Category-Adjacent Innovation
Enter a proven category, then differentiate just outside its center
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 93%
Category-Adjacent Innovation balances originality with evidence. Instead of assuming that being first is inherently desirable, the founder investigates why a market appears empty and whether previous attempts failed. Existing products in a neighbouring category are useful because they demonstrate recognizable demand and reduce the amount of customer education required. The founder then positions the offering just outside the category's center, preserving familiar cues while introducing a distinct audience, delivery model, capability, or value proposition. The mechanism lowers pioneering costs without forcing the business into undifferentiated competition. It also turns competitive research into a diagnostic tool: competitors validate the problem, failed predecessors reveal hazards, and the adjacent position establishes a defensible reason for customers to switch or participate.
Origin
Extracted from The Jasmine Star Show as Marcus Murphy explained why Five should have comparable products in the market while occupying an adjacent position focused on private athletic communities and education.
Core principles
- 01Being first creates market-education costs
- 02An empty market may signal either opportunity or prior failure
- 03Existing alternatives provide evidence of demand
- 04Differentiation can come from positioning adjacent to an established category
How to run it
- 1
Name the neighbouring category
Identify the established product category customers will use to understand the offering. Describe the familiar job that category already performs.
Pro tip Choose the category customers recognize, not the one that sounds most innovative internally.
Watch out An unclear reference category increases the burden of explanation.
- 2
Investigate the empty space
Determine whether the apparent gap exists because nobody noticed it, because entry is expensive, or because earlier attempts failed. Study abandoned products as carefully as current competitors.
Pro tip Interview former customers or employees of failed entrants when possible.
Watch out Do not interpret the absence of competitors as automatic validation.
- 3
Calculate education costs
Estimate how much effort is required to teach buyers that the problem exists and that a new solution is credible. Compare this with entering a category where the need is already understood.
Pro tip Include sales-cycle length and behaviour change in the estimate.
Watch out Market education can consume more time and capital than product development.
- 4
Choose the adjacent edge
Differentiate through a specific audience, community structure, privacy model, workflow, or delivery mechanism. Keep enough familiar structure that customers can categorize the product quickly.
Pro tip Express the distinction in one sentence that contrasts the product with the category norm.
Watch out A cosmetic distinction will not create durable value.
- 5
Validate demand and distinction
Test whether customers understand both the familiar category and the reason this adjacent offering is better for them. Refine the position before scaling.
Pro tip Ask prospects to describe the product back to you in their own words.
Watch out Interest in novelty is weaker evidence than willingness to adopt or pay.
In the wild
A founder sees that athletes need digital community, education, scheduling, and communication, but sports organizations fear information leaking publicly. Rather than creating another open social network, the company builds a closed platform adjacent to community and learning products. Buyers recognize the existing categories while understanding that privacy and organizational control make this version different.
→ The product benefits from familiar demand while gaining a clear position for athletic organizations.
Common mistakes
Romanticizing first-mover status
Being first can mean paying to educate the entire market before demand is established.
Ignoring failed predecessors
An apparently open market may contain hidden evidence that others tried and could not overcome a structural barrier.
Moving too far from the category
Excessive novelty makes the product difficult to understand and removes the demand signals that made adjacency useful.
Is it for you?
Best for
It is best for founders shaping a novel product in a market that already contains related solutions.
Not ideal for
It is not ideal when regulation, patents, or scientific discovery inherently require creating an entirely new category.
From the transcript
“many times when you're the first person to it, you got to ask yourself two questions. Why am I the first person here?”
“It's expensive because you have to educate the market.”
“I want something that's like in the category, but I can be just outside adjacent to category.”
From the episode
Being Ok When You Don’t Know What’s Next With Marcus Murphy