anything other than that, you know, being the guy who is working hard, sixty to eighty hours a week, traveling all over the place. I used to travel to to four hundred thousand miles a year and you know, I was the upandcoming guy, right. Yeah, and sort of the interesting thing is you get to a place in your career where you wake up one day and you go, Oh, you're not the upandcoming guy anymore. You're now the been there, done that guy. And so I'm a been there, done that guy and of course I'm still trying to learn, you know, just like you, I'm a category design student. Yeah. Well, so real quick, just to give us more context, O, best moment as a marketer. worset moment as a marketer. HMM. You know,...

I've had so many best moments as a marketer. You know, look that you can't you can't beat going public, standing there at Nasdak pushing a button, you know, as I got to do it scient and you know, I joined that company as the founding CMO. We were thirty something people and you know, we got to well over twozero people and we designed it dominated a space and that's incredibly exciting. And so experiences like that are amazing. That mercury we got into a massive amount of trouble and our stock cratered and we had to fire our CEO, CFO and general counsel in one day and the whole company almost blew up. And that happened in November and our stock went from the mid s to the low S and it was incredibly challenging. And then fast forward to June July of the next year, we sold the company to Hewlett Packard for five billion dollars. That was a pretty good day. And then I'll tell you, you know, as a kid with no education, who essense we got, I guess, as we got thrown out of high school. I'm dyslexic and have some number of these other learning differences. To sit there and be the first authors to launch a book at Nas deck on Facebook live in front of almost half a million people in the NASDEC recording studios and Time Square. You know that that was an amazing experience. And the other one today. That's probably maybe a little less dramatic than that, but it's rare for me today, John, to go a day without somebody sending me an email or a tweet or a linkedin or something saying that one of my books or one of my podcasts made a difference for them in their life. And that maybe isn't quite the big thrill of hitting the Naz deck button or becoming a number one best seller, but when you get to the stage of life that I'm at, you know, all I really want to do today, John, is have a very good time and make a very big difference, and so it's insanely rewarding knowing that other people say I'm...

...making a difference for them and their careers and in their business, and the fact that, you know, somebody lets me know that on a pretty regular basis. That's probably the greatest reward that I could I could imagine for having a thirty year career like I've had absolutely, I can. I can imagine that and hopefully after we share this episode you'll get a few more of those emails and phone calls kind of thanking you for your expertise. And you know you've talked about category design. Your books are on that kind of thought process. So maybe to kind of dive into that topic a little bit further. Just kind of start us off by telling us what category design is and why should marketers and entrepreneurs care about it? Yeah, so it's you know, my writing partner Kevin Maney says that category design is a new Lens on business and once you have the Lens you have really, I think, an unfair competitive advantage. I don't know if you if you saw the movie taken with Liam Neeson. No, I haven't. It's a great movie about a guy who's a former I don't know if he's CIA, but he's, you know, he's a former badass black ops kind of a guy and and these these bad guys kidnap his daughter. There's a scene in the movie where he's on the phone with the bad guys and he says then they say they want a lot of money to get his daughter back and he says, look, I don't have a lot of money, but what I do have is a very special set of skills, skills honed over a long career that make me a really big problem for people like you. And so I think category design is a very special set of skills that, for marketers and entrepreneurs, give them an unfair competitive advantage. And here's why. Most people believe in it unchallenged way, that the best product wins. Most people believe that if we can expose the world to our product or our service, that we're going to win. And most people sort of treat the market like they treat the weather.

Right, so you wake up in the morning and I say, well, what's the weather going to be in northern California today? It's going to be sunny, it's going to be this, it's going to be that. And they treat the market like it is the way that it is. And the first big Aha is that categories markets behave the way they do because somebody designed them that way, either on accident or intentionally. And I'll give you simple example. If you take a big step back and start thinking about well, why is it that this is the way that it is in our space, a simple example that I can relate to is in the United States of America, a high end pair of sunglasses is about three to four hundred dollars and a pretty good medium sized flat screen TV at Costco is a hundred and fifty to two hundred and fifty dollars. Now, if you are an alien and somebody said you hey, John, there's this one category of products that is a piece of plastic that you put on your eyes to make you less sensitive to the sun, and then there's this other category of products that is a technological marvel that talks to satellites in space and delivers, you know, a hundred thousand channels, or turingly feels that way, of News and information and entertainment. which category of product is four hundred bucks and which category of Product is two hundred and fifty bucks? Most people would say, well, it must be the technological marvel that talks to satellites in space, when of course it's not sure. And so category design is really about why our categories the way they are? Who set it up and, most importantly, what problem and therefore what solution matters. And the big hoges like this. The company that designs the category is best position to dominate it and in play bigger.

