Critical Success Factors

Identifying the things that really matter for success

So many important matters can compete for your attention in business that it's often difficult to see the "wood for the trees". What's more, it can be extremely difficult to get everyone in the team pulling in the same direction and focusing on the true essentials.
That's where Critical Success Factors (CSFs) can help. 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.
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.
Inevitably, the CSF concept has evolved, and you may have seen it implemented in different ways. This article provides a simple definition and approach based on Rockart's original ideas.
Rockart defined CSFs as:
"The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization's efforts for the period will be less than desired."He also concluded that CSFs are "areas of activity that should receive constant and careful attention from management."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.

Using the Tool: An ExampleCSFs are best understood by example. Consider a produce store "Farm Fresh Produce", whose mission is:"To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction."(For more on this example, and how to develop your mission statement, see our article on Vision Statements and Mission Statements.)The strategic objectives of Farm Fresh are to:

Gain market share locally of 25%.
Achieve fresh supplies of "farm to customer" in 24 hours for 75% of products.
Sustain a customer satisfaction rate of 98%.
Expand product range to attract more customers.
Have sufficient store space to accommodate the range of products that customers want.


In order to identify possible CSFs, we must examine the mission and objectives and see which areas of the business need attention so that they can be achieved. We can start by brainstorming what the Critical Success Factors might be (these are the "Candidate" CSFs.)


Objective Candidate
Gain market share locally of 25%

Critical Success Factors
Increase competitiveness versus other local stores

Objective CandidateAttract new customers
Achieve fresh supplies from "farm to customer" in 24 hours for 75% of products

Critical Success Factors
Sustain successful relationships with local suppliers

Objective Candidate
Sustain a customer satisfaction rate of 98%

Critical Success Factors
Retain staff and keep up customer-focused training

Objective Candidate
Expand product range to attract more customers

Critical Success Factors
Source new products locally

Objective Candidate
Extend store space to accommodate new products and customers

Critical Success Factors
Secure financing for expansion


Once you have a list of Candidate CSFs, it's time to consider what is absolutely essential and so identify the truly Critical Success Factors.And this is certainly the case for Farm Fresh Produce. One CSF that we identify from the candidate list is "Sustain successful relationships with local suppliers." This is absolutely essential to ensure freshness and to source new products.Another CSF is to attract new customers. Without new customers, the store will be unable to expand to increase market share.A third CSF is financing for expansion. The store's objectives cannot be met without the funds to invest in expanding the store space.

Tip: How Many CSFs?Whilst there is no hard and fast rule, it's useful to limit the number of CSFs to five or fewer absolute essentials. This helps you maintain the impact of your CSFs, and so give good direction and prioritization to other elements of your business or project strategy.

Using the Tool: Summary Steps

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.Here are the summary steps that, used iteratively, will help you identify the CSFs for your business or project:Step One: Establish your business's or project's mission and strategic goals (click here for help doing this.)Step Two: For each strategic goal, ask yourself "what area of business or project activity is essential to achieve this goal?" The answers to the question are your candidate CSFs.

Tip: How Many CSFs?To make sure you consider all types of possible CSFs, you can use Rockart's CSF types as a checklist.
Industry - these factors result from specific industry characteristics. These are the things that the organization must do to remain competitive.
Environmental - 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.
Strategic - 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.
Temporal - these factors result from the organization's internal forces. Specific barriers, challenges, directions, and influences will determine these CSFs.

Step Three: Evaluate the list of candidate CSFs to find the absolute essential elements for achieving success - these are your Criticial Success Factors.As you identify and evaluate candidate CSFs, you may uncover some new strategic objectives or more detailed objectives. So you may need to define your mission, objectives and CSFs iteratively.

Step Four: Identify how you will monitor and measure each of the CSFs.

Step Five: Communicate your CSFs along with the other important elements of your business or project's strategy.Step Six: Keep monitoring and reevaluating your CSFs to ensure you keep moving towards your aims. Indeed, whilst CSFs are sometimes less tangible than measurable goals, it is useful to identify as specifically as possible how you can measure or monitor each one.

Key Points

Critical Success Factors are the areas of your business or project that are absolutely essential to its 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.

