How should government categorise or segment businesses?

[Originally published on the Australian Government Public Sector Innovation Network under a Creative Commons 3.0 BY AU licence]

There are over two million businesses trading in Australia. Within that large number, there are going to be lots of different categories of shared characteristics and interest.  How can government best divide this big group into smaller groups of common experience? And what groupings should be used when?

One of the areas we at DesignGov are looking at in our project on business/government interaction is this question of segmentation. Just as businesses divide their market into different segments of consumers with common needs/characteristics, governments and individual public sector agencies need to split that large part of the economy called ‘business’ into different segments to engage and interact productively.

This segmentation may be in order to identify how to best communicate with different groups of businesses (e.g. to target those firms that particular services or rules are relevant to). It may be to understand the make-up of the economy and how different parts will respond to events and changes. It might be to understand the different journeys experienced by businesses and where, if anywhere, government may need to intervene. Regulatory agencies might need to understand different segments in order to know when and where to direct resources to best facilitate compliance with the law. It might be to understand common problems, or to understand factors of success. Or it might be for a number of other reasons, reflecting the wide range of responsibilities of the public service.

There are a number of ways that public sector agencies can, and already do, segment businesses. Some of these include:

    • By geography (e.g. which State/Territory does a business mainly operate within)
    • The purpose or mission of the firm (e.g. does the firm want to grow or stay at its current size? Is the firm a social enterprise? Is it looking to commercialise an idea and then licence the technology or be bought by a larger company that can roll-out the technology?)
    • Who is the business selling to (their target market), and how are they selling to that target market (e.g. direct, online, through intermediaries, through licensing)
    • The capability or developmental stage of the business
    • By the process the business is undertaking or by the activity it is interacting with government on – e.g. as a supplier, as a stakeholder, as a ‘customer’, or as a ‘regulatee’
    • Through membership of peak industry bodies (e.g. the Business Council of Australia, the Australian Chamber of Commerce and Industry, the Australian Industry Group, or the Council of Small Business of Australia).

As part of the project, we intend to work with businesses to better understand different ways that businesses might categorise themselves, and what categories they might think the public sector should use in interacting with them.

However, we’re very keen to hear about other types of segmentation already used, either in the public sector or outside of it. We’re also keen to hear about any other ideas about what direction we should take in looking at this question.

So if you have any ideas about how government should categorise businesses, we would love to hear from you.