Critical Success Factor (CSF) is the term for an element that is necessary for an organization or project to achieve its mission. It is a critical factor or activity required for ensuring the success of your business. The term was initially used in the world of data analysis, and business analysis. For example, a CSF for a successful Information Technology (IT) project is user involvement.
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 they are.
* 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: Create assets from the tools you make to run your business.
* Strategic relationships: New sources of business, products and outside revenue.
* Employee attraction and retention: Your ability to find, train, and keep employees and to let go employees that are not a good fit.
* Sustainability: Your personal ability to keep it all going.
Before anything else we should examine first on how to identify CSFs
When a customer gives you business, he does so for many reasons but there are usually a few critical ones. Without those factors, he would not order from you. The rest of the reasons don't make a lot of difference. When you run your business and market it, you give customers many reasons why they should buy from you. You'll say that you give good value, you're reliable, your products are good quality and you have a high level of customer service. Your customers hear the same thing from all their suppliers but they chose you - you need to know exactly why. The reason you need to know this is because you're doing all these different things, many of them quite expensive, and many of them have no effect at all on whether you get that order. You want to concentrate on those activities which your customers find critical and which make them order from you. Your best bet is to periodically discuss your business with your best customers. They will give you feedback and tell you what they would like to see. Is quick delivery important or would they rather see a lower price? Is it important that you keep items in stock? Would they like to see you more often to discuss their orders or is a quick check by telephone enough? What about particular characteristics of your products - should they be lighter, heavier, shinier, different colours etc?
Once you have discussed your business with a number of your best customers you will notice a pattern - groups of customers will value the same things. Now it is time for you to do the selecting and decide which of the things your customer’s value is going to be priorities for you. What you are looking for are things you can do more of and better without increasing your costs and things which you can do better than your competition. If some of your customers value a quick response time and you're the only business of that type in the area, you've got one of your critical success factors. At the same time, this identifies a good target market for you - other businesses similar to those customers in the same area. Now your business strategy is streamlined: for this group of customers you use your proximity to them to give fast service and you tell similar prospects that fast service is one of your strong points. If that is the critical success factor for this group of customers you will be able to concentrate on it and stop doing some of the other things they don't value. You may even be able to charge more.
Critical success factors (CSFs) have been used significantly to present or identify a few key factors that organisations should focus on to be successful. As a definition, critical success factors refer to "the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organisation” (Rockart and Bullen, 1981). Identifying CSFs is important as it allows firms to focus their efforts on building their capabilities to meet the CSFs, or even allow firms to decide if they have the capability to build the requirements necessary to meet critical success factors (CSFs). "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...
"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:
First Step: Establish your business's or project's mission and strategic goals...
Second Step: 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.
Third Step: 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.
Fourth Step: Identify how you will monitor and measure each of the CSFs.
Fifth Step: Communicate your CSFs along with the other important elements of your business or project's strategy.
Seventh Step: 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...
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. These relate to environmental factors that are not in the control of the organisation but which an organisation must consider in developing CSFs. Examples for these are the industry regulation, political development and economic performance of a country, and population trends. For example, Ladbrokes, a UK bookmaker, will be establishing an international business in Italy where it has just acquired a business license, a requirement for foreign sports betting firms prior to establishing a business in the country (Citywire, 2007).
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." Temporal factors are temporary or one-off CSFs resulting from a specific event necessitating their inclusion. Rockart and Bullen (1981) state that typically, a temporal CSF would not exist and they give as an example of a firm which "lost executives as a result of a plane crash requiring a critical success factor of rebuilding the executive group". However, with the evolution and integration of markets globally, one could argue that temporal factors are not temporal anymore as they could exist regularly in organisations. For example, a firm aggressively building its business internationally would have a need for a core group of executives in its new markets. Thus, it would have the CSF of "building the executive group in a specific market" and it could have this every year for different markets.
References:
http://en.wikipedia.org/wiki/Critical_success_factor
http://rapidbi.com/created/criticalsuccessfactors.html
http://www.coursework4you.co.uk/essays-and-dissertations/critical-success-factors.php
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