Many large companies find themselves launching new businesses at unprecedented rates in an effort to maintain growth profiles, margins and leadership status. When a company pursues new markets, that can include a variety of corporate initiatives which are distinct from each other. At the highest level in terms of potential value creation is the process of vying for a new category. I call this category-creation or entry. Category-creation is different than finding a new market for an existing line of business.

In the latter case, an existing product or service is re-oriented from a positioning, capability and/or distribution standpoint beyond existing customer focus into distinct and additive customer groups. This can be a complex activity for an established business because success often leads to inertia. In other words, it’s hard but necessary to unlearn certain aspects of an existing success formula in order to make the business mix work for new sets of buyers. Expansion of existing products lines into new customer groups holds a lower risk profile than the pursuit of a new category because some aspects of these new markets leverage existing capability. But product line expansion to new segments also carries lower magnitude of order growth potential. Only truly new categories move the needle in breakout ways.

These two growth strategies are equally important — one should not exist without the other. But it’s far more likely that a company is proficient at market expansion than market creation and development. That’s why I’m going to share some thoughts on the category-creation process. Read more »

• Reinventing innovation at consumer goods companies - McKinsey Quarterly;
• How companies approach innovation - A McKinsey Global Survey;
• The Granularity of Growth - McKinsey Quarterly

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