Defining Category Design and Why it’s Important to Brand Positioning with Christopher Lochhead

Agencies are brilliant at helping their clients differentiate themselves from the pack.  And yet, this is the Achilles Heel for most agencies.  You look and sound just like everyone else on the block, in the pitch or online.

It’s not easy to find the kernel of what makes you unique and the right fit for your clients.  And you can’t use the same trite language (full service, integrated, we love to partner with our clients, etc.) and sound different. Maybe it’s not about how do you differentiate yourself from everyone else in the pack.  Maybe it’s about creating a new category so you truly stand alone?

That’s the premise of my podcast guest Christopher Lochhead. He’s a longtime CMO, entrepreneur and author who has had just enough of the right mindset, courage and faith to unlock the key to differentiation. His book, “Play Bigger: How Pirates, Dreamers and Innovators Create and Dominate Markets” details the method to his madness — what he calls “category design.” He explains it as “creating your own niche to become nouveau riche.”

If you want to drive growth on both the agency and client side, follow along as Christopher and I go through the steps of adopting category design with:

• Chris’ career journey that took him from Silicon Valley CMO to coach to podcast host
• Chris’ book: “Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets”
• What category design is and why every agency needs to get great at it
• Why “category” is as important as “product” and “company”
• How to position your agency in a category that you can dominate
• The two kinds of problems that need solving
• The three questions to ask to start creating your category to dominate
• The three ways service-based businesses make money
• Why your client base may change after you define your category (and why that’s perfectly okay)
• Why your agency can still do work that doesn’t fit exactly in your category if needed (the kids gotta eat!) as long as the perception of your agency stays within your category
• Why legendary category designers always expand what they do
• Why becoming a category king is going to take a leap of faith
• And tons of examples of category kings that have done what it takes to stand out amongst the competition

Christopher Lochhead is co-author of Harper Collins’ instant classic “Play Bigger” and host of the Legends and Losers podcast.

Christopher is a retired three-time, Silicon Valley, public company CMO, entrepreneur and category designer. Fast Company Magazine calls him a “Human Exclamation Point” and The Economist calls him “off-putting to some”.

He can recite much of The Big Lebowski but can’t remember his wife’s phone number. He’s a proud advisor to nonprofit 1 Life Fully Lived, an ass-kicking public speaker, and surf / ski bum living happily ever after in Santa Cruz, California with a wonderful tribe and 7 beautiful hens.

To listen – you can visit the Build A Better Agency site (https://agencymanagementinstitute.com/christopher-lochhead/) and grab either the iTunes or Stitcher files or just listen to it from the web.

If you’d rather just read the conversation, the transcript is below:

Table of Contents (Jump Straight to It!)

1. More on Chris’s Background
2. Explaining the Concept of Category Design
3. What “Brand” Means to Agencies
4. How Agencies Should Think About Category Design
5. What’s More Important: Skill, Scale or Time?
6. How to Introduce Category Design to Your Team
7. How Category Design Relates to Brand Positioning
8. Why You Need to Keep Innovating and Evolving Even After Designing a Category
9. How to Know if You’re Heading Down the Right Path
10. How Business Owners Can Design Their Own Categories

If you’re going to take the risk of running an agency, shouldn’t you get the benefits too? Welcome to Agency Management Institute’s Build A Better Agency Podcast presented by Hubspot. We’ll show you how to build an agency that can scale and grow with better clients, invested employees and best of all, more money to the bottom line. Bringing us 25+ years of experience as both an agency owner and agency consultant to you. Please welcome your host, Drew McLellan.

Drew McLellan: Hey, everybody. Drew McLellan here with another episode of Build A Better Agency. Today, we’re going to talk a little bit about the future, we’re going to talk about differentiating yourself, helping your clients differentiate themselves and I suspect a wide array of other topics. Let me tell you a little bit about today’s guest. Christopher Lochhead is co-author of what was called the instant classic by Harper-Collins, the book is called Play Bigger. He also hosts a great podcast called Legends and Losers. He is a retired three-time Silicon Valley public company CMO.  He is an entrepreneur and he is a category designer which we’re going to dig into.

Here’s the dichotomy of Chris. Fast Company Magazine calls him a human exclamation point and The Economist calls him off-putting to some, we’ll see where he falls today. He can recite much of The Big Lebowski but he can’t remember his wife’s cell number. I think we all suffer a little bit from that, thanks to our smart technology. He’s also the proud adviser to the non-profit One Life Fully Lived. He calls himself and others call him an ass-kicking public speaker. He’s also a surf and ski bum, living happily ever after in Santa Cruz, California with a wonderful tribe and some hens. We’ll see if we’ll get into that so Chris is all about designing a legendary business and a legendary life. You know that that sounds good to me.

Chris, welcome to the podcast.

Christopher L: Drew, couldn’t be more stoked to be here with you and your listeners. Thanks for having me.

More on Chris’s Background

Drew McLellan: Let’s talk a little bit about how you evolved out of your Silicon Valley CMO life to where you’re at today. Take us quickly through that evolution.

Christopher L: Quickly, I got thrown out of school at 18 for being stupid. I had faced the decision that a lot of young people face which is do I do a manual labor job because I had no experience, no education, no relationships, no money, no nothing or do I start a company. Those were really the only options that I could see. The job of being the lead singer of The Ramones was taken so …

Drew McLellan: Not an option for you.

Christopher L: Not an option. With some encouragement from my dear friend, Jack, he and I started a company. At 21, I found out I was dyslexic so that made my education make sense and overtime, I just started a handful of small businesses in Canada where I grew up and one of the companies ended up getting acquired. At about 27, 28 years old, I found myself in Silicon Valley after being acquired by a software company and I was the head of marketing for a publicly traded NASDAQ listed company.

