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Success Factors

Critical Success Factors & Key Performance Indicators

Critical Success Factors (CSF) are unique to implementing your particular strategy.

Key success factors will be common across many of the businesses within an industry and (hopefully) each business has identified a few key factors of difference to differentiate itself away from the  competition.

The combination of key success factors and key factors of difference you need to focus on to deliver your strategy become your critical success factors.

Critical Success Factors Are Individually Necessary & Together Sufficient

These CSF are the factors which are individually necessary and together sufficient for your business to succeed in its mission.

There are normally about seven critical success factors for a business. If you identify more than ten, you need to go back and have a look at what you’re trying to do and test each success factor to see if it is really critical.

The reason is simple.

The critical success factors become the guide to managing your business and assessing your daily decisions and actions. You can remember five to seven success factors and check that actions that improve one won’t have an unnecessarily detrimental effect on another.

The Problem Of Having Too Many Critical Success Factors

But trying to juggle thirteen or fourteen success factors makes the process too mentally demanding.

You lose focus when the entire purpose of identifying success factors is to create focus on the few things that really make a difference.

Your business becomes complicated and confusing when the intention is to make success simple to understand and simpler to do.

Communicating Your Critical Success Factors With Key Performance Indicators

I sometimes talk to business owners and directors who have a problem with communicating their critical success factors with their staff and suppliers. It seems that there is this idea that having done all the hard work, thinking and analysis, your strategy should be kept secret.

Bits of it should be but not your critical success factors. Your staff need to understand the important elements that really matter and the success factors should be converted into performance measures and targets.

Performance measurement systems are important for monitoring how well the business is achieving its critical success factors and the Balanced Scorecard is the best well known technique.

Your customers need to be told about your key differentiation factors and they need to experience for themselves that the words turn into consistent performance, benefits and experience. And if your customers can see your differentiation factors, then so can competitors.

in 3 – Your Strategic Positioning

Key Success Factors And Their Link To Factors Of Difference

There’s a big temptation to make business strategy and strategic planning too complicated to be successful. This is why the idea of focusing on your key success factors (KFS) and your key factors of difference (KFD) is so important.

There are so many things that you could do to make your business more successful. There are plenty of experts promoting their methods as the one you must master if you’re going to achieve your big goals.

There is a problem. Following too many ideas can confuse and distract you when you need focus on the things that really matter.

That’s why the concepts of key success factors and factors of difference are vital to understand and use effectively.

First some definitions:

Definitions of Key Success Factors & Factors Of Difference

A key success factor for a trade, profession or industry is something that a business must do to be successful. It is a necessary condition for success.

A key factor of difference is a dimension of performance which influences customers in their choice of supplier and a criteria you have chosen to emphasise in a) your marketing and b) your business design, processes and personnel.

Critical success factors are a unique combination of industry key success factors and particular key factors of difference which together summarise the strategic plan of the business to achieve its mission.

Contrasting Key Success Factors & Factors of Difference

To contrast these two, KSFs are performance dimensions that you’d expect any successful business in an industry to perform well, the KFD are performance dimensions that make individual successful businesses in an industry unique and distinct from each other.

Key success factors can be internal or external factors in the business. Cost competitiveness may be a key success factor in a mature business. Key factors of difference focus on extra factors that add value to the customer.

Both may be used to differentiate one business from its competitors.

On the KSF, think good, better, best.

Everyone is good but it is possible to win customer preference by being better. You can aspire to be the best in a particular purchase criteria.

Key success factors can be order winners and order qualifiers.

The Difference Between Order Winners & Qualifiers

Order winners provide reasons why customers should choose your business, product or service.

In contrast, failure to meet the minimum standards on order qualifiers provide reasons why customers will reject or ignore your business, product or service.

I don’t like airlines (see Airlines Suck But We Still Fly) but you can see the contrast in order qualifiers and order winners as key success factors clearly. (For more information about the difference between order winners and qualifiers please read my article called Order Winners & Qualifiers)

Order Winners & Qualifiers Example 1 – The Airline Industry

A good safety record for an airline is a qualifying key success factor.

I don’t care how cheap a flight is, if there is a significant risk that it will crash, I don’t want to fly and nor do you. Some things are just too important to save a little money.

A high on time take-off and landing record is an order winning key success factor.

We don’t fly because we want to fly, we fly because it’s the best way of getting from point A to point B quickly. Waiting around for hours in an airport or being stuck on the plane sitting on the tarmac isn’t part of the deal I want.

Order Winners & Qualifiers Example 2 – Hotels

In another example, I recently wrote about differentiating hotels. Here cleanliness is a qualifying key success factor. The room is clean enough or it’s not. And if it’s not, then I don’t want to stay there but if I don’t have any choice, then I’ll complain until it’s fixed.

A great breakfast is an order winning key success factor. I haven’t reached a level of delight yet where I think it just can’t get any better although I have had some super breakfasts and especially in South Africa.

The Fit Between Key Success Factors & Key Factors Of Difference

So where do the key factors of difference fit in if you can differentiate your business with key success factors?

The key factors of difference create uniqueness.

They are order winner performance criteria which competitors don’t offer or don’t offer in the combination that you do.

They are optional extras that you choose to deliver to make your business stand out.

