Software Growth

Category creation

Category creation means defining and owning a new market category, not competing in an existing one. Costly; most bootstrapped SaaS should skip it.

Category creation is the strategy of inventing a new market category, giving it a name and becoming its leader. The idea was popularized by the 2016 book Play Bigger, by Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney. Its argument is that winning is less about beating rivals at the old game and more about defining a new game, so that you become the "category king." The authors point to companies like Amazon, Salesforce, Uber and IKEA.

How it works

A category creator names a problem people did not know they could solve, gives the solution a label and teaches the market to look for it. If it works, the company shapes buying expectations and gets most of the value in the category. Salesforce did it with software sold as a service.

The cost

Teaching a market a new word takes years and money. You must educate buyers, win analysts, build content around terms nobody searches for and convince other vendors to join the category. In an episode of Startups For the Rest of Us, Rob Walling calls building a category like building a brand on hard mode: you build a brand for a whole group of software, while competitors resist being grouped under your word. His blunt rule is that without millions of dollars and three to five years, you should not start one. He also says he has seen more people fail at it than succeed.

The bootstrapper's counter-argument

Walling's advice to a founder who wanted to invent "SEO automation" was to piggyback on an existing category, such as "site audit tool," and differentiate through features or a vertical focus. That path has real advantages:

  • Buyers already search. They know the term, have a budget and compare options.
  • SEO and ads work. You can rank for terms people actually type.
  • Faster sales. You do not need to explain what you are.
  • Clear competitors. That gives you a map of what to beat.

The trade-off is crowding: an existing category is easier to enter and harder to own. You answer that with sharp positioning and a clear unique selling proposition, for example by winning one niche (a beachhead market) and expanding.

Example

Say you build a tool that finds broken links and thin pages. You could call it "content health intelligence" and spend a year explaining it. Or you call it a "site audit tool for ecommerce stores," show up in searches for that phrase and win ecommerce owners. If 400 people search that term each month and 3 percent sign up, you get 12 signups a month from one page. 400 times 0.03 equals 12. A new term gets zero searches on day one.

When it can make sense

A new category may fit when you have real funding, a genuinely different approach, a long time horizon and the ability to repeat the story at scale. Even then, many companies reach success by describing themselves in familiar terms first, and shaping a category later, once they have customers and some leverage. A distinct product creates a moat, but only once buyers understand it.

Related terms

Sources

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