How does NAICS improve upon the SIC?
Process, not product orientation — NAICS establishes a unified economic concept for defining industries, by grouping firms together based on their use of similar raw material inputs, capital equipment, and labor, or how they produce an end product or provide a service. For example, software publishers are grouped in the same NAICS subsector as magazine publishers, newspaper publishers, etc. because all are engaged in issuing copies of works for sale to the general public in one or more formats, including print, CD-ROM, or online. In contrast, under the SIC, firms were grouped in industries based on what end product they produced or service they provided: software publishers, therefore, were grouped with other firms engaged in data processing and computer programming services, reproduction of software, and other computer-related services. This “process”-oriented classification methodology yields industrial groupings that are more homogenous, and thus better suited for economic analysis