After that, I did that two more times. Then at age 38, after 20 years in business, I hung up my player’s jersey, if you will, left Silicon Valley, moved up to Tahoe to become a ski bum and while I was doing that, I also did some coaching work. Ultimately, that work led to the formation of a company called Play Bigger with two great friends of mine.

For the last decade or so, Drew, I’ve been a semi-retired, if you will, coach. Coaching chief executives and executive teams in marketing and category design. Then last year, shortly after our book Play Bigger came out, I decided that that was it for me so I hung up my coach’s jersey after 10 years of coaching. Essentially, 20 years as an entrepreneur and CMO, 10 years as a coach and now I’m a very happy podcast host and a guy trying to have a very good time and make a very big difference at the same time.

Drew McLellan: I feel like the shortened version of the book title is a discredit. For a full disclosure, the real book title is “Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets”. That’s really speaks to more of the spirit of the way you coach and talk and teach, don’t you think?

Christopher L: Yeah, absolutely. If you look at it throughout history, and we did, we studied the great innovators overtime. What the book is really about, Drew, is a culmination of … There are four authors, myself and three other very smart guys, and it’s a synthesis of everything we’ve learned and the result of studying the great innovators overtime including doing over half a million dollars worth of big data science research to figure out what happens as new categories get created and we can get into that if you want to.

The spirit of the book is how does a pirate, a dreamer or an innovator go from having an aha about a new company, a new product, a new problem they want to solve, how does she make that into a giant company that matters or what we call a category king. We try to unpack what the legends, like Steve Jobs and Sara Blakely and Henry Ford and Clarence Birdseye, the creator of frozen food and many others, did intuitively in the market that was meaningfully different than what, most of us mere mortals, do and unpack that. In the book, we unveil, if you will, this new management discipline we call category design.

Explaining the Concept of Category Design

Drew McLellan: Yeah. What I loved about the book was it was both instructional and inspiring so it fires you up to be different, bigger, bolder but also gives you some real easy to digest direction on how to approach that. Let’s talk a little bit about this idea of category design because that’s the core of the book.

Help the listeners understand what that is and in particular, how that relates to their world which is agency life?

Christopher L: Yeah, it relates directly on multiple …

Drew McLellan: Absolutely.

Christopher L: Yeah, on multiples levels both in terms of how to differentiate your agency so that you can become a category king in your space and I believe that over the next decade, you’re not going to be able to be any kind of a marketing agency, whether you’re a branding agency, a PR agency, social media or whatever, direct marketing or whatever angle you’re helping clients with.  You’re not going to be able to do that without a category design practice.

Drew McLellan: Tell the listeners what you mean by a category design practice?

Christopher L: Sure. At a high level, Drew, the way we think about it is if you talk to most entrepreneurs and innovators and you ask them, “What are the big things you’re doing to be successful?” The essentially say there’s two big levers that they pull: one is a product and the other is company. That is to say most entrepreneurs think they’ve built the world’s greatest new carbodingulator and they want to build a company to deliver that carbodingulator to the world and they fundamentally believe that if they expose the world to the carbodingulator, it’ll all work out and it’ll become …

Drew McLellan: Yeah, who wouldn’t want one?

Christopher L: Exactly. It turns out, when you study the legends, they pull a third lever and that lever is called category. In the book Play Bigger, we describe it as prosecuting the magic triangle: product, company and category. If you’re an agency, of course, service, company and category. The big aha around that is the legends don’t do marketing in the way most of us think about marketing. Most entrepreneurs and innovators make an unconscious choice to position themselves in an existing category and to have, essentially, a feature war or a product or service war with our competitors and fight for share.

We took a step back and said, “Who created these categories? Why do they work the way they do? Who set the rules of the game up this way?” In particular, we looked at how the legendary pirates, dreamers and innovators created their own rule set or, if you will, teach the world how to think about a problem and therefore, a solution in a completely different way and as a result, position themselves as a leader in a new category that they could dominate. That’s really, at the core, what category design is about or a friend of mine who runs a marketing agency called Fathom, Scot Lowry, he says category design is really about how to create your own niche to become nouveau riche.

Drew McLellan: I like that. Always like it when it rhymes. Your ideas made me think about a book I read many years ago by a guy named Joe Calloway called Becoming a Category of One. Again, the same idea of not jumping into a crowded category but creating your own and owning it and defining for everyone else what the rules are.

Christopher L: Yeah. It’s interesting, I had not heard of that book until now. I’ll have to check it out.

What “Brand” Means to Agencies

Drew McLellan: Yeah, it’s a branding book so it’s much more narrow and focused and it certainly isn’t data driven like your book is but they’re great companions for one another. From an agency’s point of view, what does that mean?

Because, as you know, I hang out with agency owners all day, every day and they’re super smart people, they hire super smart people but they struggle to differentiate themselves from either the other agency down the street or the other healthcare agency or the other fill in the blank agency. In practical terms, how have you seen this play out in the agency space?

Christopher L: Yeah, it’s a great question. If you hang your shingle out, a lot of agencies will spend a lot of time thinking about their brand, what to name the agency and then all of a visual components of the brand, et cetera, et cetera, all of the powerful things about branding. Of course, that’s incredibly important and many agencies, of course, offer branding services as welL What I would pose it to you is the category makes the brand, not the other way around. I’ll share with you a simple example.

When Pablo Picasso starts his career, he does a lot of beautiful paintings and his career doesn’t take off until he starts painting these squares in unusual ways and he takes the boob and sticks it where the ears should be and takes the nose and sticks it in all these other places. Now, when people first start to look at that work, they say, “Well, that looks like the work of a crazy 8-year-old.” He says, “No, that’s where you’re wrong. That’s the work of a genius.”

You can’t evaluate my work the same way you evaluate, for sake of example, an impressionist painter’s work because this is a new category of art called cubism. For Pablo Picasso to become the most famous painter in the world as he is today, what I would pose to you, Drew, is his greatest design was not any one painting but was a new way of thinking about art, a new distinction, a new category in art called cubism.

