Playing A New Category Game
How to segment, target & position the game
This is Part 2 in a blog series on Category Management
In my previous post I covered why category games matter, and how to define and set a new game.
In this post, I cover how to segment, target and position your new game, once you have defined it. I also give an example of Apigee API management software (now Google Cloud) where I was part of this game play. Finally, in the appendix, I touch upon the challenge of creating a new game in a new category.
How to Segment, Target & Position the New Game
Segment the Market by Your POV
Most tech companies make the common mistake of chasing the wrong customers. Despite polite noises to the contrary, most people don’t like to change. And any new technology that triggers change, hopefully to create value, disrupts the status quo. As we noted in the previous post, most customers will reject your contrarian POV as it would require changing their current criteria of tech purchase or usage. They may find your provocative vision of an inevitable future too risky and ambiguous.
Your should NOT spend any time with customers who reject your contrarian POV.
To make sure this happens, you need to segment the market. You need to find only the customers who are willing to take a chance on you. Talking to any and all customers is a common mistake among early stage founders and product leaders. Each of your discovery calls need to be tagged for those who have an appetite for risk in your category.
Most tech companies begin with established segmentation of the market. Some common criteria are: customer size, geography, industry. Others might be by product type, customer attitude to tech adoption, etc. And then they choose a criteria unwittingly, such as enterprises where they have a network, start-ups who are growing, or small businesses that are easy to access. They find mixed responses from a scatter plot of prospects who are across the tech adoption spectrum (early adopters to laggards).
There is a better way to segment for early adopters, based directly on your contrarian POV.
Here are a few sharp questions that help you segment for early adopters.
How well does your contrarian POV fit with the needs of each current segment? Talk to prospects in each segment and check for what aspects of your POV resonate and what are considered too risky or irrelevant. Based on the responses, can you re-segment the market, based on your contrarian POV?
Who are the users most willing to change their selection criteria to adopt your product? What are their needs? Can you re-segment the user audience based on this criteria?
Who are the buyers most willing to change their purchase criteria? What are their needs? Can you re-segment the buyer audience based on this criteria?
Which of these new segments have the most hungry and desperate customers?
Target Early Adopters who Subscribe to the Inevitable Future
Once you have re-segmented the market, define the ideal profiles of users and buyers in the segment.
These are the ideal customer personas (ICPs) who are hungry to solve a burning problem that you have identified in your contrarian POV; and they are willing to accept the new changed criteria of usage and purchase. Ideally, many of these customers would also be open to your vision of an inevitable future that can unfold over time.
You need to search and find such an Early Adopter Segment because you are unlikely to find product market fit outside of it.
This is also where you set your new category game in motion.
Position Your POV to Your Magical Product
This chart shows how to position your new game in an existing category by anchoring it to your magical product.
The goal should be to create and deliver a laser-sharp positioning to early adopters, even if all other customers reject it.
This is counter-intuitive and hard for many tech leaders.
For early adopters, this positioning should be a coherent narrative that works top-down, bottom-up or middle out.
Tech company founders and leaders need to get fluent in presenting the narrative to buyers and users in the segment, based on business context.
For instance, your top down buyer story could go from painting an inevitable future that will unfold from a contrarian POV through a category dynamic (differentiate, dominate or disrupt) generated by solving a burning problem which is enabled by a new value prop created by a magical product that encapsulates a new phenomenon but requires changing the purchase criteria.
Your bottom up user story could demonstrate how the tech “phenomenon” in your product unlocks a better way to progress their job, but requires accepting and learning a new way of selecting and using the product, which unlocks previously unrealized value for the company, and takes them into a new future.
Or this story may be abbreviated or combined differently for emphasis.
Playing the New Game: Apigee Case Study
Here is an example of how to play the new game, based on my experience at Apigee software.
From 2012-2016, API management was a fast growing dynamic category with vendors offering different solutions to help enterprises build, secure and manage their portfolio of internal and external APIs. Apigee was an early stage company (<$100M) in this category surrounded by several competitors (Mulesoft, IBM, CA, Tibco), each significantly larger than us.
