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:
- The industry key factors for success as they are now and as you expect them to develop in the future
- 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.