Key Success Factors

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Key Success Factors

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Key Success Factors, also known as Critical Success Factors, is the term for elements necessary for an organization or project to achieve its mission. This methodology is commonly used in data analysis and business analysis.

Relative Importance for

Effective Distribution

Strong Brand

National Marketer

5

Regional Marketer

4

5 3

Innovative Product

Tiered Pricing

2 3

2 3

Multiple Segmentation

Low Cost Manufacturing

4 1

1 3

High R&D spend

Total

2 1

21 18

2Questions & feedback? Email me – [email protected] diagrams in this pack are to be used by the original buyer only.

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Key Success Factors (KSF) and index of key success factors – introduction

Strengths & Limitations

Benefits:– If rigorously applied, clarifies what capabilities or skills

companies need to compete successfully– Index allows us to quantify competitors’ relative strengths

against KSFs– Index provides a structured, concise technique for

comparing competitors Drawbacks:

– The KSFs and comparative index are only as good as the business understanding and judgement used to develop them

What They Are

Key Success Factor (KSF): Any dimension in which excellence is crucial for

competitive success, for example:– Parts of the marketing mix– Research and development– Low-cost manufacturing

Also known as a critical success factor (CSF) Analysis of KSFs is crucial in most studies of

competitive strategies: Skill is in identifying appropriate KSFs

Index of key success factors: A summary table that scores and ranks each

competitor against the KSFs for the business or segment

Note: The important insights come from understanding what

is key to success in the industry or segment:– The index is simply a device to display the output– Refer to section on industry dynamics

Why We Use Them

Key success factors: Determines at what companies must excel to be successful

in a business or segment They should be the logical outcome (the so what) of PEST,

Porter etc. analysis

Index of key success factors: Evaluate competitors’ strengths and weaknesses in areas

that are critical to success To position our client relative to competitors

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Key success factors and index of key success factors – how to apply them

Key Success Factors Index of Key Success Factors

Determining KSFs requires a thorough understanding of a business or segment, and therefore draws on several of other analytics in the toolkit.

Relevant issues in understanding the business or segment are:– How customers buy, and what’s important to them in

the purchase decision:• See key purchase criteria

– Who’s successful in the business or analytic segment, and why. See:• Company analysis• Financial analysis

– Trends within the business or segment Other sources of insights into key success factors are:

– Client’s executives/staff– Industry analysts or commentators

Determining KSFs is an iterative process: initial research, developing draft hypotheses, testing and, refining these hypotheses

The purpose of developing an index of KSFs is to understand:– Which ones are most important– How competitors perform relative to each key success

factor Ranking KSFs, and scoring competitors, requires a good

understanding of the business or segments Key steps in the process for ranking and weighting KSFs:

– Identify KSFs (see box, left)– Give each KSFs a weighting reflecting its relative

importance (this is a non-trivial task):• How would you allocate investment resources for a

competitor?– Score each competitor against each key success

factor:• Document the rationale for each score

– Add up the total scores for each competitor– Convert the total for each competitor into a percentage

(i.e. what proportion of the perfect score it achieved?) The resulting percentages indicate the relative

performance of each competitor




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Key success factors and index of key success factors – illustrative output

Note: The scale does not matter. A five-point maximum per factor is convenient because people are used to making five-point scale evaluations.

Relative Importance for As National Marketer As Regional Marketer

Effective Distribution

Strong Brand

National Marketer

5

Regional Marketer

4

Competitor A

4

5 3 5

Competitor B

2

Competitor A

4

Competitor B

3

3 3 4

Innovative Product

Tiered Pricing

2 3 2

2 3 1

1 3 2

1 3 2

Multiple Segment Participation

Low Cost Manufacturing

4 1 4

1 3 1

1 1 1

1 3 3

High R&D spend

Total

2 1 2

21 18 19

2 1 1

11 18 16

19/21

= 90%

11/21 18/18 16/18

= 52% = 100% = 89%

Index of Key Success Factors—Hypothetical Example

Source: MAC Group, Core Practice Manual.




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Key success factors & index of key success factors – guidelines

Key Success Factors – Identification Techniques

I

II

III

IV

Technique Focus

Environmental analysis (e.g. PEST)

Macro

Analysis of industry structure (e.g. Porter, Value Chain)

Industry Macro

Industry/business experts Industry Micro

Analysis of competition (focus is limited to the competitive environment, how firms compete)

Industry Micro

Sources Advantages Disadvantages

• Environment scanning (Corp. Staff)

• Econometric models• Socio-political consulting

services

• Future orientation• Macro orientation: analysis goes

beyond industry-firm focus• Can be linked to threats/ opportunity

evaluation

• More difficult to operationalise into specific industry or firm KSFs

• Results may not lend themselves to incorporate usage in current timeframe (today’s KSFs)

• A variety of industry structure frameworks

• Specific focus is on industry• Frameworks allow user to

understand interrelationships between industry structural components

• Can force more macro level focus (beyond industry boundaries)

• While excellent source for industry-wide KSFs not so useful in determining firm-specific KSFs

• Industry association executives

• Financial analysts specialising in industry

• Outsider familiar with firms in industry

• Knowledgeable insiders who work in industry

• Means of soliciting “conventional wisdom” about industry and firms

• Subjective information often not discovered with more objective, formal and analytical approaches

• Lack of objectivity often leads to questions in verifying/justifying

• Staff specialities• Line managers• Internal consultants• External consultants

• Narrowness of focus, offers, advantage of detailed, specific data

• Depth of analysis leads to better means of justification

• Narrowness of focus – KSF development limited to competitive arena (as opposed to industry structure approach)

Note“CSFs” = Critical Success Factors.Source:Leidecker and Bruno, Identifying and using Critical Success Factors, 1984.




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Key Success Factors

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Transcript of Key Success Factors