The Strategic Power of Category Creation for Tech Startups

Al Ries & Jack Trout

Being First or Creating a Category: "It's better to be first than it is to be better". "If you can't be first in a category, then set up a new category you can be first in". The first brand to establish itself in a category often has a huge advantage. The first brand into the mind tends to have about twice the market share of the second.

This foundational wisdom from positioning pioneers Ries and Trout remains powerfully relevant for today's tech startups. Their insight that market leadership comes not from battling established competitors on their terms, but from reframing the conversation entirely, forms the backbone of modern category creation strategy. In today's rapidly evolving technology landscape, this principle has evolved beyond simple market positioning to become a comprehensive business strategy with profound implications.

Creating your own category isn't just a marketing tactic—it's a strategic positioning that can fundamentally alter your company's trajectory. When a startup successfully defines a new category or meaningfully redefines an existing one, they don't just participate in a market—they become the market's definitive leader and reference point. This "category king" position typically captures 70-80% of the economics in their space, commanding premium valuations and enjoying stronger customer loyalty. Rather than competing on incremental features or price, category creators compete against "non-consumption" or clearly inferior alternatives, allowing them to set the narrative around what matters and why their approach represents the future.

This is the "Blue Ocean Strategy": the active strategic choice between competing in established markets versus defining entirely new ones.

The most effective category-creation strategies begin with identifying genuine market gaps, or pain points that existing solutions fundamentally misunderstand or underserve. The best way to win is not to start by developing a strong product but to discover a strong market need. If you have a strong market need but a weak product, you can iterate and make the product better over time. This market-first approach requires deep problem understanding, customer engagement combined and technological vision—seeing what customers struggle with today and what they'll need tomorrow.

Successful category creators then build their entire go-to-market approach around educating the market on this new paradigm, often using thought leadership content, distinctive language, and novel metrics highlighting previous approaches' inadequacy. The key is consistency across product development, messaging, customer success, and even funding strategies—every aspect of the business must reinforce why this new category exists and why your company represents its purest expression. For startups, this approach transforms positioning from a marketing exercise into a comprehensive business strategy that can create an enduring competitive moat.

Category-Defining Unicorns

Examples of unicorn companies widely recognised for creating or redefining their categories

Company	Before	Category Created	After Impact
Uber	Traditional taxi services with physical hailing or dispatch calls	Ridesharing	On-demand transportation via app with real-time tracking, cashless payments, and gig economy drivers
Airbnb	Limited to hotels, motels, and formal B&Bs	Home sharing marketplace	Unlocked millions of private spaces as accommodations, creating the "sharing economy" for real estate
Spotify	Music ownership (CDs, downloads) or piracy	Music streaming	Normalized access over ownership with personalized discovery, making streaming the primary music consumption model
Stripe	Complex merchant accounts with lengthy approval processes	Developer-friendly payment infrastructure	API-first payments enabling businesses to start accepting payments in minutes instead of weeks
SpaceX	Government-dominated space launches	Commercial spaceflight	Reusable rockets drastically reducing launch costs and privatizing space access
Coinbase	Cryptocurrency limited to technical enthusiasts	Mainstream cryptocurrency exchange	User-friendly platform bringing crypto to everyday users with regulatory compliance
Notion	Teams juggled multiple disconnected tools: Evernote for notes, Confluence for wikis, Trello for tasks, Airtable for databases	All-in-one collabrorative workspace	Flexible building blocks approach allowing teams to create customized workspaces combining documents, wikis, databases, and project management in a single, interconnected platform
Gong	ales coaching relied on managers' subjective feedback and manual note-taking	Conversational Revenue Intelligence	AI-powered platform that records, transcribes and analyzes customer-facing conversations to provide data-driven coaching, pipeline intelligence, and market insights
Datadog	IT teams used siloed monitoring tools - separate products for infrastructure metrics, logs, application traces, and user experience	Unified Observability Platform	Created a single platform integrating infrastructure monitoring, APM, log management, and user experience in one solution with correlated views, enabling DevOps teams to quickly troubleshoot complex distributed systems
Slack	Corporate email and fragmented communication tools	Team communication	Integrated, searchable, channel-based communication with extensive app integrations
Snowflake	On-premises data warehouses with fixed capacity	Cloud Data Warehouse	Cloud-native, elastic data platform separating storage and compute for unprecedented scalability
Klarna	Traditional credit or upfront payment only	Buy now, pay later	Interest-free installment payments integrated directly into shopping experience
Instacart	In-person grocery shopping or limited local delivery	Grocery delivery	On-demand delivery from multiple stores through a single marketplace
Epic Games	One-time game purchases	Games as a service	Free-to-play model with continuous updates, in-game events, and virtual economy
Impossible Foods	Vegetarian options as niche alternatives	Plant-based meat	Meat replicas targeting omnivores with comparable taste, texture, and cooking properties
GitLab	Separate tools for code hosting, CI/CD, and security	DevOps Collaboration	End-to-end software development lifecycle in a single application
Discord	Game-specific chat or general social platforms	Community Messaging	Voice-centric, persistent communities organized around shared interests beyond gaming