“If you really want to do category building, you actually need some competitors. In some ways, you want to team with them to create the category, and that’s a bit counterintuitive,” says Godard Abel, co-founder and CEO of G2.
This unexpected advice comes from a man who’s overseen the creation of over 2,100 software categories on G2, the world’s largest software marketplace. But why would a SaaS founder want to collaborate with competitors?
Lesson #1: The Myth of the “Category of One”
Many founders dream of creating a unique category for their product. Godard debunks this notion:
“One of the most basic rules, and some entrepreneurs are like, ‘Oh, I have this really special thing. I’m a category of one.’ And of course, that never works.”
The reason? Buyers aren’t looking for unicorns. They’re looking for options. Godard explains:
“Buyers of software, you at least want, let’s say three choices, right? If not more.”
This insight challenges the conventional wisdom of differentiation at all costs. In B2B software, being utterly unique isn’t always an advantage.
Lesson #2: The Power of Collaborative Category Creation
Godard shares a compelling example of successful collaborative category creation:
“I remember I was recently talking to Sangram, he was one of the co-founders of Terminus, and now he’s leading GTM partners that advise on go to market strategies. But when he’s building Terminus and they help create ABM, account based marketing. But I remember he went to a bunch of competitors, including Jon Miller, who’s now with Demandbase, he was starting his own ABM vendor, but he said he went to ten of his competitors and said this was like in 2015. He said, hey guys, let’s all call it ABM, let’s all call it account based marketing.”
The result?
“In hindsight, that was brilliant, right? Because now account based marketing has become huge. And now we have like six subcategories, like ABM Execution, ABM ads, et cetera.”
This approach isn’t just about playing nice. It’s about creating a more receptive environment for your product. Godard reveals G2’s perspective:
“If you just come say category one, we’ll say, no, thank you. But if you come with five to ten well funded, cool competitors, we’ll say, hell yes.”
Lesson #3: The Benefits of Collaboration in Category Creation
- Market Education: Multiple companies can educate buyers more effectively than one alone.
- Accelerated Adoption: A unified front lends credibility, potentially speeding up category acceptance.
- Ecosystem Building: Collaboration can lead to complementary products, creating a richer ecosystem.
- Differentiation Within Collaboration: Companies can still stand out through product features and customer service.
Lesson #4: When Solo Category Creation Goes Wrong
Godard shares a cautionary tale from his own experience:
“We were actually creating CPQ. It didn’t exist yet. And honestly, we almost went bankrupt and that took like ten years.”
Lesson #5: The Alternative: Drafting off Existing Categories
If collaboration isn’t possible, Godard suggests another approach:
“Usually what I recommend to founders, one thing is usually it’s easier to first draft off an existing category,” Godard advises.
He illustrates this with his experience at Steel Brick:
“CPQ existed, lots of people were buying, right? So we just said, hey, we’re just next gen CPQ and drafted off existing demand in the existing category. And honestly, that’s just so much easier if you can do it.”
This strategy allows you to tap into existing demand while still differentiating your offering.
The Path Forward for SaaS Founders
- Rethink Uniqueness: Focus on being the best within a recognizable category, not being utterly unique.
- Embrace Collaboration: If you’re truly creating something new, consider reaching out to potential competitors to define the category together.
- Educate the Market Collectively: It’s often more effective and less expensive than going it alone.
- Grow the Pie: Sometimes, growing the category is more valuable than fighting for a larger slice of a small market.
Godard’s approach to category creation challenges the nature of competition in SaaS. It suggests that sometimes, the best way to succeed isn’t to outcompete everyone else—it’s to bring everyone along with you, growing the market for everyone’s benefit.
For SaaS founders navigating category creation, this collaborative mindset offers not just a strategy, but a paradigm shift. It’s an invitation to see potential allies where we once saw only competitors, and to focus on market expansion rather than just market share.
In the end, category creation in SaaS isn’t just about having a unique product. It’s about understanding market dynamics, buyer psychology, and the power of collective action. By embracing these principles, SaaS founders can increase their chances of not just creating a category, but creating one that thrives.
Listen to the full interview with Godard Abel:
How B2B Market Categories Are Created with G2’s Godard Abel (Behind the Category)