Problem Solving 14: USP Analysis

USP Analysis

The Unique Selling Proposition: Crafting Your "Competitive Edge"


For years, business trainers have stressed the importance of "USPs" (Unique Selling Propositions). Your USP is the unique thing that you can offer that your competitors can't. It's your "Competitive Edge". It’s the reason that customers buy from you and you alone.

USPs have helped many companies succeed. And they can help you too when you’re marketing yourself (when seeking a promotion, finding a new job or just making sure you get the recognition you deserve.) If you don't have a USP, you're condemned to a struggle for survival - that way lies hard work and little reward.

However, USPs are often extremely difficult to find. And as soon as one company establishes a successful USP in a market, competitors rush to copy it.

This tool helps you find your USP. And it then helps you think about how you’ll defend it.

How to use the tool:

Follow these four steps:

1. Understand the Characteristics that Customers Value:First, brainstorm what customers value about your product or services and those of your competitors. Move beyond the basics common to all suppliers in the industry, and look at the criteria customers use to decide which product or service to buy.

As with all brainstorming, by involving knowledgeable people in the process, you'll improve the range of characteristics you’ll identify. So talk to sales people, customer service teams and, most importantly, talk to customers themselves.

2. Rank Yourself and Your Competitors By These Criteria:Now identify your top competitors. Being as objective as you can, score yourself and each of your competitors out of 10 for each characteristic. Where possible, base your scores on objective data. Where you can’t, do your best to see things from a customer’s perspective and make your best guess.

3. Identify Where You Rank Well:Now, plot these points on a graph. This helps you spot different competitors’ strengths and weaknesses.And from this, develop a simple, easily communicated statement of your USP.

Tip:
When you identify your USP, make sure it’s something that really matters to potential customers. There’s no point in being the best in industry for something they don’t care about.


4. Preserve Your USP (and Use It!):The final step is to make sure you can defend your USP. You can be sure that as soon as you start promote a USP, your competitors will do what they can to neutralize it: If you’ve got the best website, they'll bring in a better web designer. If you’ve got a great new feature in your product, you’ll see it in theirs next year.


If you’ve established a USP, it makes sense to invest to defend it - that way, competitors will struggle to keep up: By the time they’ve improved, you’ve already moved to the next stage.And once you’ve established a USP, make sure the market knows about it!


Example: Dan Jackson, the new CEO of LPC Office Supplies, was worried. He was confused by the situation he'd inherited, and felt that the company was drifting. Part of this, he felt, was that the company had no distinctive market position. He decided to use USP Analysis to find one.After talking to the company's biggest customers, Dan has identified the following criteria as important:


- Price
- Quality of merchandise
- Range
- Catalog quality
- Website appearance and navigation
- Ease of ordering
- Speed of delivery
- Reliability of delivery

.He then ranks LPC and its competitors using the criteria he had identified. Some criteria he assesses objectively, and on others he relies on instinct, market reputation and salespeople's reports.


This gives him the table below:
LPC BAR ROS HTX
- Price 7 9 6 6
- Quality of merchandise 7 7 7 7
- Range 9 6 5 9
- Catalog quality 9 7 6 9
- Website appearance 9 7 6 8
and navigation
- Ease of ordering 7 7 7 6
- Speed of delivery 6 7 9 7
- Reliability of delivery. 7 7 9 7


Using these rankings, Dan plots this graph:

As he does, different industry USPs start to become plain. Barnwick Smith seems to operate a “pile ‘em high and sell ‘em cheap” policy. The Roskan Group seems to focus on fast, reliable delivery, possibly of urgent, essential materials. Looking at these, Dan is sure that LPC can compete effectively against these competitors by emphasizing the breadth of its range and the quality of its catalog. However, HTX Supplies is more problematic: Curves are quite close. Even here, though, LPC seems to have better customer service and a better website. A USP of “The easy way to buy everything you need!” seems to work well.

Dan decides to invest in LPC's website and its customer service systems, with a view to opening up a clear gap between itself and HTX. And he then launches a marketing campaign stressing LPC's USP.

Key points:
USP Analysis is a useful way of understanding how people are competing in your industry. And it's essential for identifying your USP, so that you know what to build upon and emphasize to your prospects.

USP Analysis is a four stage process:

First, you list the decision criteria (explicit and hidden) that customers of your industry use in making purchase decisions;

Second, you rank yourself and your competitors by these criteria;

Third, you look at where you rank well, and craft a USP from this; and

Finally, you look at how you will defend and build your USP as competition evolves