Category Design Tip: Don’t Fight Over Existing Demand, Create Net-New Demand
If your reference is the competition, you’re done before you’ve begun.
Dear Friend, Subscriber, and Category Pirate,
This week’s Category Design Tip is about removing yourself from the race to the bottom.
Most businesses fight for demand.
They walk into existing markets saying, “We do the thing the already established Category Queen does, just better/faster/smarter/stronger/cheaper.”
These people are not Pirates.
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Pirates Don’t Fight Over Existing Demand—They Create Net-New Demand
In business, the unquestioned rationale is: demand exists. And if our business can tap into that existing demand, we will find customers—and customers lead to profits.
But what is “demand” really about?
Demand is fighting over scarce resources. Land. Oil. Gold. Water. It’s a scarcity mindset played out.
And the reality is, only idiots fight over scarce resources.
Think about it: Apple stores are not jammed with customers because “demand for technology retail is on the rise.” If that was true, Microsoft Stores would be jammed too. Demand does not just happen.
It gets created.
Legendary entrepreneurs, creators, and leaders find ways to create net-new resources for everyone.
Instead of acting like a bunch of monkeys on an island fighting over bananas, they work to grow enough banana trees for everyone—and then some.
This is no different than how today’s NFT boom isn’t “disrupting” the legacy art world, but creating a radically new and different world of art. Much of this net-new world is populated with consumers who previously a) didn’t own “professional art,” b) weren’t interested in collecting or learning about art, and c) couldn’t afford to step foot in the category, even if they wanted to. So NFTs are not taking market share away from Sotheby’s.
They’re creating net-new category potential in a new category of collectibles.
We Call This The No Ocean Strategy
The No Ocean Strategy is where you take someone who says, “Never in a million years would I ever be interested in doing a thing like that,” and you convert them into your category.
You turn them into Superconsumers of the new and different. As a result, you change which way the wind blows. And you do it by inventing something that did not exist before you came along and made it so.
Once you begin creating net-new demand, the next step is to take a No Ocean Strategy approach to unit economics.
For example, how do you get someone to buy an NFT more than one time?
You make it so they’re not buying the NFT—they’re buying an item, a product, or access to some feature connected to the NFT. For example, the NFT collection Bored Ape Yacht Club didn’t “discover” a way to sell more art to art collectors. They invented net-new “demand” for net-new consumers, resulting in a net-new business model, which created massive net-new value.
Creation. Not discovery.
You may be thinking, “Creating demand out of thin air sounds hard and risky.”
This is exactly why the “No Ocean Strategy,” combined with the “DAM the Demand” strategy, is so powerful.
Because if you conceive of a world many people believe is impossible (to invent something that doesn’t yet exist) you create net-new demand.
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I would like to point out this article contradicts itself. At first it says you need to create something new not innovate in an existing category and not right over demand. Then it proceeds to reference NFTs as something “new” when in fact they’re just digital art which is innovation in an existing category. How is category creation any different than innovation? From what I’ve learned it’s the same thing. Category creation is tapping into existing demand because there is a need for something that may not exist yet but the demand is there for it. Tesla for instance everyone needs cars and there is a need for energy efficient cars that are smarter, faster, self driving, and more efficient. Tesla innovated and capitalized on existing demand that nobody was fulfilling.
Question about selecting the first niche to focus my new category on to be king and try crossing the chasm with this new innovative way of investing.
How small a niche should i go?
If I’m a financial advisor and I have something different and will benefit investors with $250k or more, i find all my users are professionals of all sorts, and just as many are retired.
Do i pick one profession to target like dentists, or target many professional types, or retired professionals??
Any insight would be great.