The Magic Triangle is a new lens for interpreting the business world.
It’s the combination of product design, company design, and category design—each side with equal importance, ideally executed at the same time. It can dramatically improve your odds of becoming a Category King or Queen yourself. Because once you see the world through what we like to call The Magic Triangle, you’ll never see things the same way again.
In this exercise, we’ll explain how to use it to reframe your thinking.
Understanding The Magic Triangle
All three elements—company design, product design, and category design—work together and balance each other to exert great force on a company’s success and value.
Product Design: The purposeful building of a product and experience that solves the problem the category needs solved. The goal here is what the business world traditionally calls “product-market fit”—which we see as strategically flawed thinking. What you really want is “product/category fit.”
Company Design: The purposeful creation of a business model and an organization with a culture and point of view that fits with the new category. The goal here is company/category fit, meaning you have engineered the right business model and missionary team for the problem you are looking to solve.
Category Design: The mindful creation and development of a new market category. It’s designed so the category will pull in customers who will then make the company its Queen. In marketing terms, this is about winning over popular opinion and teaching the world to abandon the old and embrace the new.
Use this exercise to think about how The Magic Triangle applies to your company and category.
We’ll walk through each side of the triangle and share questions or statements to get the wheels of your mind turning. Before you continue, grab a notepad or open a new doc—this works best when you write down your answers.
Side #1: Product Design
Great products, alone, rarely become category queens.
To find out if your product is carving out a new category, answer “true” or “false” for the following statements:
“The only thing that matters is having the best product.”
“My products are competing in existing market categories.”
“My products are the “next-best” alternatives to existing products.”
“My products are better, faster, smarter, stronger than competing products.”
If you answered “true” for any of these statements, you’re not on track to design a radically new and different category of product. And it’s likely because you don’t have a unique POV to frame, name, and claim a new and different future for customers.
Answer the following questions to think about whether or not you’re innovating on the company/business model side of The Magic Triangle:
Do I make money when good things happen to my customers/consumers/users?
Examples of good things happening to your customers:
Netflix charging per month (with no late fees) versus Blockbuster charging per rental (and making money off late fees) was a business model innovation.
Salesforce charging companies a subscription fee instead of selling higher-ticket, one-time products (which was the status quo in the late ‘90s and early 2000s) was another.
Tesla refusing to partner with car dealerships and sell their vehicles at fixed, easy-to-understand prices was a third.
Do I make money when bad things happen to my customers/consumers/users?
Example of bad things happening to your customers:
Bank of America charging people when they overdraw their bank accounts (overdraft fees) versus Ally offering multiple forms of overdraft protection (like declining payments and giving people 14 days to add more money to their accounts).
Category Designers look to make money in fundamentally different ways than other businesses in their industry. They innovate in the gaps between where the category is and where it should be, and add value in places others failed to see.
Side #3: Category Design
Your company needs a category to market itself within.
What you are trying to achieve is Maximum Viable Category. Or, as we call it, MVC. This is different from a Minimum Viable Product, or MVP. Minimum Viable Anything is a waste of time—and sets you up for playing a comparison game in the market. Instead, you want to create a NEW and DIFFERENT category/market, which you now have free rein to market WITHIN.
To achieve MVC, ask yourself these questions:
What new niche within an industry where I have strong interest/expertise hasn’t been created yet?
Is this niche compelling?
Do I have data or insight telling me there is a strong headwind blowing in this direction?
Is this niche specific enough to customers?
Am I drilling into what exactly this new and different problem is?
Will customers “get it?”
What POV will educate them so they do “get it?”
Does this niche have growth potential?
What might the world look like if this niche becomes the new and commonly accepted way of doing things?
Once you’ve determined where there is an opportunity to CREATE (not “compete”) a new and different future for customers/consumers/users, of course, be smart about product development.
Create an alpha version.
Expose it to a small number of people you trust—ideally your Superconsumers. Make improvements.
Launch a beta program.
Expand the number of people using/testing the product. Etc.
And then, once you’ve refined the problem you are solving and the radically different solution you are creating for the world, THEN launch a Maximum Legendary Product in a new category that differentiates your breakthrough product.
If you are successful at prosecuting all three sides of The Magic Triangle, you will unlock your data flywheel and be well-positioned to avoid The “Better” Trap.