As a result, he teaches the world to think about art in a completely new way and most importantly, he teaches the world how to evaluate what is good cubism and not. As a result, he comes the first cubist artist and none of us, unless you’re a real art aficionado, can name the second or third greatest cubist artist in the world. I sure as hell can’t. That’s what Bob Marley did with reggae, that’s what The Ramones did with punk rock.

It turns out that’s what Sarah Blakely did with Spanx, that’s what Clarence Birdseye did with frozen food. If you’re an agency owner, if you just call yourself a marketing agency, you’re blowing an opportunity to position yourself in a completely new and distinctive way and teach people how to think about your agency, particularly in the context of a problem and a solution, the way you want them to. The first question I’d ask is if you want to position yourself in a category that you can dominate in, what’s the problem that you solve and why does that problem matter?

Drew McLellan: Okay. Do you believe that every agency solves a different problem or for most of them, would the problem be the same i.e. all of our clients, at the simplest form, want to sell more stuff, whatever their stuff is?

Christopher L: Yeah, I think we have to think about the specific: who is our prospect, who is our client and what problem are they experiencing. There’s really two kinds of problems, there’s a known problem that gets re-imagined. If you think about the founders of Uber, we all understand the problem called, if you will, personal transportation. They re-imagined the problem in the context of what we have today which is the Cloud and mobile computing and the devices that we have and asked a simple question which is how come I can’t press a button on my iPhone and have a car magically come get me.

By rethinking the problem, they, therefore, re-imagined the solution and once the world sees the problem the way they want them to, ba-bang, the world has to have the solution. Sarah Blakely did the same thing with Spanx. She didn’t call it a girdle 2.0, she didn’t call it underwear, she called it shapewear. In so doing, she differentiated themselves, the core of the word differentiation, of course, is different and most people get different and better confused. She said, “No, no, no, we’re different than a girdle. We’re shapewear.” The rest is history. The big aha particularly for those of us in the marketing world is that categories make brands, not the other way around.

Drew McLellan: Do you think it’s easier to define or design a category if you sell a thing, a tangible thing, rather than a service or vice versa?

Christopher L: No, I think it really doesn’t matter. One of the greatest category designs in the history of the services business was a company about 25 years ago called Cambridge Technology Partners, CTP. It’s in the consulting business for bigger systems work, computer consulting, systems design, software implementations, those things. The number one problem at the time in that industry was the paradigm, the business model was time and materials. The complaint the customer had was, “Well, if you’re charging me time and materials, I don’t know how much this thing could cost, it could cost $2 million, it could cost $250 million, I don’t know.” They were the company, at least, in the tech space who said, “No, we’re going to do fixed time, fixed fee.”

By alleviating the big problem, they became one of the fastest growing services companies in history and as a result, they introduced a whole new paradigm. Now, I don’t know what the percentage is, Drew, you probably know better than I but a huge percentage of the services businesses today are not time and materials, they’re fixed time and fixed fee. CTP was a pioneer in that new category and a result, they experience a tremendous amount of growth. In the case of Uber, they had, what you might call, a market insight and in the case of CTP, they had that same market insight around a problem they saw with the current paradigm. Another kind of insight would be when you identify a problem that nobody knows is a problem.

One of the examples we use in the book Play Bigger, and one of my favorites is, this guy Clarence Birdseye who is the category designer of frozen food. What many of us don’t realize is every product or service that we love exists because some legendary pirate, dreamer or innovator got product, company and category right at the right time. Before Clarence, there were two categories of food. There was food and there was canned food. I could tell you the story if it matters but he saw how to make frozen food work. As a result, he brought a new whole new category of food and in the beginning, to make that work, he evangelizes the problem. For example, if you Google Birdseye Foods and if you look at some of their old ads from the ’30s, ’40s and ’50s, what you’ll see are things talking about why can’t we have fresh vegetables in February. Well, now you can. He’s teeing up the problem to facilitate the solution if you get what I’m talking about.

How Agencies Should Think About Category Design

Drew McLellan: If you think about agency life, you think about the kinds of work that agencies do, I am sure that a lot of people are listening and saying, “Okay, I get it but how do I do it? How do I figure out what categories are possible and how do I design the category that we can be the Picasso of?”

Is there a thought process that you recommend or walk someone through to begin to think about this in a different way? Because it is really about titling your head and looking at things from a new angle, right?

Christopher L: Yeah and I think the first two things to realize are number one, the category makes the brand. For example, in 1999, Dell had an amazing brand. Michael Dell was on the cover of virtually every business magazine you could imagine as a celebrated entrepreneur and the company sold laptops, desktops, servers and storage. Well today, the company’s in trouble, had to do this horrible reverse financial engineering, merged with a bunch of other companies and really nobody gives a shit about Dell Computer anymore. You say …

Drew McLellan: Like what happened?

Christopher L: They have a great brand and they do, what changed are their categories and so the Cloud, social and mobile inflicted, if you will, category violence on laptops, storage, servers. The categories that Dell plays in are much less relevant and there are new categories that are much more relevant and so the value of their brand is a function of the perceived importance of the category. It’s a 180 for a lot of marketers. Listen, I’m a three-time public company CMO.  I think I get to talk about the marketing headset but the company that sets the table is the one that really wins. It sets the rules in the space so how do you do that? There are three questions to ask and then, there’s three ways a services company can differentiate.

The three questions to ask, Drew, are: number one, what category do I solve and can I explain that like I’m a three-year-old or a five-year old? Number two, if I solve that problem perfectly, what would it be called and not in BS business babble, carbodingulator speak but in like something that a normal person would understand and then, the third one is if I solve that problem perfectly and I get 76% of the value of the category which is what accrues to the leader, we can talk about how we got to that number if you like, but some primary research we did for the book, what is my company worth? Those are the three questions to start with before I shift then to how to differentiate, for services companies, any thoughts, comments, questions about that, Drew?

