Assignment 6

Identify and discuss the steps for "critical success factors" approach?


Critical success factor

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.

So many important matters can compete for your attention in business that it's often difficult to see the "wood for the trees". What's more, it can be extremely difficult to get everyone in the team pulling in the same direction and focusing on the true essentials.
That's where Critical Success Factors (CSFs) can help. CSFs are the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project.

By identifying your Critical Success Factors, you can create a common point of reference to help you direct and measure the success of your business or project.
As a common point of reference, CSFs help everyone in the team to know exactly what's most important. And this helps people perform their own work in the right context and so pull together towards the same overall aims.

The idea of CSFs was first presented by D. Ronald Daniel in the 1960s. It was then built on and popularized a decade later by John F. Rockart, of MIT's Sloan School of Management, and has since been used extensively to help businesses implement their strategies and projects.
Inevitably, the CSF concept has evolved, and you may have seen it implemented in different ways. This article provides a simple definition and approach based on Rockart's original ideas.

The advantages of identifying CSFs are that they are simple to understand; they help focus attention on major concerns; they are easy to communicate to coworkers; they are easy to monitor; and they can be used in concert with strategic planning methodologies. Using critical success factors as an isolated event does not represent critical strategic thinking. But when used in conjunction with a planning process, identifying CSFs is extremely important because it keeps people focused. Clarifying the priority order of CSFs, measuring results, and rewarding superior performance will improve the odds for long-term success as well.

Critical success factors cannot be specifically defined for the masses because success can be defined quite differently by each individual, and for the goal at hand. Therefore, in order to identify critical success factors, it is first necessary to come to terms with your own personal definition of success. Each individual’s own definition of will be influenced by several key factors:

• Success is subject to individual interpretation based on upbringing, past experiences, role models, personal motivations and goals. For some it might be to own a home in an upscale neighborhood, while for others it might be a career in the Peace Corps. Carefully contemplate your definition of success based on your values—not what your brother-in-law or Madison Avenue tells you it is. Your own definition of personal success directly influences critical factors leading to that success.

• Your view of success will change at various times throughout your life. For example, what might be deemed successful in college or on your first job is very different from successfully raising a family or comfortably retiring in the Caribbean. Your definition of success will continue to change, so don’t make the error of pursuing an outdated version of it. Success factors will change over time.

• Personal success is sometimes measurable and sometimes not. Accumulating a certain amount of wealth is one way to measure success, but it is not the only way; a successful marriage may be far more meaningful to many people and can only be measured by how the two partners feel about each other as the years go by.

• Very few people achieve success accidentally. Most people who achieve success first defined it then planned for it; they set a goal to achieve it. Critical success factors change with the goal.

There are four steps of CSFs:

Industry CSF's follows from specific industry characteristics.

Different industries have different CSFs. Even within same industry CSFs are not identical from company to company. For example:
Objective: Achieve market share locally of 15%.
CSF: Increasing of customers quantity, increasing of competitiveness versus other local shops.

Strategy CSF's follows from the selected competitive strategy of the business.

It depends on how company positions itself on market, what is the strategy of business and development.
Objective: Decrease time of client servicing to 50%.
CSF: Install PC-ba
sed customer service system.

Environmental CSF's follows from economic or technological changes.

These factors represent environment in which company operates. They include things like the business climate, the economy, competitors, sociopolitical issues, technological improving and so on.
Objective: Expand assortment of goods to attract more consumers.
CSF: Discovery of new required local suppliers, arrangement of win-win relationship with them.

Temporal CSF's follows from internal organizational needs and changes.

These are temporary conditions or situations in which the organization must achieve success in order to ensure safety of successful accomplishment companies main goals.

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: Increasing what you know is profitable.
• Strategic relationships: New sources of business, products and outside revenue.
• Employee attraction and retention: Your ability to extend your reach.
• Sustainability: Your personal ability to keep it all going.

The 5 Critical Success Factors in Business

There are five business success factors (critically important core profit principles) that all businesses share - both small business and large. In times of economic crisis like these, they are essential. And, they can make the difference between just getting by - or you getting ahead in your business.

