Sizing The Category Prize: How To Run A Size Of Prize Analysis To Understand Your Category’s True Potential

It’s not about how big the category was in the past. It’s about how big the category will be in the future.

Arrrrr! 🏴‍☠️ Welcome to a paid edition of Category Pirates. This foundational series shares category design principles, strategies, and actionable frameworks to help you design new and different categories. Thank you for reading. And, of course, forward this mini-book to anyone who you think needs to hop aboard the Pirate ship.

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Dear Friend, Subscriber, And Category Pirate

As young Pirates, we learned not to dive into unknown waters before asking several important questions:

• Will I be swimming with sharks or with dolphins?

• How deep are we going?

• What’s the dive plan?

The same thinking applies when you jump into a new and different category. 

Before you dive, it’s crucial to ask:

• What new and different abundance will this category provide?

• How deep is the profit potential of this new category?

• How big is the category going to get?

The last question is the most important. 

It’s not about how big the category was in the past. It’s not about how big the category is today. It’s about how big the category will be in the future. 

In the business world, this is called “sizing the prize.”

Investors want to see the “prize” (the total addressable market or TAM) before buying a stake in your company. Executives want to see the prize before making a big strategic investment. Entrepreneurs want to see the prize before quitting their day jobs and going out on their own. Employees want to see the prize before giving their precious time and talent to a company whose stock options might be worth a lot (or very little) in the future. 

It’s clear everyone benefits from knowing a category’s potential.

But there’s one reason why this analysis is so important to Category Designers.

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Want to listen to this mini-book instead? Head to the audiobook version, available to all paid subscribers.

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A Size Of Prize Analysis Is The Critical Catalyst For Meaningful Market Capitalization Growth

As pirates, you know savvy growth investors don’t buy your company’s PERFORMANCE in an existing category. They buy your POTENTIAL in an exciting, emerging, and fast-growing NEW category that is creating a different future. And it’s your job to sell them on that potential.

You do that by running a size of prize analysis, which drives growth in 4 ways: 

1. It adds credence to your words, story, and POV of your new category.

2. It adds clarity to your #1 priority, so you avoid “shiny new toys” and strategically build the mission-critical beachhead you need to dominate the entire category.

3. It adds conviction to your actions, so you go big when building the category.

4. It accelerates all outcomes, which increases your credibility, conviction, and clarity.

Together, these factors help drive the valuation of your category and company. 

This simple equation sums it up: POV Credence + Priority Clarity + Convincing Actions + Accelerated Outcomes = Enduring  Market Cap Growth.

Now, some of you might see the word “analysis” and want to jump overboard. Don’t. There’s more to this process than collecting data and crunching numbers—it’s not just for analysts and investors. In fact, the analysis is most useful when you tell a story about it.

Why should you care about sizing the prize? 

We don’t say this often, but….

Put down your rum, sober up, and pay attention to this mini-book.

Size the prize is for everyone in business. Employee. Executive. Entrepreneur. Writer. Solopreneur. Marketer. Consultant. Ignore this at the peril of your career. 

You might still have doubts, so we’d like to squash those by addressing a few common misconceptions: