Three Dimensional Business Definition

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Defining the business of a company. Explanation of the Three Dimensional Business Definition model of Derek F. Abell. ('80)

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Abell Three Dimensional Business Definition

What is the Three Dimensional Business Definition? Description

The Three Dimensional Business Definition framework from Harvard Professor Derek F. Abell is a model that can be used for defining the business of a company. The definition of a business is an issue that should not be taken lightly. In his book "Defining the Business - The Starting Point of Strategic Planning" Abell says that the standard two dimensional way of looking at a business (products and markets) has serious flaws. He suggests a three dimensional model, with the following 3 axes:

  1. Served Customer Groups. Categories of customers. (WHO)
  2. Served Customer Functions. Customer needs. (WHAT)
  3. Technologies Utilized. The way that the needs are being satisfied. (HOW)

The  business scope  of the example company in the figure on the right is defined as: providing CF1, CF2 and CF3 to / for: CG1, CG2, CG3 and CG4 using: T1 and T2.


Origin of the Three Dimensional Business Definition Model. History

Before Abell it was standard practice to define a business in one of the two following ways:

  • Resource Capabilities. For example: a business could be defined as: manufacturing high value, low priced electronic devices.
  • Programs of Activity. Conventionally in terms of products offered and markets served. For example: a business could be defined as: providing electronic devices for the oil industry. See: Product/Market Grid

Kotler proposes in 1975 to add a supplementary measure of Differentiation to the Product/Market GRID, distinguishing between:

  • Undifferentiated Marketing. A company chooses not to recognize the different segments in the market. Advisable when there is substantial product homogeneity or market homogeneity and/or at an early stage of the product life cycle.
  • Differentiated Marketing. A company decides to operate in two or more segments of the market but designs separate product and/or marketing programs for each. Advisable when competitors are using segmented approaches to the market. And/or at later stages of the product life cycle.
  • Concentrated Marketing. A company tries to achieve a large share of one or a few submarkets. Advisable when the company resources are small and/or when competitors are using segmented approaches to the market. And/or at an early stage of the product life cycle.

Usage of the Three Dimensional Business Definition Framework. Applications

  • Define a business scope at all three of the following business levels:
    • Corporate Level.
    • Business Level.
    • Lower Organizational  Levels.
  • Describe or communicate changes in business definition. See: Product Life Cycle
  • Describe or communicate the business of the competition.
  • Systematically analyze the growth opportunities for a business.
  • Describe or communicate (the evolution of) markets. See: Four Trajectories of Industry Change

Strengths of the Three Dimensional Business Definition Method. Benefits

  • Emphasizes that products are merely a physical manifestation of the application of a particular technology to the satisfaction of a particular function for a particular customer group. The choice is one of technologies, functions and customers to serve. Not of products to offer.
  • Central in the model of Abell is the customer, not the company itself. See: Value Disciplines
  • Framework can be used to describe both the current status and the desired status. The graph is easy to understand for each employee.

Limitations of the Three Dimensional Business Definition Approach. Disadvantages

  • Three dimensional thinking is more complex than two dimensional thinking.
  • Model provides only abstract growth directions.
  • Model does not provide assistance to determine the appropriate scale or size of a business.

Assumptions of the Three Dimensional Business Definition Theory. Conditions

  • Business definition covers the definition of activities at any level in the organization in which some relatedness of resources exists.
  • Individual business definition determines market boundary definition.
  • Market boundaries and business boundaries can and must be defined in three dimensions instead of two.

Book: Derek F. Abell - Defining the Business - The Starting Point of Strategic Planning -


Three Dimensional Business Definition Forum
  Placement of Current Items in Abell's 3D Business Definition Model
Note that normally, one puts the CURRENT served customer groups, served customer functions and the technologies utilized near the Origin (0,0,0) of the axes in Abell's business definition model....
     
 

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Diversification Pitfalls

Diversification of businesses has in many cases resulted in success. An example is General Electric, a very large company that operates in many busine...
Usage (application): Things to Signal and Avoid when Diversifying
 
 
 

In Which Direction Should we Grow our Portfolio?

According to Professor Aneel G. Karnani in 'Mastering Strategy', there's no standard way to gain market value for all businesses. An answer that works...
Usage (application): Portfolio Strategy, Innovation Strategy
 
 
 

Determining the Optimal Breadth of your Product Portfolio

Due to technology changes and a stiffing competition at all levels, historically companies needed to constantly check their portfolio and cut off unpr...
Usage (application): Product Portfolio Analysis
 
 

Resources - Three Dimensional Business Definition Premium

The Importance of a Long Term Focus on the Customer

Ohmae explains the importance of the fundamental belief that all actions of a company need to be good for all concerned, especially the customer.
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Usage (application): Interview Ohmae on the Need for a Long-term Customer Focus
 

Three Dimensional Business Definition Diagram

Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in intranets, websites, books, ma...
Usage (application): Business Definition
 
 

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Compare with Three Dimensional Business Definition: Product/Market Grid  |  Resource-Based View  |  BCG Matrix  |  McKinsey Matrix  |  ADL Matrix  |  Disruptive Innovation  |  Value Disciplines


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