Drew McLellan: Yup, I just want to make sure. You said the first question, you used the word category but I think you meant problem, what is the problem that I am solving or needs to be solved, right?

Christopher L: Yes.

Drew McLellan: Okay, I just want to make sure. I’m tracking you but I want to make sure everybody’s with us. Now, I’m tracking so far so keep going.

Christopher L: Then, the second thing to realize as a services business, there’s only three ways services companies make money. That is they fill what you could call a skill gap, a scale gap or a time gap. What do I mean by that? If you think about the ultimate that skill play that all of us would know in the services business, that’s McKinsey. Marvin Bower, who, for all practical purposes, is the founder of what we could consider McKinsey today is the category designer of management consulting. At the time, he saw a hole in the market.

There were accountants and there were lawyers and business owners would go to them for those services but invariably would ask for business advice as well. He said, “Well, what if we created a purpose built firm that was focused on business advice?” He called that management consulting. Now, a new category of services firm came to light. That’s a classic skill play and a skill play makes money when the world believes that company has more knowledge in a particular area than anyone else. The bigger the perceived skill gap and the more important filling that skill gap is, the higher growth rate and the higher the margins and billing rates, et cetera of a skill play in the services business.

Drew McLellan: Which they seemed to have done quite well by.

Christopher L: Absolutely, legendary. Hall of fame, I’m bowing.

Drew McLellan: Right.

Christopher L: Incredible. Another more recent example of that is Idealab. They created a whole, just like McKinsey did, a whole new category of services firm around, what they call, design thinking. They focused on innovative product design. They became the thought leaders in this new paradigm called design thinking in the product world and they created perception that they had a skill set around product design and design thinking that was way bigger than anyone else. What they said to the world was, “If you’re trying to build really innovative breakthrough products, then you need the experts in design thinking and if you believe that, then you hire Idealab.”

Now, there’s countless Idealab knockoffs who are trying to do similar things but the Idealab founders are the creators of the product design design thinking services business and they used exactly the same play that McKinsey did. The next one is a scale play and at the far end of that spectrum would be UPS or FedEx, if you will, which is I do something so often, so regularly that there is no way that you could do it the way I do it.

It is much more cost effective to have them deliver a package for us than it is for me to do it. An example of a small scale play that I work with every day is my friend Matt Johnson and his partner at Pursuing Results. Pursuing Results is a company that produces podcasts for other people so they are the producers of Legends and Losers. Well, me and my partner at Legends and Losers, we know how to … We think we know anyway, who knows what the world will tell us over time, that we know how to create a great podcast. We don’t know how to plug it into iTunes and Libsyn and SoundCloud and all that stuff.

Drew McLellan: You are preaching to the choir there, my friend.

Christopher L: All that shit, I don’t know any of that. We shoot an episode of Legends and Losers, we use a technology called Zoom to do that, we drop it in the Dropbox file and then magically Pursuing Results turns it into a well-produced podcast. Well, they do that over and over and over again and I don’t want to have to learn how to do that, Colin doesn’t want to learn how to do that and so, they are a scale play around a very tight niche because they do it over and over again and therefore, it’s much more effective for them to do it than for me to do it. Then the third one is you’re either a scale play or a skill play and your client thinks they have that skill or the scale but their resources are otherwise deployed and they have to get that problem solved immediately and so they hire you.

If you’re marketing services company and for example, maybe you put on events as one of the services that you provide for people and you get a call from a client who, maybe, has some event production capability inside. Maybe they want to pull this thing off really fast or maybe they’re doing it at a time frame when their event people are focused on something else. They have the resources to do it on their own, they do some of the stuff on their own but for whatever reason, they need help to do this particular event or campaign or whatever the case maybe and so they’d go outside. My point is you can differentiate and therefore, become the category king as a small services business by figuring out how do we differentiate skill, scale or time. Then, differentiate really hard on that with this thing called the point of view which we can talk about. Does that make sense?

What’s More Important: Skill, Scale or Time?

Drew McLellan: It does.

If you’ve been listening to the podcast for a while, odds are you’ve heard me mention the AMI peer networks or the Agency Owner Network. What that is really is it’s like a Vistage group or an EO group only everybody around the table owns an agency in a non-competitive market. It’s a membership model. They come together twice a year for two days: two days in the spring and two days in the fall and they work together to share best practices, they show each other their full financials so there’s a lot of accountability, we bring speakers in and we spend a lot of time problem solving around the issues that agency owners are facing. If you’d like to learn more about it, go to Agencymanagementinstitute.com/networks.

In your research, did you find that one of the three of those was more compelling, the skill, scale or time or are they all equally valuable to the marketplace?

Christopher L: The research that we did on this was much more quantitative than qualitative so I don’t have data per se to give you the right answer. What I would tell you, having been in and out of the services business for the better part of 30 years, my personal experience is that most smaller services plays tend to be more on the skills side. However, it is interesting to build a very differentiated scale business. Another example, I’ll give a bit of a plug, is a firm that I am a client of which was started by my friend, Tom Schwab. When we started Legends and Losers, Drew, we did some research and said, “Okay, well, how do you promote a podcast?”

One of the best ways to promote a podcast is to go on another podcast. We found a company who was the category king, that is to say the company designing a whole new service around podcast interviews, and their real differentiation … The company is called Interview Valet and their real differentiation isn’t just that they book you on podcasts but they also help you, you might think of it as monetize your participation in a podcast, pre-impose marketing of being on a podcast. It’s a very micro niche, they call it podcast interview marketing.

