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Create Your Own Category

“The category makes the brand, not the other way around.” –Christopher Lochhead

The Story

It was 1997. Danny rode his skateboard down the middle of the street with his boombox blaring. He reached his house, jumped up, and popped the board into his hand in the middle of the street.

The car behind him screeched to a halt and the horn sounded. It was the first time he noticed it. He waved to apologize but the driver waved him over.

“I could’ve killed you!” shouted the driver.

Danny rolled his eyes. He lived in a small town and the driver looked familiar. “Sorry,” he mumbled and started to walk away.

“No come here!” shouted the driver. “I’ve been meaning to talk to you.”

“About?” asked Danny.

“I hear you design website home pages. They look great, and I need one for my business. How much would you charge?”

Danny sighed. He didn’t want to do another website. The money was good, but the only reason he’d done the others was to see what it was like to make one.

“I don’t know,” said Danny.

“C’mon. Tell me a price.”

Danny decided to say the wildest number he could to make the man say no. “$5000.”

The man studied him and grinned. “You got gumption, kid. Deal! My restaurant is on the corner of 7th and Elm. Meet me there this Saturday at Noon.” He drove away.

Danny couldn’t believe it, he was in business.

From there, Danny’s business ventures started. Web design orders flowed in and he started hiring his friends from school to help him. He taught them web development and then paid them in cool gadgets.

His mom and stepdad grew suspicious when he had a large-screen TV delivered to the home. But they were afraid to ask him about it. They feared he was dealing drugs.

To them, Danny seemed like a normal kid. He played the guitar. He tinkered with computers and video games. He surfed the internet and downloaded songs from Napster.

But then he spent money like a millionaire. Where did he get it from?

When his mom approached him about it, he shrugged it off. “I’m just doing a little computer work for people.”

What she didn’t know was that her teen-aged son was earning $50,000 per month with his side business…

(Scroll to the bottom to read the rest of The Story!)

Category Design, Competition, and Getting Creatives To Do Legendary Work

Christopher Lochhead is the co-author of the Harper Collins’ instant classic Play Bigger: How Pirates, Dreamers and Innovators Create and Dominate Markets and he’s the co-host of the Legends and Losers podcast. He is a former three-time public company CMO and serial entrepreneur.

Chris joined Ian to discuss why category design is the most important skill set for a CMO, why competition is bad, and how to get creatives to do legendary work.

“The people, companies, and brands that we respect and admire the most ALWAYS are the ones that broke and took new ground.”

Listen to the Episode!

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News That Matters:

→ “We’re not exactly in the business of making predictions, but as we write this, we’re eagerly comparing notes on where some of tomorrow’s legendary niches will swirl up or storm through the calm complacency of a mature, mild-mannered market segment. We see mega categories and whole industries ready for nichetastic fragmentation! And we’re excited to report that we see oodles of opportunity for those courageous enough to step forward.” — Niche Down: How To Become Legendary By Being Different.

A bank you can trust? At this new online banking platform, customers are the owners. 💰

3D printed heart valves are the latest in biomedical tech that could save lives. ❤️

A study conducted by The University of Bristol has identified how birds and dinosaurs evolved to have such striking color diversity. Learn more. 🦜

NASA’s Voyager 2 probe has exited the heliosphere and entered interstellar space. Here’s what that means. 🚀

Are you working at the right company? These are the companies with the best company culture of 2018. (Our only quarrel is that they forget to include The Mission right at the very top.) 😉

Keep your eyes and ears open because the Next Great Innovation for Your Business Might Come From Another Industry. 👀

How do you get your news? A new study from Pew Research has found that social networks have passed print newspapers as the primary source of news. To be honest, we’re a little surprised it didn’t happen sooner. 🗞

“The rise of networks will bring about a similar paradigm shift — akin to what we saw in the 19th century. Rather than put our money into corporations, we should invest in networks because they bring democracy, an abundance of wealth, and an improvement in everyone’s standard of living.” -Corporations Are Dead by Christopher Lochhead

What’s the best way to have a lasting impact? Investing At The Community Level Is The Best Way To Better The World. 🤗

The Story (continued)

… After a few years, Danny decided to expand his business. He bought several servers and set them up in his closet. But as the business grew, he quickly ran out of space. At 22, he convinced his family to move out so he could use the whole house as a workspace.

