Critical Success Factors

Critical Success Factor (CSF) is a business term for an element which is necessary for an organization or project to achieve its mission. They are the critical factors or activities required for ensuring the success your business. CSFs are the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project. These are elements that are vital for a strategy to be successful.

By identifying your Critical Success Factors, you can create a common point of reference to help you direct and measure the success of your business or project.
As a common point of reference, CSFs help everyone in the team to know exactly what's most important. And this helps people perform their own work in the right context and so pull together towards the same overall aims.

The idea of CSFs was first presented by D. Ronald Daniel in the 1960s. It was then built on and popularized a decade later by John F. Rockart, of MIT's Sloan School of Management, and has since been used extensively to help businesses implement their strategies and projects.

Critical Success Factors are strongly related to the mission and strategic goals of your business or project. Whereas the mission and goals focus on the aims and what is to be achieved, Critical Success Factors focus on the most important areas and get to the very heart of both what is to be achieved and how you will achieve it.
In reality, identifying your CSFs is a very iterative process. Your mission, strategic goals and CSFs are intrinsically linked and each will be refined as you develop them.

Critical Success Factors are the areas of your business or project that are absolutely essential to it success. By identifying and communicating these CSFs, you can help ensure your business or project is well-focused and avoid wasting effort and resources on less important areas. By making CSFs explicit, and communicating them with everyone involved, you can help keep the business and project on track towards common aims and goals.

Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success your business. The term was initially used in the world of data analysis, and business analysis.

These are seven critical success factors based on Mike Gospe that successful businesses, both large and small have embraced. They will not only help ensure your business' survival but will also accelerate your competitive advantage.

Be realistic about your business objectives.

Every company needs a clear vision and a mission statement, but specifying ambitious goals without support will lead to agitation in the board room, frustration for the sales team, and a detrimental cash burn rate. Those companies that were the most successful shared a common trait of setting clear business goals that included credible and complete information for their staff to execute them.

Success Factor #1: Identify stretch goals with reasonable milestones and timelines that can be matched with current investment and spending plans.

Understand your unique value proposition.

Successful companies know that it takes more than technical leadership to create a sustainable business. There must be value for the customer that exceeds the value currently being offered by other solutions. A value proposition starts with careful focus on a single target.

Success Factor #2: Based on customer and/or prospect feedback, frame a value proposition that identifies the target customer and what you do for them better than anybody else.

Take a hard look at your competition.

Some entrepreneurs are focused so intently on their product that they fail to recognize evolving market trends or anticipate competitive advancements in markets that may overshadow their own value proposition. With product lifecycles shortening, it is critical that companies accurately judge the competitive landscape in order to take full advantage of their market window.

Success Factor #3: Research the competitive landscape and categorize your competitors, noting their strengths and weaknesses. Then compare your company against this landscape. This exercise helps identify points of differentiation that can be communicated in sales and marketing programs.

A marketing foundation is absolutely necessary for your success.

It is common for entrepreneurs to incorrectly believe that marketing is not important at the early stage of a company's development. Many view marketing as something to be done later when they are ready to build a brand. However, the successful companies we studied spent time and resources to carefully craft their unique value proposition and build a foundation of sales tools before the product launched.

Success Factor #4: Invest early in marketing to clarify and articulate your value proposition, key messages, and defendable points of differentiation. Integrate this market strategy into your product development plans, and later, your sales organization.

For best results, marketing and sales should work hand-in-glove.

A common goal expressed by one VP of marketing is that at the end of each day, marketing and sales must be able to conclude that their combined efforts accelerated sales in some way. The most successful businesses we've worked with embraced this philosophy.

Success Factor #5: Regardless of organizational structure, build a sales and marketing team with common objectives, milestones, and measures.

Plan for the future.

In planning for the future, we were interested to find that successful companies tended to juggle these three management dimensions: managing their cash burn rate, looking for "learning" in every corner of the organization, and embracing creative hiring practices.

Success Factor #6: Be fiscally prudent, but willing to consider targeted investments to build a solid business infrastructure quickly.

It's all in the execution and learning.

