How To Stop Being Competitive: Create Your Market Category

Ambition is a dream with a V8 engine” – Elvis Presley

The corporate world romanticizes competition. Business-school students around the world carry copies of Sun Tzu’s “Art of War” in their back-packs. Battle metaphors are part of corporate lexicon. From “war-rooms” to “competitive battle-grounds”. From “war-games” to “strike when enemy is weak”. Teams obsess about beating the competition and use it as a rallying cry in large sales meetings.

In this setup, it is worth pausing and taking note of Peter Thiel when he says “competition is for losers”. Peter’s view is based on a deep understanding of competition and monopolies. In his wonderful book, “Zero to One”, he lays out the examples (e.g., from restaurants in Palo Alto to companies like Google) to point out

All happy companies are the same: each one earns a monopoly by solving a different problem. All failed companies are the same: they failed to escape competition

While Peter Thiel’s narrative is great, he is less clear about the question – “so how do we avoid competition?”

I found the book “Play Bigger” has a great perspective on the question. Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney do a masterful job explaining how companies can escape completion and create large profits.

Their argument boils down to using a technology or market insight about a problem to not create a new company or a new product but a whole new category. And, if you play your cards right you can dominate the category you created.

My favorite example as that of energy drinks. Several years ago there were all kinds of energy drinks competing in the market. Red Bull. Monster. Rockstar. There were also organic energy drinks and so many different flavors it reminded me of Bertie-Botts multi-flavored beans. These drinks competed with each other. And like Peter Thiel noted, the competition eroded profits.

In this setup, Manoj Bhargava had a market insight after a work-out. His insight was,

“Just because I am tired, doesn’t mean I am thirsty”.

Out of this insight, came an idea to create a new category. Instead of 300ml+ drinks with caffeine all he needed was a smaller more potent energy drink. He created 5-hour energy. And, it wasn’t just a new product, it was a new category of Energy Shots. Manoj went on to serve millions of happy customers and make several billion.

Silicon Valley is in love with the word “disruption”.  In this context, it feels asinine.

Being disruptive or creating disruption sounds cool but it should never be the goal. Disruption takes a counter-productive competitive view of business.

Creation is the goal. Disruption is a by-product.

People move to the new category (e.g., 5-hour energy) leaving the old (e.g., energy drink) that leads to a disruption.

Elvis did not disrupt Jazz. He created “Rock and Roll”.

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