They have a process for doing it, it’s highly automated and I hardly ever have to interact with the founders of the company. Their system just works and tells me I’m booked on a show and then, I’d go on the show and et cetera, et cetera, they’re very process oriented and yet, they’re a small business who has scale and some skill, of course, but they’re able to book you on way more podcasts that you could on your own or that a PR firm would because they’re not specialized in it.

I think both can work and there’s a little bit of skill and scale in every small to medium-sized services company but when you take a big step back, Drew, you find that one is more than the other. In both examples, Pursuing Results and Interview Valet, two companies I’m a client of, they have a skill set for sure but really, they focused on how do I do that on a repeatable basis so that it’s super cost effective for them to make money doing it and it’s easy for me as a prospect or a client to buy those. It’s a really interesting way to think about things when you’re a small services company in the marketing world.

Drew McLellan: It’s a challenge. That whole skill and scale issue is a challenge for agencies especially if you’ve been in the business for a long time, you pride yourself. In fact, I hear a lot of agency owners say, “Well, we don’t cookie cutter our solutions for clients. Everything is custom or we start fresh.” That makes scale a little more of a challenge.

Christopher L: If you’re differentiating on skill, then you just want to have super highly trained, super ninja sensei people who can do that. On the flip side, my buddy Matt Johnson at Pursuing Results, I’m friends with the guy who owns the gym that I train at. He’s a wonderful guy and he wanted to do some more social media marketing steps using video and audio and so I connected him with Matt at Pursuing Results, and Matt very quickly said no and I was surprised. He said, “Well, he doesn’t actually want to do a podcast, Chris. He wants to do this other stuff. And theoretically we could help him because we have that expertise but, if you don’t fit into this box, that is to say fit into the system, the process that we built to pump out high-quality podcasts, then we’re not going to do one-offs.” He was very, very disciplined.

That’s more like what a company that’s trying to scale as a service does. A skill business, you walk in and you’re a legendary brand architect and they say, “Okay. Well, so we want to design a legendary brand and we want to think in constrained ways and we want to do this and we want to do that.” You’re sort of hiring, if you will, a mad genius who can think about things in different ways. That is more inherently a skill business that’s deeply difficult to scale, if you will.

How to Introduce Category Design to Your Team

Drew McLellan: I buy all of this. How do I actually … In my head, I’m an agency owner. How do I begin to think about this? How do I identify the problem that I can solve? What’s the process of walking myself or my team through this to answer the questions that you have posed?

Christopher L: I mean, there’s a bunch of ways to go about it but here’s the way I would suggest you think about starting. If you think about the current paradigm in your area of service today, your category today, how does the category work? What’s the pricing like, what’s the value proposition, who are the prospects and customers, et cetera, et cetera. What’s the construct of the ecosystem? How does the whole space work?

You say, to quote The Big Lebowski, “This aggression will not stand, man.”  That you want things to be different than the current paradigm in your category. If you were to write down all of the ways in which it exists today and sort of recast those ways as the froms. That is to say, five years from now, you want the current paradigm in your category to be the past and you have a vision for the way you want it to be. Let’s call those the tos.

If you think about it at a simple high level, when the founders of Netflix started, you could write down all of the ways in which you had to do business with Blockbuster at the time. Drive to the video store, try to find a movie, they don’t have the movie, then you’ve got to talk to a kid behind the counter who doesn’t really know, then they got to look it up on the computer and you gotta wait till … et cetera, et cetera, et cetera. You write down all of the things that it was like, you had to do doing business with Blockbuster and then, knowing what we today know about Netflix, you could correlate their vision back at the time, which is almost 15 years ago now, as to how they wanted the future to be different.

That grounding yourself in what you could call the from-tos, the way it is and the way you want it to be, sets you up to begin to think about the problem in new ways and therefore how you evangelize the solution in new ways. Does that make sense?

Drew McLellan: Yeah. Do you believe that, and in the research you did as you were writing the book, is every company capable of doing this? Is it possible that literally every company could be its own category and there would be … No doubt, in all the examples you’ve given, there are always somebody who’s like, “Oh, I want to ride that train,” and they’re going to jump on the train. In theory, could everyone move to becoming a category designer and in a unique category?

Christopher L: It’s possible for everyone. Everyone’s not going to do it and the reason everybody’s not going to do it is it takes courage to be legendary. Most people are living inside other people’s thinking, and so they don’t have the courage to reimagine a problem and a solution and to educate the world about that problem and solution such that they position themselves as a category king.

Most people don’t have the courage to do that. There’s a very weird mental problem, which is it seems safer to position ourselves in an existing category because, on its face, you go, “Oh, well, I can measure that category.  Clients are looking for PR services or growth hacking services or branding services or whatever it is your agency does.” And so if I say to them I’m a Floppo service and they’ve never heard of Floppo but they’re looking for branding and branding is one of the things I do why would I say Floppo and screw myself?

As human beings, we’re naturally attracted to an existing market. However, one company takes two-thirds of the economics. That’s the category king. In space after space after space. You don’t want to be the second.

Drew McLellan: Or the third.

Christopher L: Or the third, right? I’d rather be Bob Marley than the 15th reggae musician, because we don’t know who the 15th reggae musician is. I’d rather be Picasso, like we talked about. Most people don’t have the courage to do it and therefore they won’t, but those of us who are true pirates, dreamers and innovators, you can say, “Yeah, I don’t want to be compared to other people. I don’t want to be compared to what came before, and so I am going to educate the world to think about a problem and therefore a solution in a new way, and as such position myself to be the category king, prosecute the magic triangle, and take two-thirds of the economics.”

Drew McLellan: It’s part of the same logic that we probably see amongst our friends who think that it’s safer to be employed by others, rather than to be self-employed, and I think a lot of agency owners have already scoffed at that idea and said, “Nope, I’d rather be in charge of my own destiny.” It’s really almost an extension of that kind of thinking.

