Are You The King Of Your Category?
By Wilson HC Chew, Principal Consultant & CEO, StrategiCom
& Cheryl Tan, Consultant, StrategiCom
22 Jun 2007

Market leadership is a highly coveted status. Regardless of the industry or the size of the organisation, every company wants to be the leader in its field; a king in its category.

The best of business-to-business (b2b) companies aspire to be undisputed. Global giant Microsoft owns an enviable 97% of the operating system market. Other categories also boast role-models like IBM, HP, Xerox, Boeing and Otis who are privileged leaders in their respective market category of corporate computers, printers, photo-copiers, jumbo jets and elevators.

Smaller b2b companies are more often content to just be leaders in their pack and perhaps stay hopeful that they too can play in the big international league one day.

In essence, being a leader IS a big deal. The fuss about being a leader stems from obvious benefits that come along with status. The world puts leaders on a pedestal and reveres while competitors can only watch as customers automatically walk through their doors while strategizing and scheming ways to out-do these leaders.

When you are a market leader, you are practically king of your kingdom of customers. The stronger your reign, the harder it is for your enemies to overthrow you. So yes, the first and primary objective is BEING king. While many will say that the size of your kingdom matters, expanding your boundaries is a secondary issue you can worry about after being king. In a world of business and brands, “It is better to be a big fish in a small pond than to be a small fish in a big pond”.

But How Do You Get To Be King?
The answer is simple. As history of the business world would prove, brands that get into the market first have a higher success rate of being king of their category in the long-run.

Just like the pioneers who conquered lands, being the first to stake claim on your market is the easiest way to be king of that kingdom. As first rulers of the kingdom, you can establish a strong foot-hold that makes it tough for later entrants to break the leadership bond you have built with the market; being first in the market only gives you the right to rule. If you do not capitalize on your first mover advantage to build that foot-hold in the mind, being first wouldn’t matter.

But markets do get saturated with competitors and when it is so, what do you do? You create your own market; your own category.

Creating Kingdoms
When markets are filled with players; do not be fazed. Competition is normal in business and when it happens, you migrate by creating new markets of your own; new categories. Let’s look at some examples.

Keppel FELS and SembCorp Marine - The Battle in the Offshore & Marine Engineering category

As most Singaporeans are well aware, the economic history of Singapore has since her founding in 1819 been closely tied with the maritime industry. Singapore expanded into offshore construction in 1969 when oil exploration intensified in South-east Asia . Her proximity to the drilling sites and her well-developed engineering capability made her the natural choice for offshore fabrication.

Between 1970 and 1984, players in the industry produced 123 jack-ups, semi-submersibles, drill barges, tenders, drillships and semi-submersible accommodations. For a country which does not possess a single barrel of oil, this is quite an achievement. Singapore was launched into rig building by the fledging Far East Shipbuilding Industries Ltd. The astute shipbuilder of small crafts reoriented its focus when it was barely three months old after it noticed that the oil search had intensified. Far East Shipbuilding Industries Ltd (FELS for short) is today also known as Keppel FELS Energy & Infrastructure Ltd (commonly known as Keppel FELS) a public company listed on the Singapore Exchange (SGX). It is today a world leader in the rigbuilding industry . Why is this so? Simple. It was the first to get into the category.

Is there no room left for other giants? Certainly not, as proven by SembCorp Marine.

Situated in the heart of an archipelagic region, Singapore is ideally suited to be a shipbuilder for regional trading, short-sea excursions and offshore oil and gas production. Hundreds have been built since boat building began on the banks of the Singapore River and the foreshores of Tanjong Rhu. Technically, it is well within the capability of Singapore shipyards to go for bigger units, as Jurong Shipbuilders did in the 1970s.

