Why is a multi-dimensional faceted taxonomy better for Business?

As we have seen, we can more closely describe a company and how they operate by using four different hierarchical trees to categorize their clientele, their methodologies, their solutions and their channels. This faceted taxonomy definitely gives us a better view of any particular business, but at what cost.  Our team has definitely found using this taxonomy has been challenging to categorize a given company. The taxonomist must research thoroughly a given business, and then be able to abstract that understanding into the four different dimensions. Another challenge we found in our first search tool, was that the user using the search tool needed to understand how to abstract the kinds of businesses they were looking for into the four different dimensions. These two issues makes us wonder whether it is worth it. (Currently, we are working on software algorithms to make the search more user friendly and to make suggestions from web scraping to help the categorization.) 


We find it is worth it. The reason why is that, unlike NAICS codes, our taxonomy allows us to dig into micro-market views. NAICS is good for broad markets, but not for close views of a given market segment. Looking back to the 2004 Presidential Election, we see that President Bush's team was able to efficiently direct resources by using Microtargeting. The impetus of our taxonomy is Mergers & Acquisitions, and an important part of that process is valuation. To find the potential target company of an acquisition, investment bankers search for recent comparable deals. A task that is impossible using NAICS codes.  With our taxonomy, we can do this. The reason is because we have moved away from the traditional way of viewing "Business" which is in terms of a vocabulary.  Instead, we now can view "Business" as a multi-dimensional space where we can define "Spheres of Competition" to determine "comparables". Stay tuned for more.

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.