The book says: over time a category will divide and become two or more categories. E.g. computers started as a single category but broke up into mainframes, workstations, personal computers, laptops etc. Cars started as a single category but divided into luxury cars, sport cars, RVs, minivans etc. Companies often don’t understand that and instead think that categories are combining, believe in synergy. Leader can maintain dominance by addressing emerging categories with new brand names instead of using brand name successful in one category in a new category. E.g. when Honda wanted to go up-market it created a new brand, Acura.
See also Eric’s take