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:
- Served Customer Groups. Categories of customers. (WHO)
- Served Customer Functions. Customer needs. (WHAT)
- Technologies Utilized. The way that the needs are being satisfied.
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:
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
- 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:
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
- 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 -
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Compare with Three Dimensional Business Definition:
Product/Market Grid |
| BCG Matrix |
McKinsey Matrix |
ADL Matrix |
| Value Disciplines
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