Operations & Sourcing method guide
Product / Market Groups
Product / Market Groups defines the distinct segments in which success must be understood.
Beginner-friendly guide · 4 min read
What Product / Market Groups does
Product / Market Groups defines the distinct segments in which success must be understood.
Product-market grouping divides a diverse business into combinations that face meaningfully different customers, competitors and success requirements. It creates a stable commercial unit of analysis for later portfolio, capability and sourcing work.
Groups should be distinct enough to support different decisions without becoming a separate category for every minor variation. Define products, services, markets, customers and geography explicitly.
In the Cambridge make-or-buy sequence, product-market groups provide the commercial unit of analysis from which key success factors and important activities are derived.[1][2]
Each occupied cell can become a product-market group when its success logic is genuinely different.
Markets or customer groups
Products or services
Original InnovationFlow illustration. Example values and software behaviour are explained in this guide; method sources are listed below.
Understand the method
The parts in plain language
Product or service scope
Describe what is offered and which underlying activity system is relevant. Combine variants only when their strategic logic is similar.
Illustrative example
New equipment sales and lifecycle services may need separate groups despite serving the same installed base.
Market scope
Define the customer situation, segment, application and geography in which success is judged.
Illustrative example
Regulated process plants may value assurance differently from small general manufacturers.
Coherent group
A useful group shares competitors, buying criteria, economics and important capabilities. Test whether the same success factors genuinely apply.
Illustrative example
Remote support for legacy equipment may be distinct from support for newly connected products.
When to use it
- When sourcing or capability analysis is too generic across a diverse business.
- Before defining key success factors.
A practical workflow
- 1
List products, services, markets and customer groups.
- 2
Combine them into strategically coherent segments.
- 3
Record scope, evidence, attractiveness and distinctions between groups.
- 4
Pass the groups into success-factor and portfolio analysis.
Fictional worked example
Example: segmenting an industrial service portfolio
This example is illustrative rather than a reported case. A manufacturer separates offerings before defining key success factors.
Observation:Data access is built in and buyers expect digital features.
Implication:Integration and lifecycle value shape success.
Observation:Installed systems vary and disruption is costly.
Implication:Adaptability and field execution matter more.
Observation:Assurance and traceability dominate buying criteria.
Implication:Treat them separately from price-led general industry.
From analysis to decision
How to interpret the result
- 1Check whether groups face distinct success factors.
- 2Keep data definitions comparable across groups.
- 3Use the groups consistently in portfolio and sourcing analysis.
Practical interpretation guidance from InnovationFlow. Refer to the method sources below for the underlying approach.
What a useful output looks like
Common pitfalls
- Avoid segments so broad that their success factors become generic.
- Do not create a separate group for every minor variation.
References and method basis
- [1]Probert, D. (1997). Developing a Make or Buy Strategy for Manufacturing Business. Institution of Electrical Engineers. Source ↗Original method source
- [2]Canez, L.E., Platts, K.W. and Probert, D.R. (2000). Developing a framework for make-or-buy decisions. International Journal of Operations & Production Management, 20(11), 1313-1330. Source ↗Peer-reviewed research
This guide synthesises the named sources into practical questions for strategy and innovation work. It does not claim that using a tool by itself produces a successful decision.