Identify and discuss the steps for "critical success factors" approach?
What is a Critical Success Factor?
Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success your business. The term was initially used in the world of data analysis, and business analysis.
Most smaller and more pragmatic businesses can still use CSF’s but we need to take a different, more pragmatic approach.
Critical Success Factors have been used significantly to present or identify a few key factors that organizations 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 organization”
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.
A slight distinction must be made when considering CSFs as a strategic driver at the organ-izational or enterprise level (as is done in this report). In this context, CSFs are more than just guiding principles; instead, they are considered to be an important component of a strate-gic plan that must be achieved in addition to the organization’s goals and objectives. While this distinction is subtle, it is intended to point out that an organization’s CSFs are not just to be “kept in mind”; their successful execution must drive the organization toward accomplish-ing its mission.
Many definitions of a CSF at the strategic planning level have already been provided in this report. In his seminal work on CSFs, Rockhart provides a useful summary of similar but dis-tinct definitions [
• key areas of activity in which favorable results are absolutely necessary to reach goals
9 This section relies heavily on the description of CSFs as documented in the original primer by John Rockhart and Christine Bullen [Rockhart 81]. Their work is still widely recognized as the initial definition of CSFs and the CSF approach. CMU/SEI-2004-TR-010 11
• key areas where things must go right for the business to flourish
• “factors” that are “critical” to the “success” of the organization
• key areas of activities that should receive constant and careful attention from manage-ment
• a relatively small number of truly important matters on which a manager should focus attention
4 Types of Critical Success Factor
1. Industry CSF's resulting from specific industry characteristics;
2. Strategy CSF's resulting from the chosen competitive strategy of the business;
3. Environmental CSF's resulting from economic or technological changes; and
4. Temporal CSF's resulting from internal organizational needs and changes.
Industry CSFs:
Every organization inherits a particular set of operating conditions and challenges that are inherent to the industry (or segment of the industry) in which it chose to do business. This results in a unique set of CSFs that organizations in a particular industry must achieve to maintain or increase their competitive positions, achieve their goals, and accomplish their missions. For example, consider an organization in the airline industry. As a member of this industry, the organization inherits CSFs such as “deliver on-time service” or “move away from the hub-and-spoke system.” Failure to achieve these CSFs may render the organization unable to stay competitive in its industry and may ultimately result in its exit.
Strategic CSFs:
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.
Environmental CSFs:
To be successful, an organization must be mindful of the macro environment in which it op-erates. A closed organization—one that does not fully interact with its external environ-ment—cannot survive in the long term. As a result, an organization must acknowledge the18 CMU/SEI-2004-TR-010environmental factors that can affect its ability to accomplish its mission. Environmental CSFs reflect the environmental factors over which the organization has very little control or ability to actively manage. By making these factors explicit, the organization can at least be mindful of them and actively monitor their performance relative to them.Environmental CSFs describe such conditions as current socio-political issues, the industry’s regulatory environment, and factors such as seasonality. For example, the airline industry has been dramatically affected by terrorist activities, which have forced changes in airport opera-tions and scheduling and have brought about new regulations with which airlines must com-ply. Unfortunately, airlines have very little control over this problem
Temporal CSFs
CSFs are tied to the long-term planning horizon of an organization. Over the strategic plan-ning period the organization’s CSFs may remain fairly constant, adjusted only when the or-ganization makes major changes, such as changing its mission or the industry in which it competes. However, at one time or another, every organization encounters temporary condi-tions or situations that must be managed for a specific period of time, while continuing to maintain its performance in all other areas. These temporary conditions or situations can re-sult in temporal CSFs—areas in which the organization must temporarily perform satisfacto-
CMU/SEI-2004-TR-010 19
rily in order to ensure that its ability to accomplish its mission is not impeded.
Things that are measured get done more often than things that are not measured.
Each CSF should be measurable and associated with a target goal. You don't need exact measures to manage. Primary measures that should be listed include critical success levels (such as number of transactions per month) or, in cases where specific measurements are more difficult, general goals should be specified (such as moving up in an industry customer service survey.
