OUTPUT
Canonical method
Strategic business areas (SBAs): divide the business to make decisions
What must be established
A useful analysis keeps its controls visible.
- 01
Define the customer groups, functions served and technologies or know-how mobilised.
- 02
Compare competitors, success factors, economics, value chains and risks before separating two activities.
- 03
Verify that a strategy, resources and a review rule can be assigned to the proposed scope.
Decision reference
Make the next choice more explicit.
DECISION SUPPORTED
When do two activities require genuinely different strategies and resource allocations?
DELIVERABLE TO KEEP
An SBA map showing boundaries, separation criteria, shared dependencies and the associated allocation decisions.
NEXT ELEMENT TO EXAMINE
Marketing and strategic segmentationExplore →Define the arena in three dimensions
Start by distinguishing who is served, which function is performed and which technology or combination of capabilities delivers it. The current product is not enough to define the arena when several solutions address the same need.
- Customer groups
- Functions served
- Technologies and capabilities
- Substitutes
Test separation or combination
Two activities warrant separate SBAs when their competitors, success factors, value chains or economics impose incompatible choices. Strongly shared critical assets can instead make separation artificial.
- Competitors
- Success factors
- Economic structure
- Shared assets
Connect the boundary to a decision
Each proposed SBA must support its own options, resource commitments or withdrawals and performance monitoring over a comparable scope. A division that changes no decision adds only a label.
- Specific option
- Resources
- Accountability
- Review rule
Example: decide whether two activities form one SBA
Two offers sold to the same customers do not necessarily belong to one SBA. If their technologies, competitors, success factors and critical investments diverge, the grid tests a separation. A shared platform, brand or critical capability can instead justify joint governance.
- Comparable customers
- Different technologies
- Success factors
- Shared dependency
DECISION ASSET
Boundary test for a strategic business area
The grid compares two activities by arena, success factors and decision autonomy before proposing a separation.
Arena
- Input
- Customers, functions, technologies
- Check
- Do all three dimensions diverge?
- Output
- Proposed scope
Competition
- Input
- Competitors and substitutes
- Check
- Do customer trade-offs differ?
- Output
- Competitive arena
Success
- Input
- Costs, access, capabilities
- Check
- Do the key success factors change?
- Output
- Economic logic
Autonomy
- Input
- Resources and accountability
- Check
- Can a distinct decision be made?
- Output
- Separation test
- Abell, Defining the Business, 1980 (opens in a new tab)Foundational work defining a business through customers, functions and technologies.
- Day, Strategic Market Analysis and Definition, 1981 (opens in a new tab)Article connecting market definition with units relevant to strategic planning.
MOVE FROM ANALYSIS TO YOUR DECISION
Produce a testable decision mandate
MOVE FROM ANALYSIS TO YOUR DECISION
Produce a testable decision mandate
RETURN TO THE DECISION SYSTEM
See the canonical definition of marketing strategy→