Key Success Factors

A key success factor (KSF) is a management term for an element that is necessary for an organization or project to achieve its mission. The term critical success factor is a synonym (Wikipedia).

The answers to three questions help identify key success factors:

On what basis do customers choose between the competing brands of sellers?
What must a seller do to be competitively successful – what resources and competitive capabilities does it need?
What does it take for sellers to achieve a sustainable competitive advantage?

Critical success factor vs. key performance indicator:

Critical success factors are elements that are vital for a strategy to be successful.
A critical success factor drives the strategy forward, it makes or breaks the success of the strategy (hence “critical”).
Strategists should ask themselves 'Why would customers choose us?'. The answer is typically a critical success factor.

KPIs, on the other hand, are measures which quantify management objectives, along with a target or threshold, and enable the measurement of strategic performance.

An example:

KPI = Number of new customers. (Measurable, quantifiable) + Threshold = 10 per week [KPI reached if 10 or more new customers, failed if <10]
CSF = Installation of a call centre for providing superior customer service (and indirectly, influencing acquiring new customers through customer satisfaction).

Industry Matrix

You can use key success factors (KSFs) to create an industry matrix, which is an analysis of firms in an industry according to their performance on the KSFs.

Key Success Factors	Weight	Company A Rating	Company A Weighted Score	Company B Rating	Company B Weighted Score
KSF 1
KSF 2
	1.0

Common Types of KSFs

Technology Related KSFs

Scientific research expertise (important in such fields as pharmaceuticals, medicine, space exploration, other “high-tech” industries.
Technical capability to make innovative improvements in production processes
Product innovation capability
Expertise in a given technology
Capability to use the Internet to disseminate information, take orders, deliver products or services
Manufacturing Related KSFs
Low-cost production efficiency (achieve scale economies, capture experience curve effects)
Quality of manufacturer (fewer defects, less need for repairs)
High utilization of fixed assets (important in capital intensive/high fixed-cost industries)
Low-cost plant locations
Access to adequate supplies of skilled labor
High labor productivity (important for items with high labor content)
Low-cost product design and engineering (reduces manufacturing costs)
Flexibility to manufacture a range of models and sizes/take care of custom orders

Distribution Related KSFs

A strong network of wholesale distributors/dealers (or electronic distribution capability via the Internet)
Gaining ample space on retailer shelves
Having company owned retail outlets
Low distribution costs
Fast delivery

Marketing Related KSFs

Fast, accurate technical assistance
Courteous customer service
Accurate filling of buyer orders (few back orders or mistakes)
Breadth of product line and product selection
Merchandising skills
Attractive styling/packaging
Customer guarantees and warranties (important in mail-order retailing, big-ticket purchases, new product intros)
Clever advertising

Skills Related KSFs

Superior workforce talent (important in professional services like accounting and investment banking)
Quality control know how
Design expertise (important in fashion and apparel industries and often of the keys to low-cost manufacture)
Expertise in a particular technology
An ability to develop innovative products and product improvements
An ability to get newly conceived products past the R&D phase and out into the market very quickly

Organizational Capability

Superior information systems (important in airline travel, car rental, credit card and lodging industries)
Ability to respond quickly to shifting market conditions (streamlined decision making, short lead times to bring new products to market)
Superior ability to employ the Internet and other aspects of electronic commerce to conduct business
More experience and managerial know how

Other Types of KSFs

Favorable image/reputation with buyers
Overall low cost (not just in manufacturing)
Convenient locations (important in many retailing businesses)
Pleasant, courteous employees in all customer contact positions
Access to financial capital (important in newly emerging industries with high degrees of business risk and in capital-intensive industries)
Patent protection