Here is the new category game we defined, set and played:
The API management category is complex. Back in 2014, most of the large vendors had origins in legacy technologies of EAI (enterprise application integration). Their solutions required significant IT resources and skills to build and maintain internal APIs. These were needed for internal interoperability, but were not developer friendly. As the world moved to mobile apps, companies had to open up access to their internal back end systems for developers to build new nimble apps, internally for employees or externally for customers and partners. Rest APIs were the new technology to connect such apps.
A novel insight
Most companies needed a simpler way to expose and manage data from internal systems through rest APIs. This was understood by many, but appreciated by only a few players. Our novel insight was that simpler ways to build and manage APIs would change how large companies modernized their legacy systems.
Our contrarian POV
We understood that large enterprises like retailers, banks and healthcare systems had to build modern apps to serve their customers. This meant they had to give access to developers who were building such apps access to their internal data strewn across systems. Yet these legacy systems were not built to offer easy access to such data. Our POV was that businesses would need a developer friendly front end to discover, build and connect data - and their IT teams would need a secure and scalable way to manage this access. We offered the most developer friendly API management platform. This POV was contrarian, since it was acknowledged by many but practiced by few customers or vendors.
We advocated for new criteria to evaluate API management, such as ease of developer use and time-to-hello world. We shifted the business discussion to the value of delivering digital projects on time, rather than managing data integration on the IT roadmap. And we emphasized the role of IT to manage developer-friendly APIs across backends to achieve these business outcomes. This was different from large competitors (IBM, CA technologies) who were tied to IT driven roadmaps.
A new game
We positioned Apigee as a (niche) differentiator who could deliver major digital transformation projects across multiple cloud platforms. This set a new dynamic in the category. While we worked with IT teams, we also sought business leaders who had to deliver major digital projects that depended on modern APIs.
An inevitable future
Our view was that business transformation was a matter of survival. Companies across sectors like retail, banking, healthcare and manufacturing had to modernize their IT. They needed to empower developers with modern APIs to build and connect new apps, data and devices for their employees, customers and partners. Business and IT leaders had to champion this new way of working and building within their companies. We defined the vision of this API-enabled future and evangelized it more than anyone else in the category.
Apigee Game Play
Playing a new category game requires a sustained and coordinated effort across company leadership to win the game. It is not just marketing talk.
Here are a few tactics of our game play in different arenas:
We aligned sales, marketing and delivery teams to this POV.
Our sales pitch started with our POV.
Our demos showcased our product magic for developers.
Our pre-sales teams pushed prospects for developer hackathons to showcase our differentiation.
We had a team of experts who ran change management courses for customers going through API-enabled transformation.
Our customer champions & testimonials spoke of the business impact of APIs - not just IT benefits.
Product and communities
We aligned our product roadmap with our POV to showcase developer portals and the cloud-first capabilities.
We supported and built for FHIR, an open source API framework and community in healthcare.
We supported and built for the Open Banking API regulations in Europe.
We built industry specific APIs frameworks in healthcare, banking and retails to help our service partners build solutions.
Analysts and influencers
We successfully advocated changes to how industry analysts like Gartner and Forrester scored the category.
We funded and partnered on research with MIT on how APIs changed business metrics.
Our S1-IPO filing included this vision.
In 2016, Apigee was acquired by Google as we were rated as #1 visionary leader by Gartner in their Magic Quadrant despite being one of the smallest vendors. By 2018, Google became a leader in multi-cloud API management platform. This was a result of multi-year effort across the company to set, play and win the category game.
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APPENDIX: Creating a New Category, Not Just a New Game
The craft for creating new categories is very different from simply playing by the rules of an existing category. According to Category Pirates, if you are creating a new category, you need to get three things right: product design, company design, and category design.
Most startups are not radical enough to create a new category. So I haven't covered new category creation at length. However, some tech companies may evolve over time to create a new category. The framework we have developed above can be extended playing a new game in a new category.
To do so in our framework, we need to develop four ideas upfront - or over time.
Your tech offering has to radically change the category criteria to create value in a different way.
Your business model has to radically change to capture value in a different way.
Your GTM ecosystem (partners, channels, etc.) has to radically change to deliver value in a different way.
The virtuous data feedback loops need build value in the three areas (product, business model, ecosystem)
Since this takes us on a new tangent, I will come back to this topic in a future post.
This is Part 2 in a blog series on Category Management
Part 1: What’s Your Category Game