Christopher L: Absolutely, and if you have the courage to start your own agency, to run your own agency and particularly to compete against a lot of the big players in the world, then you probably have the courage to design your own niche and get, as my friend Scott says, nouveau riche. Why would we use all the language that came before and position ourselves and think about it as a nose-picking agency, as opposed to truly differentiate around a skillset that makes us unique around a problem that really makes a difference in the world? And do what legends like Steve Jobs did, which is explain to the world why we’re a new category, why this problem matters, and why therefore we’re uniquely qualified to solve that problem.

How Category Design Relates to Brand Positioning

Drew McLellan: In many cases, did you find that people who prove to be good examples of this, had to shift who they served or is it more about how they position themselves and how they serve?

Christopher L: It’s a little of both. You know, one of the greatest category designers I ever knew in the services business was Jon Jerde, the legendary architect, God rest his soul. He’s the founder of The Jerde Partnership, which continues to this day, and he was a guy who had the courage of his convictions and he knew he wanted to be different and he had a very different point of view on what architecture should mean in the world.

And he refused to call himself an architect. The new category he designed for himself and for his firm he called placemaking. He said, “Architects draw buildings. I’m not interested in that. I’m interested in helping to make places.” And he had a definition of what a place was, which is essentially someplace that was incredibly compelling, incredibly unique, and drew us back there for multiple reasons. He developed a black belt in that. He is the designer of the most visited place in the United States of America. You want to try and guess what that place is?

Drew McLellan: Well, okay, so this is my bias. I’m going to say Walt Disney World but I know that’s not right, but that would be my most visited place so that’s where my brain went.

Christopher L: Yeah, and that’s actually where my brain went before I met Jon and the team at The Jerde Partnership. It’s actually the great Mall of America.

Drew McLellan: I’ve been there too. They’re not the same.

Christopher L: No, they’re not. But, you know, Jon was the guy who put an amusement park in a shopping mall.

Drew McLellan: Yeah, that’s brilliant. A movie theater, right?

Christopher L: All of it, right? He was very, very early. I mean, that place is almost 30 years old. He’s also the designer of the 1984 Olympics in Los Angeles. I could tell you what he did that was innovative there but here’s what he did: by declaring he was not a nose-picking architect and that he had this different vision for what architecture should really deliver, which is attract people to a unique environment that they were super compelled to come back to for a whole series of reasons. He called them high density hives.

But he described himself and therefore his firm as a placemaker and placemakers. To get back to your question, Drew, not only was he bringing a new distinction in architecture to the world, but he was also differentiating his clients. He said, “Listen, if you want to create a piece of art, go talk to Frank Gehry,” who he loved and was very close to, “but that’s not me. That’s a very elitist thing. I am a populist. I want to design places that attract millions and make a lot of people happy and economically revitalize an area.”

One of the first projects he ever did was Horton Plaza at San Diego for then mayor Peter Ueberroth. Working with civic leaders like that who really wanted to, in this case, revitalize downtown San Diego. So he had a very clear way he wanted to differentiate himself and the story that Jerde told me, so Ueberroth, he does Horton Plaza for Ueberroth. Ueberroth loves it. Revitalizes San Diego.

Then Ueberroth becomes the chairman of the ’84 Olympic Committee in Los Angeles, invites Jerde in to present to the Olympic Committee on how he would design, sort of reimagine LA to make it work and be cost effective and so forth. He comes in with this crazy idea using flags and all this sort of out there imagery as a way to kind of bring LA together and unify the theme of the Olympics and so forth and so on.

He goes in, presents the idea, they all stand there stone-faced, and he thinks, “Ah, I’ve just blown the biggest opportunity of my career.” He walks out of the meeting room, heads to the elevator. As he’s standing there waiting for the elevator, Ueberroth comes running down the hallways and says, “Hey, Jerde, did you mean all that you said in there?” And when Jon shared the story with me, Drew, he said there was a moment where he almost thought he should say, “No, I was kidding.” But he stood with his vision and he said, “No, I meant it.” He said, “Look, those guys don’t get it. I do. You’re hired. We’ll make this work.”

My point is, by Jerde saying he was a placemaker and standing true to his point of view that unique places deliver unique experiences, his mantra over time, Drew, became the experience makes the place. He differentiated the Jerde partnership with a handful of projects around that category design that fuels the growth and success of that business to this day. There’s a very powerful way small services businesses can differentiate themselves with category design and a point of view to support that design.

Drew McLellan: I can hear the agency owners in my head saying, “Okay, is it possible to do that, to be the places guy, but to also take …,” back to your podcast producer example, “… other work to kind of fill in the gaps?” Is this an all-in sort of proposition where you are disciplined enough to say no or can you have your cake and eat it too?

Christopher L: I think you have to decide how you’re going to differentiate and you’ve got to stick to that. That said, some of us have to do whatever it takes to make a living because, I don’t know about you …

Drew McLellan: Got to feed the kids every single day.

Christopher L: Yeah. When I go down to Trader Joe’s, they’re not going to give me a bag full of groceries because of my good looks.

Drew McLellan: Right.

Christopher L: There’s one thing in terms of how you do category design and position yourself and then there’s another thing in terms of the services that you do. What we know is the legendary category designers stay true to their position, to the category they’re evangelizing, and ultimately want to dominate. If along the way you got to do stuff that is a little bit out of alignment with that so that you can feed the kids, then bless you. But the perception the world should have is you’re a placemaker.

Drew McLellan: They key is you can’t make the exception so often that it becomes the new rule.

Christopher L: Right. In the beginning, McKinsey was an accounting firm, right? I don’t know. I can’t remember. I did read that Marvin’s history, his biography is, I don’t remember now but there’s some period of time where McKinsey is still an accounting firm and it sort of goes through a multi-year process of morphing into what today we call a management consulting firm.