We did a big data science research project. Oy analyzed every venture back technology start up bounded in the United States from two thousand to two thousand and fifteen, and we asked the data set what percentage of total value created in any given category goes to the market leader, or what you could think of is the category Queen of the Category King? And it turns out the answer to that question, and we wrote an article for the hbr about this, is seventy six percent. So two thirds of the economics in any given market category goes to the category Queen. And so what's my point? The A high is most of US embark on a battle of competition. Legends don't do that. Legends proactively position themselves as different and unique and design a new way of thinking about a problem and therefore a solution that meaningfully advantages them and is a meaningful disadvantage to anybody that comes after them. And so the big Aha is the most legendary marketers, the most legendary CEOS, the most legendary company founders and, frankly, the people in the world that make the biggest difference. We can talk about how this plays outside of business, if you want, are the ones that do three things. One, they design a legendary product, to they design a legendary company and three, and this is the part that most people don't get, they design a legendary category and when they do that, they proactively position themselves to be the company that takes two thirds of the economics. So what play bigger is about, what niche down is about, is this discipline of category design trying to unpack what are the things that the most legendary leaders in business history have done, intuitively, to teach the world how to think differently, and when the world agrees with the way you think, Byam they literally line up in front of your building to get whatever it is that you're selling. And fundamentally that's what category designs about. So he talked about those three kind of pillars coming together roughly the same time.

A great company, a great product and a great category. And I think those first two there's a lot of literature around at a design great products. There's a time around company culture and how to design a great team, but it seems like the topic of category design, it's not really been talked about in depth as much as there's other kind of two pillars that you mentioned. Why do you think that's the case, Chris? Because I think that we live in a world where we get taught that the most legendary entrepreneurs, the most legendary companies are innovators. Right. Christensen wrote the INNOVATOR's dilemma, and what most people here when they hear that is product innovation. Right. So you ask most people why did apple beat blackberry, most people are going to say, well, you know, the iphone is just a way better product, and so that's where everybody focuses. And what I would say to you is the statement the IPHONE is a better product is a an interpretation. Be Not true, because it's an interpretation, you know, to quote the Big Lebowski that's just like your opinion man. Right. So an objective measurement it's not. And so what category design asks is, how do you teach the world to see things the way you do? So if you were fewer research in motion, and you were, I guess, if you could go back in time and kind of lead that company, what would you have done differently than to kind of position the blackberry as that category King, and sorry, the category King and to kind of position any apples or other efforts as kind of a secondary player within that space. Yeah, so the category King or Queen Stays in their position as long as the world agrees with the definition of the problem in the solution. And so blackberries problem was they did not continue...

...to evangelize the ray zone detra for the blackberry or said in a different way when the definition, when the design of the smartphone category was it's a mobile, untethered device whose primary use case is email and phone. Then the blackberry one, when the design of the category gets changed, that is to say the RFP for what most people agree a smartphone is, moves from the blackberry definition to a definition called, oh, it's a magical star trek like device that has all these APPs. If you remember, in the beginning what made the iphone go, they had this mantra that they use. They said, oh, there's an APP for that right. And so when it became about APPS, not about email, they were done. And so they lost not just a product battle, but the truth is, the main thing. Last was a battle for what the definition of a smartphone was, and when enough people agreed with apple, it was over. And, in point of fact, as far as I'm concerned, for email, the blackberry was and still is the better device. And I'm a I'm a big guy, I have big hands and using a tactile keyboard that I can feel with my thumbs is a much more effective way to do email than using a non tactile device where I would say probably one in four times when I hit a letter with my thumb it's the wrong letter and that I was so in other words, from if the use case is email, blackberry crushes the iphone. But jobs and apple got the world to interpret what a smartphone should be as something meaningfully, and I'm going to use this word on purpose, John Different than what the definition was before, and when enough people agreed with there what I would call category design of what a smartphone is, Bam it was over, and at...

...that point there was nothing blackberry could have done m so if someone was listening to you kind of lay at those two examples and they were little skeptical, they might say something like well, those are consumer products and there's so much advertising and marketing and they're deserving such mass markets that it's it doesn't really apply. People don't buy phones based on speeds and fees. They buy for emotional reasons. It's kind of a aspirational purchase, you know, for an Iphone, especially when they're, you know, nearing a thousand dollars. But again it's skeptical. Person might say. Well, but in the BB space people are more rational, they're doing product research, they have, you know, committees who are buying these these products and services and there are taking a more thorough, objective, kind of measured look at what the capabilities of each product is. Now I know how you're going to tell me that's not true, but I want to hear why that's the case and why that skepticism is kind of unfounded. Well, the first thing I'd say is if you think that be to be products are purchased based on any kind of analytics, any kind of objective RFP process, your eft. You're finished, because it turns out there's no difference between the way human beings by consumer products and be tob products. And you can set up the biggest evaluation committee you want. Those evaluation committees are put in place to justify the emotional decision that is already been made. And if you don't think that's true, you're not going to have a very long or successful career in B Tob Marketing. That's just the reality of it, and I know that might sound harsh, but I've been doing this for thirty years. And here's the Aha. In every RFP situation, who would you rather be? The company responding to the RFP or the company that helped the company? The excuse me, that the vendor who helped the customer write the RFP, because there's no such thing as an RFP that isn't meaningfully...

