Most of my experience in doing definition work has mostly been from the perspective of an analyst involved in systems development. These days it usually data-centric applications, such as building Master Data Management (MDM) or business intelligence (BI) environments. The method of the analyst begins with understanding scope and requirements, and then finding the business concepts and data objects that need to be defined.
However, there are other perspectives. Terminologists, often oriented to the language translation industry, do deinition work. So, I suspect, do brand managers, who want to control messaging to customers. I work a good deal in financial services, and I am aware that there is another group that gets involved in definitions. These are business people who create completely new products. For instance, Asset Backed Securities (ABS) and Colladeralized Debt Obligations - both now notorious as weapons of mass financial desctruction - were created by investment bankers in the past few years.
My experience with ABS begins with the legal documents of a bond issuance deal. These documents contain the full definition of everything in the deal, the rules for how the bond is supposed to work over time, and the contractual obligations of the parties involved. One of the tasks I was involved in was to take these documents, reverse engineer them, and create cashflow models under various scenarios to see how the bonds would perform. A global meltdown caused by changing the credit rating of the these bonds from AAA to DDD overnight was not part of these scenarios (in case you were wondering).
The definition work that goes into an ABS structure has to be precise. It is essentially part of building a conceptual system - a new piece of reality - that will be set in motion. A major problem in finance is that the products are all non-material. It is not like manufacturing new designs of plastic gnomes to decorate gardens, or baking a different kind of doughnut. The laws of metaphysics, mathematics, and nature do not supervene to automatically take care of things. The new plastic gnome will not suddenly melt down overnight for no apparent reason. A doughut I place in the fridge will not evaporate for no apparent reason. But equally strange things can and do happen in financial systems. Contradictions, I would maintain, do not exist in material reality - but they can be present (albeit unrecognized) in financial reality. An ABS issuance can both be AAA-rated and have significant defaulted underlying collateral at the same time.
Legislative definitions are those which are created as part of creating the concept being defined. I agree that creating a concept is diffenent to creating an instance of a new type of already existing concept. Each ABS deal includes a lot of concepts that were defined previously - in other ABS deals. However, differences can still arise. My point is that the degree of care involved in such definitions much be much greater than that of the analyst. An investment banker can create a Doomsday Machine if he or she puts together a flawed ABS deal. An analysts can mess up an integration point for a data object, but can usually remedy it after discovering the problem.
So I think we can conclude that the consequences for bad definition work vary depending on what the work in being done for. In some situations the definitions have to be rock solid from the start. Other situations may be more forgiving. Recognizing the risks involved is an important part of definition work.
One final point. I have illustrated legislative definitions using examples from financial services. However, I would maintain that the same problems apply to all sectors, e.g telecommunications, pharmaceutical, and government. The problems will arise in any situation where non-material reality is constructed.