Category creation is a business strategy that focuses on positioning and evangelizing a brand new problem as well as its solution in the marketplace. The offering of these companies is completely different and new, something that the market has never experienced, creating a single category the winner of which they are, themselves. This requires the creator to identify the problem, design its solution and educate the market about it. 

For startups that create a new category, the value of dominating a market while scaling can also reap operational benefits. This can consequently result in them having greater access to more funding and more resources which can help them attract good talent. This naturally converts to higher market share and higher valuation multiples.

Companies like Uber, Netflix, Spanx, Airbnb and more created new categories and aced it in one go. These companies did not rely on chasing market shares in pre-existing markets but brought a fresh perspective to the consumer. They changed how people think and perceive a certain problem. They focused on rethinking standard approaches to these problems and opening up new and creative ways to deal with them.

For e.g. Netflix did not focus on competing with the Hollywood and Bollywood of the world, rather changed attitudes towards media and entertainment consumption. This put Netflix in such a powerful position as this platform now knows more about video consumption habits than Disney does. It has a flywheel that spins revenue as well as data.

However, carving out a new market and bringing a product/service to cater to this market is not a piece of cake. While today we cannot even think about functioning without these essential services, initially it was a hard walk for the companies to explain to people why the traditional ways were no more a viable option and they should switch to these new alternatives. A unique marketing strategy needs to be devised in such a scenario that is not only convincing enough but also interest for it to grab people's attention. A lot of costs are also involved in educating the customers about these new alternatives and how it can benefit them. Some people do not get it right away since these are problems that are not on top of mind for a customer. 

While category creation comes with its own challenges, its one of the best ways to enter the market and move the path of a long-term success.