Here, we'll explore what they are - and how you can put them to work for you in your own business. These principles form the basis for most success in business achieved by entrepreneurs, business owners, business managers, and professionals. Without following them at least to some extent, you'll find business to be a struggle - and much less rewarding than it could be.

As you read this, see how well your own thinking and actions in business stack up to these five core principles:

1) Profits are essential for your business to succeed - they are what pays you.

You don't have to look far to find examples of businesses imploding due to lack of profits. (The current banking and financial crisis immediately comes to mind... Or, remember the dot-com bubble?... the spend, spend, spend your way to market share type of thinking.) And, those are just some larger, more visible examples... small businesses are at even more risk.

Ultimately, profits are the essential key ingredient for business survival - and your focus on them is key. The very existence of your business depends on a steady-stream of profits... to pay your bills... your salary... your employees... your vendors and suppliers... and to secure your financial future.

Profits make the difference between the success or failure of your enterprise. They're the essence of being in business and are the fruits of your labor. Without profits (or deep pockets), you can't last long.

2) Most businesses miss profit opportunities on almost every transaction or customer/client relationship - and are limiting their incomes without even knowing it.

Here again, you won't have to look far for examples. Just think of all the leads that don't get proper follow-up, the customers/clients that receive only occasional communications (if any), the up-sells, cross-sells and add-on sales that could have been part of a given transaction, the unrealized intangible opportunities that exist in your customer/client or vendor/supplier relationships - and you can begin to see a sad pattern.

It's a pattern of profit opportunities gone by... wasted utilization of assets... or under-realized profit potential in your transactions. In many cases, business owners, managers and professionals are completely unaware of their lost profit opportunities.

Make your expenditure of time, energy, capital, and resources produce more for you - and capture the money that most businesses miss. Think about your sales, marketing, and advertising process as a total package - and create, test, and put in place processes that take advantage of strengths in your business.

3) Stability and security comes from creating a "Web of Profits" in your business.

Do you have a number of different sources within your business to support you? Or, are you relying on only a few? Or, even worse, relying on only ONE primary source of profit?

The majority of businesses rely on fewer than five profit sources - and think in terms of "profit centers." In other words, a collection of different channels of profit from individual sales of products or services (retail), bulk sales (wholesale), joint ventures, ownership interests, licensing and/or other arrangements, and so on.

But, when you create a "Web of Profits" in your business - that is, an interconnected approach that integrates a variety of profit sources and activities together into a single unit of functionality - you stand a better chance of leveraging your business in new ways.

4) The focus on Increasing Profits is more beneficial than the focus on Cost-Cutting.

In times of recession or economic crisis, sometimes cost-cutting is the only logical and sane option. If you're bleeding... you stop the bleeding before anything else. But, when it comes to cost-cutting, the effect is temporary and fleeting. Once you've drastically reduced your expenses, any additional cost-cutting might hurt your business's effectiveness and viability.

Crisis management aside, it's much better to focus on getting more business, to create new profit sources, run better promotions, do better advertising and marketing, and generally operate your business in a more customer/client oriented way.

That's what eases the pressure from high-costs... and provides you with what you need from your business. The thinking that goes into a profit-oriented focus and mindset can often provide innovative and inspirational breakthroughs in results.

5) Strategically plan for Profits - and take the specific action steps needed to implement your plan.

Being laser-focused on profits - rather than your strategic planning being primarily focused on revenue - takes you to the next level in your business plan. You'll be able to see alternative profit possibilities - and the action steps needed - so you can build them directly into your plan.

By their very nature, business plans focus on the bottom-line - and usually they just focus on the obvious sources - not necessarily on the alternative profit possibilities. And it's these alternative profits that most businesses miss... profits that could even eclipse what's being produced by your current business activities.

Sources:

http://en.wikipedia.org/wiki/Critical_success_factor
http://www.mindtools.com/pages/article/newLDR_80.htm
http://www.e-competitors.com/Strategy/SBUPlanning/SBUPositioning/SBU_Critical.htm
http://www.articlesbase.com/business-articles/the-5-critical-success-factors-in-business-639661.html

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