Critical success factor
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Critical Success Factor (CSF) is a business Advocate term for an element which is necessary for an organization or project to achieve its mission. They are the critical factors or activities 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.[1]
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[edit] Concept history
The concept of "success factors" was developed by D. Ronald Daniel of McKinsey & Company in 1961.[2] The process was refined by Jack F. Rockart in 1986.[3] In 1995 James A. Johnson and Michael Friesen applied it to many sector settings, including health care.[4]
[edit] Factors
A plan should be implemented that considers a platform for growth and profits as well as takes into consideration the following critical success factors:[5]
- Money: positive cash flow, revenue growth, and profit margins.
- Your future: Acquiring new customers and/or distributors.
- Customer satisfaction: How happy are they?
- 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: Increasing what you know is profitable.
- Strategic relationships: New sources of business, products and outside revenue.
- Employee attraction and retention: Your ability to do extend your reach.
- Sustainability: Your personal ability to keep it all going.
[edit] Management factors
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Key success factors generally include exceptional management of several of the following:[6]
- Product design
- Market segmentation
- Distribution and promotion
- Pricing
- Financing
- Securing of key personnel
- Research and development
- Production
- Servicing
- Maintenance of quality/value
- Securing key suppliers
- New product development
- Good distribution
- Effective advertising
- Innovative response to customer needs
- Consumer loyalty
- Linkage of technology to market demand
- Link marketing to production
- Investment in growth markets
- Unique positioning advantage
- Strong brand image and awareness
- Prevention of price wars
- High product quality
- Patent protection
- Low product cost
- Large marketing resource budget
- Marketing research quality
- Information system power
- Analytic support capability
- Develop human resources
- Attract the best personnel
- Managerial ability and experience
- Quick decision and action capability
- Organizational effectiveness
- Learning systematically from past strategies
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[edit] Relation to Key Performance Indicator
A critical success factor is not a key performance indicator (KPI). Critical success factors are elements that are vital for a strategy to be successful. KPIs are measures that quantify management objectives and enable the measurement of strategic performance. A critical success factor is what drives the company forward, it is what makes the company or breaks the company. As staff must ask themselves everyday 'Why would customers choose us?' and they will find the answer is the critical success factors.
An example:
- KPI = Number of new customers.
- CSF = Installation of a call centre for providing quotations.
[edit] References
- ^ Rockart, John F., "Chief executives define their own data needs", Harvard Business Review 1979 (2), pages 81-93.
- ^ Daniel, D. Ronald, "Management Information Crisis," Harvard Business Review, Sept.-Oct., 1961.
- ^ Rockart, Jack F. "A Primer on Critical Success Factors" published in The Rise of Managerial Computing: The Best of the Center for Information Systems Research, edited with Christine V. Bullen. (Homewood, IL: Dow Jones-Irwin), 1986, OR, McGraw-Hill School Education Group (1986)
- ^ Johnson, James A. and Michael Friesen (1995). The Success Paradigm: Creating Organizational Effectiveness Through Quality and Strategy New York: Quorum Books. ISBN 978-0899308364
- ^ Paul Lemberg's Extraordinary Results
- ^ INFORMATION MANAGER - STRATEGIC PLANNING FOR THE PROACTIVE BUSINESS LEADER: Success factors
