Strategic Planning and Framework

Abell's Three-Dimensional Business-Definition Model Abell's three-dimensional business model consists of three variables -- customer needs, customer groups and distinctive competencies. What the model asks the practitioner to consider is who the company is serving, what are their needs, and whether or not the company's competencies are aligned with the needs of those customer groups (Martin, 2015). One of the issues that comes up is the recognition that if there are different customer groups, that different strategies might be required to deal with those groups, as they likely have different needs.

There may also be situations where the customer groups require different competencies for those needs to be met. The value of Reader's Digest was in its subscriber base, which was once at 50 million. Abell's model does not provide value in understanding what it could sell to that group. That group would have been incredibly diverse -- one out of every six people.

Further, Amazon has demonstrated rather amply than the array of products that can be sold online is nearly limitless -- pretty much everything other than cars, guns and booze. What other products could be sent down this distribution channel -- literally hundreds of thousands of them, and by 1994 Amazon was on its way to proving that. Abell's tool is limited to describing what the business already is; it is not useful for planning strategy, but describing it. That is not going to get it done for extending product lines.

Reader's Digest did not adapt; it was limited to what it could promote through its magazines and mailouts, and this proved far less than what could be sold online. Here's the rub -- if Reader's Digest had thought creatively, it could use a tool like this to plug in other ideas. It would just plug in a product, and ask if that product could be sold to its existing customer base, using its existing technologies, and if that product filled any particular customer need.

Ultimately, that ends up being a very long list. Part of the reason is that the market for Reader's Digest was so large. At 50 million subscribers, it was able to sell either a mass market product or a niche product; it had the reach to do either. Reader's Digest would ultimately have to pare down what it wanted to sell at any given time because of the physical limitations of its format. But any product theoretically would work.

The problem with having a subscriber base that encompasses such a broad segment of America is that the magazine found itself unable to pin down a niche market; it opted for mass market goods, but only offered a limited selection thereof. The managers were likely aware that they could sell at the very least tens of thousands of items; but were forced to make choices.

If the subscriber base was more niche, the company would have fewer products it could sell, but it would have a much better knowledge of its market. Reader's Digest could reasonably assume it was in most white middle-class homes, urban or rural, given a market share that big. If it knew more about its subscribers, that would definitely have helped it to adapt better to the changes in the market for mail-order goods. Overall, a model has to lend itself to creative insight to be valuable for strategy formulation.

The Abell model asks you where you are, rather than to identify gaps. Reader's Digest could plug any of tens of.