Things were looking good. Until one day he got a letter in the mail. It was from the government, and they wanted their tax money… $200,000 of it to be exact.

Danny’s heart skipped a beat. He’d spent all the money or invested it back into the business.

Panic seized him. He was too young to know much about taxes and dodged paying them for years. Now it had caught up with him. He thought he would go bankrupt. Worse than that, he realized his 25 employees would lose their livelihood.

Luckily for Danny, larger companies in the area started showing interest in buying all four of his companies. He said YES, and within a few months, he went from facing personal bankruptcy to having a few million dollars in the bank.

He decided to treat himself and bought a candy-apple red Ferrari and a new condo in the city. Danny spent his time partying. But his life wasn’t going as well as outsiders might have perceived. Things started to turn dark. Partying took its toll and depression set in. He wasn’t happy.

Danny knew he had to make a change. He sold everything and bought a small cabin deep in the woods. He took long walks, read, meditated, and played his guitar. After several months, the depression lifted. Danny started to feel optimistic and curious again.

He asked himself: What would the next five years of his life be like? What passions could he turn into a business?

He had only two passions that he didn’t think he could get tired of: Music and technology.

It was time to make his own opportunity. He reached out to his former business partner, Martin, and told him about his idea. Martin offered to join him and invest.

It was 2006. They had a seed of an idea and knew how to get started. They hired a handful of friends to help.

But no one in the music industry wanted to talk to them. As they tried to secure songs to showcase in their app, they received a tidal wave of rejections.

They were confident they were onto something special. They just needed someone to listen to their story and catch their vision. So they kept calling. And calling. And calling.

There’s something Zen-like about two-and-a-half years of constant rejection. Danny was preparing for the world to catch up with the truths he had already stumbled on.

The only way he could get companies to visualize the model was to show it for them. But without the rights to use any music, he couldn’t demo it.

So he did what came naturally to him — what he had learned to do as a 14-year-old entrepreneur with gumption. He leapfrogged the rules and pirated some tracks. The irony is… it worked.

The industry execs got it. The musicians got it. And he showed them how they could earn money from his service. Labels and musicians were in.

All they needed now was a name for the company. During a last-minute brainstorming session before the launch, Danny made a name suggestion. Martin misheard it but purchased a domain name for what he thought he heard.

When he showed Danny, it wasn’t the name that he suggested. In fact, neither of them could remember what he suggested… but he liked the name and domain Martin purchased so they rolled with it.

Later, they decided to explain the name as a combination of “spot” and “identify.”

Spotify was born.

At age 25, Danny… Daniel Ek was on his way to changing the music industry — by working side-by-side with the artists and record labels.

Daniel’s motto is “Think it, build it, ship it, tweak it.” It’s been his M.O. since his youth. And his North Star as he guides Spotify through the waters of growth and their very recent IPO.

By all rational arguments, Spotify shouldn’t have worked. The music industry wanted nothing to do with digital media or streaming or the Internet.

Most people would’ve given up when the number of rejections started to mount. But Daniel didn’t care about the math. He said, “We led with our conviction rather than rationale, because rationale said it was impossible.”

So where do your convictions lie? How many opportunities have you passed up because you couldn’t rationalize them?

To talk about business building and category design, we invited on Christopher Lochhead, co-author of Play Bigger and Niche Down. The greatest opportunities might be nearby… maybe they’re already in our network, or in our passions. Maybe all we have to do is learn the right skills, build solutions, and be able to endure the word “no” hundreds of times.

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