Outliers: How to Build a Breakout Business in a Declining Industry
The Paradox of Decline
Conventional wisdom says growth lives in expanding categories. Yet some of the decade’s most magnetic brands were forged in markets everyone else had given up on: Spanx in a shrinking hosiery aisle, Dollar Shave Club as cartridge razors stagnated, Oatly as dairy milk per-capita consumption trended down, Casper while mattresses felt commoditized, and Polaroid Originals resurrecting instant film.
These companies didn’t “defy the data.” They reframed the data:
They separated structural decline (end of a format) from perceptual decline (end of imagination).
They found non-consumption and under-served jobs-to-be-done hiding inside tired shelves.
They used brand narrative, distribution hacks, and format innovation to re-price value.
A Simple Diagnostic: Is the Category Really “Dead”?
What’s declining? Units? Revenue? Per-capita use? Shelf space? Or just buzz?
What’s constant? The underlying human job (comfort, confidence, convenience) seldom vanishes.
Where’s the friction? Poor fit, confusing sizing, boring tone, bulky packaging, unfair pricing.
Who’s ignored? Non-buyers, stigmatized buyers, new use-cases, or cultural tribes.
What’s the wedge? Material science, format/UX, pricing model, identity, community.
Case Patterns (with Teaching Charts)
1) Spanx vs. Hosiery: From Commodity to Confidence Tech
Hypothesis: The hosiery “decline” masked a premium problem-solver opportunity (comfort, smoothing, confidence) that mass brands ignored.
Repeatable Moves
Re-define the frame: From “hosiery” to invisible technology for daily confidence.
Material/fit innovation: Solve pinching/rolling—engineer comfort as the hero.
Founder-led storytelling: Authentic use-case demos beat category jargon.
Retail re-segmentation: Earn a distinct shelf + price tier with education.
Class takeaway: If a category is “boring,” it’s often underspecified. Add a new spec customers care about (comfort index, confidence index, sustainability grade) and price to that spec.
2) Dollar Shave Club vs. Cartridges: Distribution Is Product
Hypothesis: Consumers weren’t loyal to blades; they were captive to a distribution choke-point and a confusing, expensive system.
Repeatable Moves
Price + convenience bundle: Subscriptions shift the value equation (fewer decisions, fewer trips).
Tone counter-positioning: Humor punctures incumbent seriousness, creating brand salience.
Unbundle the “system”: Offer just what’s needed at transparent prices.
CAC arbitrage: Viral video lowers acquisition cost; ops excellence sustains LTV.
Class takeaway: In many “declining” CPGs, the product is fine—the buying experience is broken. Fix the experience and you own the category story.
3) Oatly vs. Dairy: Culture Eats Category Curves
Hypothesis: As dairy per-capita inches down, demand doesn’t disappear—it mutates. New values (ethics, climate, gut health, taste) write a new purchase logic.
Repeatable Moves
Create a why moat: Planet + performance + playful brand voice.
Barista-first GTM: Win the café as a proof point channel; expand to retail with credibility.
Packaging as media: Cartons talk like people; education at the point of pour.
Portfolio stretch: From milk to cooking cream and ice cream—own use-cases, not just SKUs.
Class takeaway: Declining incumbency ≠ declining demand. Win the cultural upgrade path.
4) Casper vs. Mattresses: Rewriting the Purchase Script
Hypothesis: The category wasn’t demand-constrained; it was trust-constrained (showroom games, high-pressure sales, price opacity).
Repeatable Moves
Friction kill-shots: 100-night trials, free shipping/returns, compressed delivery.
SKU minimalism: Cognitive load is a tax; fewer choices convert better.
Own the channel mix: DTC proof → selective retail/pop-ups once the story lands.
Mind the midpoint: As imitators crowd in, evolve beyond the box (sleep ecosystem).
Class takeaway: In “flat” categories, trust engineering can be the primary innovation.
5) Polaroid Originals vs. Instant Film: Nostalgia with Utility
Hypothesis: The core job (tangible keepsakes + social rituals) remained unsolved in the smartphone era; scarcity and ritual create value.
Repeatable Moves
Ritual design: Slowness and tactility are features, not bugs.
Community before performance: Imperfection as aesthetic.
Aftermarket revival: Re-manufacture film, refurbish cameras, curate creators.
Scarcity pricing: Limited runs as revenue and brand theatre.
Class takeaway: In “obsolete” formats, lean into the meaning the format carries, not specs it can’t win.
The Outlier Playbook (12 Levers)
Re-scope the Job: Define the job-to-be-done more broadly than incumbents (confidence, calm, convenience, identity).
Invent a New Spec: Introduce a measurable promise (fit score, comfort index, planet points, time saved).
Counter-Position Tone: If the aisle is sterile, be human; if it’s noisy, be calm—own the emotional whitespace.
Distribution Innovation: Subscription, SMS reorder, barista/clinician channels, TikTok shop—channel = differentiation.
Format Flip: From liquid to stick, from bulk to minis, from hidden to display-worthy packaging.
Friction Removal: Trials, guarantees, plain pricing, onboarding content; trust is a feature.
Community as Proof: Win tastemakers/micro-communities before mass retailers.
Starter SKU Discipline: One hero solves one pain, then ladder up.
Story as Moat: Founder narrative + visual world + memes → memory structures.
Unit Economics Early: Gross margin ≥60% in CPG or a credible path via mix, repeat, and ops.
Earned Authority: Reviews, credible citations, retail pharmacist endorsements, certifications.
Portfolio Logic: Expand by use-case adjacency, not vanity SKU count.
How to Hunt Your Own “Outlier in Decline”
Data Sweep: Pull multi-year signals (units, Google Trends, review sentiment, shelf facings). Look for flat/declining macros with rising micro-intent (e.g., “comfort,” “vegan,” “fragrance-free”).
Friction Interviews: Five 30-minute calls > 500 surveys. Document workarounds and rage moments.
Spec Sprint: Can you define a new spec customers will immediately understand and pay for?
Wedge Channel: Identify a niche where your story is obvious (e.g., barbers, pilates studios, indie cafés, pharmacists).
Minimum Viable Brand (MVB): One SKU, one promise, one page, one video.
Trust Stack: Trial + guarantee + transparent pricing + credible third-party proof.
Unit Model: CAC ceiling, expected repeat, contribution margin by month, breakeven cohort.
Final Word
Decline is often misdiagnosed demand, not destiny. The winners here didn’t chase growth—they manufactured it by rewriting what counts (the spec), where it’s bought (the channel), and why it matters (the story). Teach your founders to look where others avert their eyes—and to measure what others forgot to value.