Sample Success Factors
• Understanding of Market
• Marketing Variables
• Decision making
A Critical Success Factor Method
Start with a vision:
• Mission statement
• Develop 5-6 high level goals
• Develop hierarchy of goals and their success factors
• Lists of requirements, problems, and assumptions
• Leads to concrete requirements at the lowest level of decomposition (a single, implementable idea) Along the way, identify the problems being solved and the assumptions being made Cross-reference usage scenarios and problems with requirements
• Analysis matrices
• Problems vs. Requirements matrix
• Usage scenarios vs. Requirements matrix
• Solid usage scenarios
• Relationship to Usage Scenarios
• Usage scenarios or "use cases"; provide a means of determining:
o Are the requirements aligned and self-consistent?
o Are the needs of the user being met as well as those of the enterprise?
o Are the requirements complete
• Results of the Analysis
In an attempt to write good CSF's, a number of principles could help to guide writers. These principles are:
• Ensure a good understanding of the environment, the industry and the company – It has been shown that CSF's have five primary sources, and it is important to have a good understanding of the environment, the industry and the company in order to be able to write them well. These factors are customized for companies and individuals and the customization results from the uniqueness of the organization.
• Build knowledge of competitors in the industry – While this principle can be encompassed in the previous one, it is worth highlighting separately as it is critical to have a good understanding of competitors as well in identifying an organization's CSF's Knowing where competitors are positioned, what their resources and capabilities are, and what strategies they will pursue can have an impact on an organization's strategy and also resulting CSF's
• Develop CSF's which result in observable differences – A key impetus for the development of CSF's was the notion that factors which get measured are more likely to be achieved versus factors which are not measured. Thus, it is important to write CSF's which are observable or possibly measurable in certain respects such that it would be easier to focus on these factors. These don't have to be factors that are measured quantitatively as this would mimic key performance indicators; however, writing CSF's in observable terms would be helpful.
• Develop CSF's that have a large impact on an organization's performance – By definition, CSF's are the "most critical" factors for organizations or individuals. However, due care should be exercised in identifying them due to the largely qualitative approach to identification, leaving many possible options for the factors and potentially results in discussions and debate. In order to truly have the impact as envisioned when CSF's were developed, it is important to thus identify the actual CSF's, i.e. the ones which would have the largest impact on an organization's (or individual's) performance.
Here are the ideas that, used iteratively, will help you identify the CSFs for your business or project:
Establish
your business's or project's mission and strategic goals (click here for help doing this.)
Think
of business or project activity is essential to achieve this goal?"
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.
Identify
how you will monitor and measure each of the CSFs.
Communicate
your CSFs along with the other important elements of your business or project's strategy.
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.
References:
http://rapidbi.com/created/criticalsuccessfactors.htm[flash][/flash]l
http://www.sei.cmu.edu/reports/04tr010.pdf
http://www.mindtools.com/pages/article/newLDR_80.htm
What is a Critical Success Factor?
Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success your business. The term was initially used in the world of data analysis, and business analysis.
Most smaller and more pragmatic businesses can still use CSF’s but we need to take a different, more pragmatic approach.
Critical Success Factors have been used significantly to present or identify a few key factors that organizations 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 organization”
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.
A slight distinction must be made when considering CSFs as a strategic driver at the organ-izational or enterprise level (as is done in this report). In this context, CSFs are more than just guiding principles; instead, they are considered to be an important component of a strate-gic plan that must be achieved in addition to the organization’s goals and objectives. While this distinction is subtle, it is intended to point out that an organization’s CSFs are not just to be “kept in mind”; their successful execution must drive the organization toward accomplish-ing its mission.
Many definitions of a CSF at the strategic planning level have already been provided in this report. In his seminal work on CSFs, Rockhart provides a useful summary of similar but dis-tinct definitions [
• key areas of activity in which favorable results are absolutely necessary to reach goals
9 This section relies heavily on the description of CSFs as documented in the original primer by John Rockhart and Christine Bullen [Rockhart 81]. Their work is still widely recognized as the initial definition of CSFs and the CSF approach. CMU/SEI-2004-TR-010 11
• key areas where things must go right for the business to flourish
• “factors” that are “critical” to the “success” of the organization
• key areas of activities that should receive constant and careful attention from manage-ment
• a relatively small number of truly important matters on which a manager should focus attention
4 Types of Critical Success Factor
1. Industry CSF's resulting from specific industry characteristics;
2. Strategy CSF's resulting from the chosen competitive strategy of the business;
3. Environmental CSF's resulting from economic or technological changes; and
4. Temporal CSF's resulting from internal organizational needs and changes.
Industry CSFs:
Every organization inherits a particular set of operating conditions and challenges that are inherent to the industry (or segment of the industry) in which it chose to do business. This results in a unique set of CSFs that organizations in a particular industry must achieve to maintain or increase their competitive positions, achieve their goals, and accomplish their missions. For example, consider an organization in the airline industry. As a member of this industry, the organization inherits CSFs such as “deliver on-time service” or “move away from the hub-and-spoke system.” Failure to achieve these CSFs may render the organization unable to stay competitive in its industry and may ultimately result in its exit.
Strategic CSFs:
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.