...influenced by the agenda of a vendor of one sort or another, and that's because people already decide what they want to buy and then they use the RFP pro ascess to justify it. And sure, are there times where there's a frontrunner and the folks on the buying side think they're going to buy from company A and they end up buying from company B. Sure, but that probably happens less than ten percent of the time. They already know when the cycle begins. That's the first piece. The second piece is what category design is really about. It's about writing the RFP for the space. You're telling everybody if you want to buy, you know this type of product or service, this is what you should be looking for. So, for example, Mark Benny off is arguably the greatest category designer the last twenty years in the B tob space. When he started he was exactly the opposite of where the entire technology space was at the time. He said, don't buy it, rent it and don't run it in your data center, run it in our data center and just put your data about your customers and your and your sales people in your forecast on our servers and will take care of that for you. That was a hundred eighty degrees away from where the category was. That man singlehandedly made the cloud happen because he taught the world how to think about computing in a completely new way and he designed a new category. He changed, he moved the world from the way it was to the way he wanted it to be, and that's what legendary category designers do and that's what legendary people do on a sale by sale basis and if you're really smart, you move the entire market category from where it is to the way you want it to be. And that's what was required. And you can compete on speeds and feeds all you want, but if somebody else has tilted the design tilted, the agenda has a a and I mean you say these words on purpose,...

...different point of view about what your what the carboningulator space should be. You will be blackberry, not apple, and that's just the truth and the data supports it. Two thirds of the economics go to one company. That's been validated by the Harvard Business Review. And Look, you can deny that all you want and I wish you a lot of luck, but you're probably going to burn a lot of money and you're probably going to cause yourself a lot of hard a living inside that paradigm. And if that's what you want to go do, then you know you can go bang your head into that wall and legendary entrepreneurs will be busy designing what we call the Magic Triangle, getting product company in category. Right. So you talked about this idea of designing a category and the economics of that and all the reasons why that's worth pursuing. So what is that process look like? You've been to this a few times yourself, having you over fifty. Yeah, yeah, so what is that kind of like? I we don't need to go through like a step by step. You Know A to Z, but like, what are some of the big pieces that have to happen for category designed to actually be something that you're doing successfully? So the first question to ask yourself is what makes me, either as an individual in your career, or me as a company, or us, if as a company, depending on how you want to think about it. So what makes us different? And specifically, how do I think about a problem and therefore a solution in a different way? And so, for example, there's this company called go Joe Industries and they are the creators of a new category of soap that emerged about fifty years ago. Before that, there was just what today we call bar soap, and they thought that was gross because it's nasty and I could be full of hair and full of dirt, and so they reimagine the problem called how do I clean my hands without having to deal with a Yucky, gross bar of soap,...

...and go Joe Industries therefore created liquid soap, a new category of soap, and then repositioned, as a result of that, traditional soap as hands soap or bar soap. Fast forward to the mid S, many decades after they had done that. By staying focused on the problem that is to say, how do I want to think about cleaning my hands? They tilted the agenda one more time. They said, HMM, the problem with liquid soap is I need water. So how do I wash my hands? How do I get my hands clean with in the absence of water? and Go Joe Industries created a product that we now all know called Purel and a new category called hand sanitizer. And that was in the mid to late S. and it prior to the mid to late S. nobody was walking around going hey, John, I got this big problem called hand sanitization. Nobody thought about that. Nobody zero. There was no there was no box on the wall of every hospital in the world was squeezy stuff coming out of it to rub on your hands. There were there were no mom's walking around with strollers with a tub of this stuff that they bathe their baby and any time today right. And so my point is this. Go Joe Industries, by continuously focusing on the problem called how do I clean my hands and how do I clean my hands in what you and I today would call multiple use case situations, have continuously done category design around their product innovation. And now there's not a parent in the world that wouldn't have this stuff on them to clean their baby right and so that's really the point. The point is legendary companies stay focused on the problem, stay focused on how they want to address problems in different ways, and when the world sees the problem the way they to, then the...

...world wants the solution. And the Big Marketing Aha is they don't market their product. Legends market the problem because they understand the bigger, the more urgent, the more strategic the problem, more time, money and energy people will apply to solving that problem. And if you are the company setting that agenda with what you could think of as a point of view, then you're going to be the company that is the category designer. And if you can pull off all three components, product, company in category at the same time, Bam. That's how you get to be Cisco. That's how you get to be what's APP B tob growth is brought to you by the team at sweet fish media. Here at sweet fish we produce podcasts for some of the most innovative brands in the world and we help them turn those podcasts into Microvideos, linkedin content, blog posts and more. We're on a mission to produce every leader's favorite show. Want more information, visit Sweet Fish Mediacom.

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