I must be hungry but returning to the breakfast theme, then every safari I’ve been on has sundowners out in the bush when you have a drink and perhaps a few nibbles as you watch the sun go down before you drive back to camp looking out for the nocturnal animals.

Only one has ever given me a proper full breakfast in the bush. It was great. An experience I’ll remember for the rest of my life although I did worry about whether a leopard might fancy my bacon, sausage, tomato, eggs etc.

Following the safari theme as a way to give you examples of KFD, another camp had a resident academic elephant researcher to study the large elephant population. We had the chance to go out with her one morning. It was terrific to hear about the family stories and how she could tell one huge elephant from another. This, together with other specialist researchers for animals was one of this safari lodge’s  key factor of difference.

Key success factors and key factors of difference are similar concepts which help focus the business and its management and staff on what it must do well.

Industry Key Success Factors Can Be Taken For Granted

Sometimes key factors of success get taken for granted. That becomes a weakness for firms in the industry, an opportunity for any company looking at the industry as a new entrant.

Industries think “we have to do X, Y and Z because we’ve always done X, Y and Z.”

But it may not be true.

Market changes happen in terms of what customers want and expect and what technology can deliver which render traditional key success factors obsolete.

How A Blue Ocean Strategy May Change Your Focus

A very popular book on strategy called Blue Ocean Strategy specifically looks at innovation to create new market space which isn’t being contested by competitors. This includes six different pathways to find new solutions to existing problems.

One of the main techniques is to map out the key success factors from the customer’s perspective on a strategy canvas to highlight areas of similarity and difference.

Industry Success Factors Can Be Broken By A New Business Model

A new business model can be created which delivers a very strong competitive advantage because it breaks one of the traditional key success factors.

In banking, having a wide brand network used to be a key success factor and it still is for some customer groups. But First Direct challenged this idea with the development of telephone banking and it’s been pushed much further with Internet banking.

The infrastructure to operate a bank is still a huge investment to get the IT systems, people and processes established (these are still key success factors) but it’s a much lower cost than the brand network with a physical branch on every High Street.

Another example is Amazon.

To sell books, CDs and DVDs on a large scale to retail customers, you used to need plenty of stores with location choice as a main key success factor. Now Amazon don’t care about store locations but do need an accurate picking and packing system and prompt distribution.

Key Success Factors & Increasing Profit

The purpose of strategic management is to review and then help to find better ways to achieve its goals which for a business is usually an increase in long term profitability.

My six step profit formula fits in well with the success factor thinking since every step can provide one or more critical performance indicators. Some businesses will put more emphasis on particular steps than others.

Have You Used Success Factor Analysis?

I’m very interested to hear stories of how you’ve used success factors to help guide your business towards its mission and vision.

in 3 – Your Strategic Positioning

Key Success Factors And Their Role In Strategic Planning

A key success factor (KSF) for a trade, profession or industry is something that a business must do to be successful. It is a necessary condition for success.

The Difference Between Key Success Factors, Key Factors Of Difference & Critical Success Factors

There are a number of similar sounding phrases that mean different things. To help understand key success factors, you also need to understand:

Key Factors Of Difference (KFD) – performance dimensions that make individual successful businesses in an industry unique and distinct from each other.

Critical Success Factors (CSF) – performance factors which are individually necessary and together sufficient for your business to succeed in its defined mission.

To summarise in less formal terms:

Key Success Factors are common across firms within a product-market or industry.

Key Factors Of Difference are the factors a particular business chooses to differentiate itself on.

Critical Success Factors are the essential elements of a strategy for success in a particular business in a particular industry at a particular time. Your CSFs should vary every time you make significant changes to your strategic plan and the emphasis may change with minor tweaks in strategy.

Success Factors And The Value Chain

As you think through the factors for success in your particular industry and business, it is recommended that you look at both:

  • The value chain for your business – all the interlocking processes you use to create value for your immediate customers.
  • The industry value chain – how the entire industry from the start of the supply chain to the end create value for the final customer.

The ideal position for any business is the ability to create a product or service for the lowest quality in the quickest time and for the best quality.

This ideal isn’t possible but it’s a useful “perfect product” to keep in mind when thinking about product innovation and process innovation.

Where are the big differences in cost, time taken and quality arising? Do particular processes or steps create trade-offs in these three main areas of performance.

Success Factors & Your SWOT Analysis

When you put together your SWOT Analysis, your strengths hopefully include your key success factors or you have opportunities to develop the extra strengths you need for success.

It would be simple if key success factors stayed constant over a long period of time to allow the business to build superior skills in the vital areas but key success factors change.

Factors That Will Change Key Success Factors

Key success factors can change through:

  • Moving through the product life cycle – in the early stages of a product life, design and marketing may be vital but as the market matures, emphasis switching to low cost, efficient operations.
  • Changes in customer needs, wants and priorities – purchase criteria that were important may be replaced by new criteria
  • Changes in PEST factors – technology changes in particular

If you ignore the idea that Key Success Factors evolve over time, you are likely to find that your strategy makes you less and less competitive.

Your Strategic Plan

Your strategic plan will bring together what you intend to do on:

  1. The industry key factors for success as they are now and as you expect them to develop in the future
  2. The particular key factors of difference that you believe you can use to create unique customer value to create a competitive advantage.

At this stage, they become critical success factors and need to be backed up with key performance indicators so that you can track performance.

in 3 – Your Strategic Positioning