Why the North American Industry Classification System (NAICS) is no good?

When navigating a database of businesses, you need a taxonomy in order to find companies in an industry you are interested in. You would think that the NAICS would be ideal, however in practice none of the commercial databases use it. The reason is found on the US Census web site.


As stated on US Census web site, "The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy." and "NAICS was developed under the auspices of the Office of Management and Budget (OMB), and adopted in 1997 to replace the Standard Industrial Classification (SIC) system. It was developed jointly by the U.S. Economic Classification Policy Committee (ECPC), Statistics Canada , and Mexico's Instituto Nacional de Estadistica y Geografia , to allow for a high level of comparability in business statistics among the North American countries."


The reason that it is not useful is that it is used to track broad trends. When you need to analyze business segments of our market you will see that a finer grained and richer taxonomy is needed. I have started this blog to explore this issue as my team and I continue to tackle the issues. Stay tuned.