Look, I’m not suggesting anybody be reckless or not feed their families or, as George Bush said, it can be hard to put food on your family. So we got to be scrappy. We got to do what it takes. But on the other hand, we have to have the courage to be legendary. We have to stick with our vision of what our position needs to be, what our category needs to be, and move in towards a category that we can dominate and evangelizing to differentiate ourselves.

Why You Need to Keep Innovating and Evolving Even After Designing a Category

Drew McLellan: And just because you design a category, I was thinking about your Netflix example, how they showed up in the marketplace is not how they are today so it doesn’t mean you don’t have to keep innovating and evolving as the marketplace demand shifts, right?

Christopher L: No. As a matter of fact, legendary category designers are always expanding their category design. If you look to Netflix by way of example, look, Reed Hastings, the founder of Netflix, is no dummy. When he started the company, he understood over time the internet was likely going to get to a place where we could be downloading movies off of the internet successfully. Or now of course streaming them. He also understood if I start there, the bandwidth and so forth and so on, it’s going to be hari cari for my business so he starts of course with the mail distribution model.

He doesn’t tell the world that ultimately that’s where he’s going. I mean, if you thought about it at the time, you might be able to posit that’s where he was going but he waits, in this case, for the technological circumstances to catch up to him. But make no mistake, he’s playing it forward. Legendary category designers are always thinking, “How do I expand the potential for this category?”

Another great services category designers is Marc Benioff, the founder of Salesforce.com. He’s the man who, I’m going to say, single-handedly took the software business from being a product business and turned it into a services business. And he is 20 years about approximately into that and he to this day, Drew, continues to pound the table by framing the problem of no software. That’s his mantra. No software.

He talks about all the problems associated with running software in-house, or as he describes it now, on premise, and all of the value of buying software as a service over this thing that today we call the cloud. For 20 years, he pounds the table on no software, no software, no software, as a way to evangelize the problem to set up a solution called a subscription business model in the software industry.

Drew McLellan: It occurs to me as you’re talking about him in particular and I think about, for an agency life, you know, the big shift that Adobe has made to being a SaaS company and all of that rather than the boxes that you would order for every new update. If you’re going to do this, you’d also have to be willing to buck the fact that it is going to require some education and you’re going to get a fair amount of pushback in terms of, “I don’t want to pay you every month. I just want the box once every two years to get my update and then I love the security of having it on my desktop and all that.” Part of this is a little bit of bravery.

Christopher L: Yeah. And in some cases, a lot of bravery. You have to have the courage of your conviction and you have to stick to it. You have to continue to evangelize your category. The E in CES stands for evangelist.

How to Know if You’re Heading Down the Right Path

Drew McLellan: How do you know if you’re headed down the right path, or don’t you? Is it, at some point, a leap of faith?

Christopher L: It is a leap of faith. You can’t research a breakthrough. You can’t. Because the world filters everything through the context of the past. Now, there is a way to responsibly meet the world where it is. For example, when Henry Ford launches the automobile, do you remember Drew what he called it?

Drew McLellan: No.

Christopher L: He didn’t say, “Ta-da, the automobile,” because of course the world wouldn’t have known what that was. He meets the category where it is and drives the from-to. He calls the category the horseless carriage.

Drew McLellan: Yeah, right.

Christopher L: Over time, of course, the category definition and name morphs to be a standalone name. One thing I would encourage all of the agency owners out there and leaders to think about is pay attention to the labels of things. In the beginning, the devices that we generally talk to each other on were called cellular phones and then they became wireless phones. Over time, they’ve turned into smartphones. Phone is one of the many things of course they do, and so 10 years from now, are we going to be calling our Android and iPhones smartphones or are there going to be some new term that emerges?

The box, if you will, the container that things get put in, matters a lot, and category design really is about giving people a framework to think about what does this thing do, that is to say, what problem does it solve and why does that matter? If I identify with the problem, I then identify with the solution. And so the languaging matters.

So if you go back to Salesforce as an example, they said they started off with, and you used the term, SaaS. Software-as-a-Service. As opposed to the old distinction which was Software-as-a-Product. SaaS over time morphs into what today we call cloud, and you hear both terms but you certainly hear cloud a lot more than SaaS today, right?

Drew McLellan: Right.

Christopher L: Somebody names those things. The other genius thing that category designers do, Drew, they reframe how we think about the current paradigm. So Benioff also created new language to describe what at the time was the current paradigm in the category for software, so business software, you had to buy it and run it in your own shop. He made up a phrase called on-premise software, and SAP and Siebel and all the big software companies at the time or small business accounting systems like Accpac and Great Plains from Microsoft and so forth, those guys weren’t calling themselves on-premise software. He invented that term to give a juxtaposition, that is to say to drive the from-tos or as we call in the book Play Bigger, the Frotos, for short.

The minute you say on-premise, you’re like, “Huh, yeah. That’s right. I am running it in my shop,” and you reframe it. When the guys at TiVo invented the DVR category, they created a new phrase to recharacterize what at the time was the current viewing paradigm on television. They called it appointment viewing. And in both the case of on-premise and appointment viewing, two things were true, Drew. One is those were descriptive terms and, two, the category designers of the future imbued those descriptive terms with negative meaning.

The TiVo folks said, “Appointment viewing? Why do you have to wait till Thursday night to watch Friends at 8:00? You should be able to watch Friends whenever you want.” The antidote to appointment viewing was this thing they called time shifting. Those set of Frotos, if you will, set up the thinking that was required to open the world up to doing business with Netflix.

The same was true with on-premise software. On-premise Benioff imbues with a ton of negative meaning. You don’t want on-premise. Like, “Oh, you don’t want cancer, do you? Oh, terrible. I don’t want any of that. Okay, well, the cloud. Ta-da,” and single-handedly creates a multi-billion dollar organization. If you go back to Marvin Bower at McKinsey. He’s not at provocative. He’s more think about the time but, at the same time, he says-

Drew McLellan: And the category, right?

