When GT Dave commercialized kombucha, he didn't just bring a new product to consumers. He also invented a wholly new market segment. (Think Starbucks and premium coffee, or Sam Adams and microbrews.) Eddie Yoon, principal at the strategy consultancy Cambridge Group, considers category creation the most powerful and overlooked growth strategy any company can use. "Category creators experience much faster growth and receive much higher valuations than companies bringing only incremental innovations to market," says Yoon. It's not easy, but the following ground rules can help.
1. Be an upstart.
"Category creation doesn't always jibe with corporate America," Yoon says. Within established businesses, he adds, it can be tricky to marshal the resources to start something without precedent--so nine out of 10 companies focus on incremental innovation and stealing market share from existing categories.
2. Start locally.
"We've found that companies that not only create categories but also sustain their leadership started regionally," Yoon says. "Once they achieve scale and leadership in a local region, they can expand from there." This is precisely how GT's Kombucha stormed the natural-foods market.