With a plan in place, effective execution of marketing and sales programs can more easily be achieved. However, not every program will be successful, despite the best-laid plans. The challenge is to learn from the success and failure of these programs and fine-tune them quickly while they are still in progress.

Success Factor #7: Speed and ruthless execution is everything. To maximize your ROI, identify and widely communicate business plans and objectives throughout the organization, and encourage widespread adoption and involvement at every level.

Critical Success Factors have been used significantly to present or identify a few key factors that organizations should focus on to be successful. According to John F. Rockart in the Harvard Business Review: "Critical success factors for any business are the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization.”
Therefore, critical success factors represent performance areas that must meet expectations if the organization is to flourish. Measurements are used to track performance in each critical success area. Critical success factors are both internal and external. For example, comparison of budgets to actual would be internal while percent of market share would be external.

One way to identify critical success factors is to go through a strategic planning process. A second or complimentary approach is to conduct competitive intelligence research. Look at the success factors of your competition. Collectively, you will need to develop a set of critical success factors which serves as the foundation for your performance measurement system. Consequently, critical success factors are an important link between strategic plans and performance measurement systems.

Each CSF should be measurable and associated with a target goal. You don't need exact measures to manage. Primary measures that should be listed include critical success levels or, in cases where specific measurements are more difficult, general goals should be specified.

A plan should be implemented that considers a platform for growth and profits as well as takes into consideration the following critical success factors:
• Money: positive cash flow, revenue growth, and profit margins.
• Your future: Acquiring new customers and/or distributors.
• Customer satisfaction: How happy are they?
• Quality: How good is your product and service?
• Product or service development: What's new that will increase business with existing customers and attract new ones?
• Intellectual capital: Increasing what you know is profitable.
• Strategic relationships: New sources of business, products and outside revenue.
• Employee attraction and retention: Your ability to do extend your reach.
• Sustainability: Your personal ability to keep it all going.

Critical Success Factor is an element of organizational activity which is central to its future success. Critical success factors may change over time, and may include items such as product quality, employee attitudes, manufacturing flexibility, and brand awareness. And it is also any of the aspects of a business that are identified as vital for successful targets to be reached and maintained. Critical success factors are normally identified in such areas as production processes, employee and organization skills, functions, techniques, and technologies.

CSF's are tailored to a firm's or a manager’s particular situation as different situations lead to different critical success factors. Rockart and Bullen presented five key sources of CSF's:
1. The industry - There are some CSF's common to all companies operating within the same industry. These factors result from specific industry characteristics. These are the things that the organization must do to remain competitive.
2. Competitive strategy and industry position - The nature of position in the marketplace or the adopted strategy to gain market share gives rise to CSF's Differing strategies and positions have different CSF's. These factors result from the specific competitive strategy chosen by the organization. The way in which the company chooses to position themselves, market themselves, whether they are high volume low cost or low volume high cost producers, etc.
3. Environmental factors - Economic, regulatory, political, and demographic changes create CSF's for an organization. These factors result from macro-environmental influences on an organization. Things like the business climate, the economy, competitors, and technological advancements are included in this category.
4. Temporal factors -These relate to short-term situations, often crises. These CSF's may be important, but are usually short-lived. These factors result from the organization's internal forces. Specific barriers, challenges, directions, and influences will determine these CSFs; and
5. Managerial position - An individual role may generate CSF's as performance in a specific manager's area of responsibility may be deemed critical to the success of an organization

There are, in fact many various applications of the critical success factors (CSFs). It may not refer to an organization’s operation and performance but it can also be relevant to an individual’s success of performance.

By definition, CSF's are the "most critical" factors for organizations or individuals. However, due care should be exercised in identifying them due to the largely qualitative approach to identification, leaving many possible options for the factors and potentially results in discussions and debate. In order to truly have the impact as envisioned when CSF's were developed, it is important to thus identify the actual CSF's, the ones which would have the largest impact on an organization's or an individual's performance.

http://en.wikipedia.org/wiki/Critical_success_factor
http://www.kickstartall.com/documents/KS_Articles/CriticalSuccessFactors.htm
http://steps-to-success.com/Critical_success_factor.html
http://www.rapidbi.com/created/criticalsuccessfactors.html
http://www.mindtools.com/pages/article/newLDR_80.htm