At this time, Jurong Shipyard was working on prototype tankers, container ships and multi-purpose ships for the regional market, which place strong emphasis on reduced costs and maintenance. As its then managing director K K Tan said, "We reduced fittings that are not vital to a ship - the expenditure items. The scantling is heavier to ensure a long life. Such vessels would have an economic life of 25 to 30 years.” Jurong Shipyard became renowned for its specialist capabilities in Shipbuilding and Repair. Today, SembCorp Marine (Jurong Shpiyard’s parent company) is rated as one of the best performing public companies on the Singapore exchange and a world leader in Ship Building, Repair and Conversion.

The moral of the story is this. Both Keppel FELS and SembCorp Marine today do provide most of the services and engineering capabilities in the offshore and marine category. They build vessels, repair ships, convert vessel utility and construct oil rigs. They are both strong within the value chain of offshore and marine construction and engineering. But their brands are renowned for different categories; Keppel FELS for Rig building and SembCorp Marine for Ship Building and Repair.

Apple vs Sony in the portable music industry

From the late 1970s when portable music first took its form in the Boombox, to the early 1990s when the MiniDisc player was the most advanced form of portable music, Sony ruled the portable music kingdom. In 1997, the first MP3 player from South Korea hit the market. This was the beginning of the age of digital music. At this point, Sony still led the portable music industry with its Discmans and MiniDiscs. It was only in 2001 with the arrival of Apple Computer's iPod was the industry truly revolutionized. Though Apple wasn’t the first entrant to the market, its success in building mindshare in the new category of MP3 players literally threw Sony out of the game. Sony’s Discmans and MiniDiscs were considered obsolete. The proliferation of iPods has since made it the ubiquitous form of portable music players.

2 Strategies That Can Be Used To Create New Categories

1) Divergence: In this method, a new category is created by splitting off from the original category. One way of doing so is by finding uncontested markets where your brand can be first. This was what Dell did when it went up against IBM. It looked to the consumer market largely ignored by IBM and further differentiated itself through its value proposition of lower costs through the sale of PCs direct to customers. In the majority of scenarios, divergent categories can co-exist with the original and with each other.

2) Evolution: The method of evolution refers to a gradual and linear process where a new category replaces the old one. Evolution usually kills the existing category when the new one comes along. This was the path taken by Sony during its near 2 decade reign of the portable music industry with its evolution of the Boombox in the late 1970s, to the Walkman, to the Discman and finally to the mini-disc in the early 1990s. When a new category of portable music players like the Discman came along, it practically killed off the use of the older category Walkman. This same evolution tactic made famous by Apple’s iPod successfully revolutionized the leadership battle of brands in the portable music industry.

The PSC Story
Cases like those above are examples of late-entrant brands that seek to establish a place in the mind of markets already dominated by incumbent pioneer kings.

This is perhaps one of the most common reasons of creating your own kingdom, because of the fervent belief that without owning your own space in the mind, you will have little chance of leadership success.

In Singapore’s context, one of our very own home-grown companies faced such a challenge. This b2b and b2c (business-to-consumer) hybrid company’s heritage lies in the Provision Supplies business – PSC Corporation Limited.

The purpose of creating a new category for PSC Corporation Limited stemmed from a unique situation. Unlike new brands, PSC already owned a category – Provision Supplies – which had served them well for more than 30 years since their inception.

PSC Corporation Limited was first known as Provision Suppliers Corporation, one of Singapore’s pioneer trading and distribution companies, supplying basic consumer and household products termed as provision supplies. These include food and beverage items such as rice, canned food and drinks to personal care items such as soap and detergent that served the living necessities of consumers.

As the corporation grew, they added to their assets a chain of retail franchised mini-marts (now known as i-econ minimart). This chain contributed to PSC’s distribution function of making their products available to the masses. The product brands that PSC now carries include a mix of principal as well as their own proprietary brands.

Thanks to highly successful marketing tactics that included a popular variety show – PSC Nite – strong mindshare for the group was built. In the minds of many, PSC was associated to Provision Supplies.