Christopher L: And the category, of course, more conservative but no less effective in that he says, “Why would you go to an accountant or a lawyer for business advice? You go to them for accounting and legal advice. If you want business advice on how to manage your company, then you come to a management consultant.” And that simple but powerful argument that, in retrospect, looks like a no … Sherlock was actually one of the biggest single insights that created a multi-billion dollar global category in the services business that of course has existed for decades.

How Business Owners Can Design Their Own Categories

Drew McLellan: Yeah, it makes total sense. I feel like we’ve just scratched the surface. We could talk for another three or four hours and I know my listeners are going to want more. As we wrap this up, how can they get more of this?

Absolutely they should read the book if they haven’t done that, but where else can they go to stimulate their own thinking as they look at their own company and try and figure out, not only how to design a category for themselves, but as you said on the front end of the show, they are uniquely positioned to create categories and design categories for their clients to help them break out of the pack. So where do they go to get more of this?

Christopher L: Just to underscore that, as a guy that’s been in marketing and entrepreneurship for 30 years and a three-time public CMO, I’ve never seen a bigger opportunity for marketing services companies than category design. Because what’s happening Drew is the world is starting to understand CMOs, CEOs, UFOs are starting to understand …

Drew McLellan: Everyone.

Christopher L: Everyone is starting to understand this simple but powerful truth: the category makes the company. Dell was hot and now they’re not. What changed? The category. Xerox is a legendary brand. No one gives … Why? Their category doesn’t matter anymore.

Drew McLellan: It’s the trouble Apple is facing right now, right?

Christopher L: Absolutely. The categories are shifting, and so you want to be the category designer of the next category and, inside that, a branding strategy to become the category king in the context of a category design strategy is arguably the most powerful secret weapon you can have in business, but a branding or marketing strategy absent a category design strategy is probably a suicide mission because, for example, Microsoft spent 10 billion dollars with a head-on feature and brand tech Bing versus Google, and nothing changed with Google’s market share or market cap. Attacking an existing space with an existing category king is almost always suicide.

And so the ability to redesign, reimagine the space, set the rules up the way you want, that’s going to become one of the biggest skills in marketing and frankly in business. I guess my point Drew is we are seeing agencies all around the world adopting category design as a key practice area to help their clients who want to drive growth.

Drew McLellan: Which by the way means that can’t be your category, right? Just saying you do category design, if a bunch of other agencies are starting to think about that, that alone isn’t drilling deep enough to be a category of one, if you will.

Christopher L: Right now, I would say it’s a great place to find growth because there’s more demand for category design than there is supply and that’s what you want. Over time, that’s absolutely right. Category designers will begin to differentiate themselves on what kind of category design.

Drew McLellan: Yeah, right. You have to drill a little deeper. Again, being category design and having a niche of agriculture, for example, would be a better mix.

Christopher L: Yeah. You know, there’s a category design agency in the UK called Positive Marketing and they started off in the communications and PR world and founded by a guy named Paul Maher who I’ve known for a long time and he has added category design but his differentiation is he does category design in Europe for American companies who are trying to expand in Europe. That’s his kind of, if you will, niche inside this big thing called category design.

Drew McLellan: Yeah. I love it. Okay, so back to the question. How can they get more of all of this thinking? Obviously they can listen to the podcast, they can read the book, where else can they find your thought leadership? And how can they keep track of what you’re thinking about and talking about?

Christopher L: The best place to find me on the interweb is legendsandlosers.com. The big reason I started the podcast Drew was, so the book came out in July or June of last year, 2016, and I retired shortly thereafter and I started getting hit on Facebook and Twitter and LinkedIn and email and so forth and so on from people all around the world who are reading the book, and a lot of them ask that question. Where do I get more? And so Legends & Losers is my attempt at more.

Drew McLellan: How’s that retirement thing working for you? It sounds like you’re still working.

Christopher L: Well, you know, it depends on what your definition of work is. If doing a two-show-a-week podcast with legendary guests and having a great time …

Drew McLellan: Not a bad gig.

Christopher L: Yeah. In between that, I get to stoke my passions like surf and ski and chase my wife around the house and make her wish I wasn’t around …

Drew McLellan: Wish you would get a full-time job.

Christopher L: Exactly. Legends & Losers has been a little bit like doing a startup but it’s a startup that requires no revenue and is really just a passion project. It is work in that context but I’m having the time of my life doing it.

Drew McLellan: Yeah. Pretty good gig.

Christopher L: Yeah, don’t you think? I mean, you’ve been at it a long time.

Drew McLellan: Yeah. No, I love it. I love the conversations. I’m sure I learned something every time I talked to somebody so it’s all good for me.

Christopher L: That’s how I feel too.

Drew McLellan: Hey, Chris, this has been awesome. Thank you so much for sharing your expertise and getting everybody fired up. I suspect you have a lot of agency owners who are walking around with earbuds in and their heads are buzzing, so thank you for being on the show today and for bringing a new perspective.

Christopher L: My pleasure, Drew. It’s really been awesome being with you.

Drew McLellan: Hey, everybody. This wraps up another episode of Build A Better Agency. I will include all the links of some of the things that we talked about in the show notes and I will also give you some other ways to keep track of Chris. Come on back next week with another great guest to help you create the agency that will allow you to live the life that you want to live. That’s I think, at the end of the day, why we take the risk of owning our own business. I will be back at you next week. In the meantime, if you need to track me down, you know you can find me at Agencymanagementinstitute.com. Talk to you soon.

That’s all for this episode of AMI’s Build A Better Agency brought to you by Hubspot. Be sure to visit Agencymanagementinstitute.com to learn more about our workshops, online courses, and other ways we serve small to mid-size agencies. Don’t miss an episode as we help you build the agency you’ve always dreamed of owning.