Environmental CSFs:
To be successful, an organization must be mindful of the macro environment in which it op-erates. A closed organization—one that does not fully interact with its external environ-ment—cannot survive in the long term. As a result, an organization must acknowledge the18 CMU/SEI-2004-TR-010environmental factors that can affect its ability to accomplish its mission. Environmental CSFs reflect the environmental factors over which the organization has very little control or ability to actively manage. By making these factors explicit, the organization can at least be mindful of them and actively monitor their performance relative to them.Environmental CSFs describe such conditions as current socio-political issues, the industry’s regulatory environment, and factors such as seasonality. For example, the airline industry has been dramatically affected by terrorist activities, which have forced changes in airport opera-tions and scheduling and have brought about new regulations with which airlines must com-ply. Unfortunately, airlines have very little control over this problem
Temporal CSFs
CSFs are tied to the long-term planning horizon of an organization. Over the strategic plan-ning period the organization’s CSFs may remain fairly constant, adjusted only when the or-ganization makes major changes, such as changing its mission or the industry in which it competes. However, at one time or another, every organization encounters temporary condi-tions or situations that must be managed for a specific period of time, while continuing to maintain its performance in all other areas. These temporary conditions or situations can re-sult in temporal CSFs—areas in which the organization must temporarily perform satisfacto-
CMU/SEI-2004-TR-010 19
rily in order to ensure that its ability to accomplish its mission is not impeded.
Things that are measured get done more often than things that are not measured.
Each CSF should be measurable and associated with a target goal. You don't need exact measures to manage. Primary measures that should be listed include critical success levels (such as number of transactions per month) or, in cases where specific measurements are more difficult, general goals should be specified (such as moving up in an industry customer service survey.
Sample Success Factors
• Understanding of Market
• Marketing Variables
• Decision making
A Critical Success Factor Method
Start with a vision:
• Mission statement
• Develop 5-6 high level goals
• Develop hierarchy of goals and their success factors
• Lists of requirements, problems, and assumptions
• Leads to concrete requirements at the lowest level of decomposition (a single, implementable idea) Along the way, identify the problems being solved and the assumptions being made Cross-reference usage scenarios and problems with requirements
• Analysis matrices
• Problems vs. Requirements matrix
• Usage scenarios vs. Requirements matrix
• Solid usage scenarios
• Relationship to Usage Scenarios
• Usage scenarios or "use cases"; provide a means of determining:
o Are the requirements aligned and self-consistent?
o Are the needs of the user being met as well as those of the enterprise?
o Are the requirements complete
• Results of the Analysis
In an attempt to write good CSF's, a number of principles could help to guide writers. These principles are:
• Ensure a good understanding of the environment, the industry and the company – It has been shown that CSF's have five primary sources, and it is important to have a good understanding of the environment, the industry and the company in order to be able to write them well. These factors are customized for companies and individuals and the customization results from the uniqueness of the organization.
• Build knowledge of competitors in the industry – While this principle can be encompassed in the previous one, it is worth highlighting separately as it is critical to have a good understanding of competitors as well in identifying an organization's CSF's Knowing where competitors are positioned, what their resources and capabilities are, and what strategies they will pursue can have an impact on an organization's strategy and also resulting CSF's
• Develop CSF's which result in observable differences – A key impetus for the development of CSF's was the notion that factors which get measured are more likely to be achieved versus factors which are not measured. Thus, it is important to write CSF's which are observable or possibly measurable in certain respects such that it would be easier to focus on these factors. These don't have to be factors that are measured quantitatively as this would mimic key performance indicators; however, writing CSF's in observable terms would be helpful.
• Develop CSF's that have a large impact on an organization's performance – By definition, CSF's are the "most critical" factors for organizations or individuals. However, due care should be exercised in identifying them due to the largely qualitative approach to identification, leaving many possible options for the factors and potentially results in discussions and debate. In order to truly have the impact as envisioned when CSF's were developed, it is important to thus identify the actual CSF's, i.e. the ones which would have the largest impact on an organization's (or individual's) performance.
Here are the ideas that, used iteratively, will help you identify the CSFs for your business or project:
Establish
your business's or project's mission and strategic goals (click here for help doing this.)
Think
of business or project activity is essential to achieve this goal?"
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.
Identify
how you will monitor and measure each of the CSFs.
Communicate
your CSFs along with the other important elements of your business or project's strategy.
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.
References:
http://rapidbi.com/created/criticalsuccessfactors.htm[flash][/flash]l
http://www.sei.cmu.edu/reports/04tr010.pdf
http://www.mindtools.com/pages/article/newLDR_80.htm
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