Fast forwarding to the new millennium, the nature and origins of provision supplies have now been relegated to a lowly perceived and sunset business. In comparison to the popular and glamorous likes of fast-moving consumer goods (FMCG) companies such as Procter & Gamble, and Unilever, companies like PSC pale in terms of its perceived growth potential and appeal of making waves in the financial markets going forward.

If you think about it, the business of PSC is not unlike that of Procter & Gamble or Unilever. Perhaps it lacked a little of the marketing edge to create an oomph factor that helped spur the success of its US based role-models. What PSC needed was a re-categorization of its business, away from Provision Supplies.

In developing this new category, StrategiCom basically considered:

1. The business and strategic directions of PSC going forward
The present day PSC has expanded from distributing mere provision supplies to a variety of FMCG products and services used by households – including items of daily use such as tissue paper. They have also included other forms of consumer businesses like healthcare and media services, in addition to a portfolio of non-consumer related businesses as well.

The challenge was to find a category that would concisely define PSC’s business activities and its function. It is this new category that will represent the business segment or space that the PSC brand occupies in the mind going forward.

For a brand to achieve high association to a category (and vice versa where a category has high association to a particular brand), a precise balance needs to be reached in terms of the brand’s scope where:

• The defined space cannot be overly broad as this would allow the term to include other brands with similar businesses and functions.

• It has to withstand the long-term strategic and growth directions of a brand. Thus, the category cannot be overly narrow such that it limits the expansion of the brand in the future.

2. Current occupied spaces in the mind
Though the function of PSC bears large degrees of similarity to the likes of Procter & Gamble and Unilever, the world has come to associate category names like “FMCG” and “consumer lifestyle products” to such international giants.

PSC would have no chance of overtaking the category mindshare that these incumbents owned, if it tried to venture into the same space. Thus a new category not currently occupied by any company had to be found.

PSC: The Consumer Essentials Group
Despite the seemingly multi-faceted nature of the present PSC, by re-visiting the group’s core focus, it was clear that their primary function was to cater to the living necessities of consumers. For this reason, StrategiCom found the perfect fit for PSC – “Consumer Essentials”.

Firstly, it was narrow enough to exclude competition from consumer companies in the lifestyle and luxury sector. PSC wouldn’t be going up against brands like The Body Shop, whose all natural personal care products crosses the boundary of basic essentials and goes towards satisfying an enhanced lifestyle. PSC also wouldn’t be playing in the league of Vertu mobile phones that spell obvious luxury.

Secondly, the category allowed PSC to progress with the evolution of society’s affluence, expanding the portfolio of product offerings that it has to meet the needs of mass consumers. For instance, prior to the early 1990s, the use of tissue paper was considered less of a necessity than it is today. This is a need currently served by PSC through its own Beautex brand of tissues. With time, we can expect society to continue to evolve in increasing sophistication. At present, health and media services are already considered essentials in the lives of many. This is another set of needs currently met by PSC. Even mobile phones are considered essentials to the majority of consumers (a business PSC can consider venturing into. While their category limits them from going into luxury mobile phones like Vertu, brands that serve the needs of the masses are well accepted in constraints of the category). As PSC grows in future, it is able to do so in tandem with the affluence of society by providing for the standard of living defined by that day and age.

Lastly, this was a category not owned and unclaimed by any company or brand. A search through Google showed no stake on this category. Most importantly, despite the term being a new and original coinage, it is easily understood by the general public.

In the re-branding of PSC, StrategiCom has now positioned them as Singapore’s leading consumer essentials group that is committed to providing for the daily needs of consumers. As living standards of consumers evolve with society’s changing affluence, they have evolved in tandem to stay relevant.

Today, the PSC Group is a fledging Pan-Asian “Consumer Essentials Group”, well-equipped to provide living essentials for the consumer of today and in the future. The group’s slogan “for your living essentials” reflects their commitment towards the provision of living essential needs of the modern consumer across the region.

Authors of this article

Cheryl Tan is a Consultant with StrategiCom; she is based in Singapore

Wilson Chew is the CEO of StrategiCom and the Principal Consultant covering Asia