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What are Critical Success Factors?

By Kerrie Main
Updated May 16, 2024
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There are many aspects to running a profitable business, and having defined critical success factors is imperative for growth and maximizing revenue. Simply put, a critical success factor (CSF) is an element that is necessary to have in order to be successful. These factors vary from industry to industry, and they often change and evolve over time. In order to qualify as critical, the identified element must have a target goal and be measurable. In the majority of businesses, however, there are four major types: industry CSFs, strategy CSFs, environmental CSFs and temporal CSFs.

Industry factors are found across the board in different companies from the same industry. Each industry typically has unique, specific factors that affect business success or failure. Company initiatives and strategic plans will be different from business to business, but the underlying success factors are similar. An example of this is the airline industry: most airline companies focus their CSFs around customer service personnel, route systems, revenue and products, such as planes, reservation systems, and seating classes. Business analysis usually is conducted before the CSF is defined to determine what is and isn’t realistic for the current state of the industry.

Strategic critical success factors typically are created after reviewing and incorporating marketing research and business analysis. The CSF usually will depend on the company’s current ranking in the industry, current resources, target market, and organization’s values. Some examples include identifying new sources of business or product launches, revenue, and profit margin growth opportunities; increasing business with current customers; and attracting new clients. Sustainability usually is an important facet of the strategic CSF as well.

When a company experiences changes from economic conditions or technological advances, environmental factors typically are identified. These CSFs are important because they consider outside factors that cannot be controlled by the company, such as political developments, regulatory changes, an economic crisis and demographic changes. These factors must be thought of so that backup plans of action can be created. For example, a company might consider upcoming tax legislation laws when making budget plans.

Temporal CSFs are considered plans for unexpected internal organization changes. They usually relate to short-term crisis situations, including loss of upper management personnel or natural disasters. These are also necessary if a company is planning to expand into new markets or create a new product design, because those activities typically involve hiring new management and personnel.

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