Monday, October 5, 2009

Establishing Critical Success Factors

Under the Situation Analysis section of your marketing plan you should define your business Critical Success Factors (CSF). These are the vital elements for your strategy’s success, or in other words, the CSFs are the factors that you must focus on to achieve the company’s ultimate objectives. Reaching such factors will be decisive to whether your business will be a success or a failure.
The principle of identifying critical success factors was first presented by D. Ronald Daniel in 1961, but it was later in 1986 when J.F. Rockart developed the concept as we know it today.
Rockart defined critical success factors as “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organisation. 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 organisation’s efforts for the period will be less than desired.”
To make it clear on the areas that these CSFs will usually fall into, Rockart categorised them in different types:

  • Industry CSFs: result from specific industry characteristics;
  • Strategy CSFs: defined through the analysis of the business competitive strategy;
  • Environmental CSFs: through the analysis of the business macro-environment resulting from economic changes, technological advancements, business climate or other related environmental factors.
  • Temporal CSFs: specific to the organisation’s internal needs and changes.
The critical success factors are intrinsically related to the business mission and strategic goals, therefore, it will be through their combined analysis that the CSFs can be clearly identified, having in consideration the above mentioned types.
To help you identify your organisation’s CSFs you can follow the below stages:
  1. Establish the business's mission and strategic goals.
  2. Looking at the mission and objectives, brainstorm ideas regarding the areas of business that need attention so these two can be achieved. The result will be a list of potential critical success factors.
  3. Narrow down your list by considering only the ones that are absolutely essential and that will be definite in whether your business is successful or a failure. Some examples of generic CSFs are cashflow; new product development; new customers’ attraction; secure financing; amongst others. Although there is no rule defining the number of CSFs you should try limiting them to five or fewer absolute essentials. By keeping a small number of CSFs it will be easier for you to have a direction and prioritise which ones are really important for your business.
  4. Identify how you will monitor and measure each of the CSFs.
  5. Communicate your CSFs within the organisation so everyone is focused on what needs to be achieved.
  6. Keep monitoring your CSFs throughout time to ensure your business keeps moving towards its main aims.