John Wall: One way to look at companies and their strategies to figure out who’s going to be most successful is to look into category design. This is something that Christopher Lochhead has written about. He has a book called Play Bigger, that is a fantastic resource that you want to dig into. The idea is there’s two kinds of companies from the category design perspective. One is a company that is going to make an incremental change, they’re trying to make things a little better, trying to make things a little bit better and hoping to gain some of the market away from other competitors. The other type of company changes everything completely. They have come up with a new understanding of the market, some kind of product that destroys everything for everybody else. And so for those types of companies, they tend to come in and take 70% or more of the market and leave everybody fighting for scraps. And so if you’re going to go through all the trouble and pain of creating a startup, starting from scratch, risking everything you want to make sure that you can get into that category design space, so that it will pay off, and you’re not just going to continually fight for 5% of the market or less for the rest of your career.

For example, Clarence Birdseye is a person that they talked about. He pioneered flash freezing of food almost 100 years ago now, but up until that point, freezing of food basically damaged it to the point where you couldn’t eat it. He came in with new technology, changed the marketplace completely, and now, even to this day, bird’s eye food is still in the freezer section in your local supermarket. Another example is Liquid Death, this brand of canned water. Don’t be fooled by the label that is something out of a motorcycle gang. Underneath the surface is a bigger play, the idea that if you’re not drinking Liquid Death water out of an aluminum can, you’re perpetuating single use plastic and destroying the planet. So now Liquid Death is able to steal the entire bottle water market, right? The only improvements we’ve seen in the last 10 years are exotic labels, less plastic or smaller caps. But by coming in with an aluminum can, it changes the game completely. Again, it’s a whole new space, and you can see from their performance, they’re just running wild with hundreds of millions. So the idea is that by coming up with something that changes the game completely, you increase your odds of having an oversized return on your investment.

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