God, grant me the serenity to accept the things I cannot change, The courage to change the things I can, And the wisdom to know the difference. (Serenity Prayer, Reinhold Niebuhr)
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.
- 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).
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
- 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)