Gaining Strategic Advantage via Key Success Factors (KSF)

Key Success Factors (KSF) are the particular areas of an industry or business where a company can gain the most competitive advantage by focusing resources. They are the critical areas of “where to compete” and “how to compete.” Competing via the KFS means you attempt to do what everyone else does, but do it better. This translates to a “head-on” competition playing the “same game.”

Methodology

1. Define “where to compete”
• Identify potential customer and product segments
• Match product groups to market segments
• Identify revenue potential of segments
• Choose the most attractive segments to compete in
2. Define “how to compete”
• Identify value chain steps
• Identify variables within each step
• Identify the most critical points in terms of delivering value to the customers
• Choose the step which can provide sustainable competitive advantage
3. Perform benchmarking. Account for inadequacies and reformulate strategy. Evaluate company’s capabilities relative to competitors.
4. Make a strategic decision on key success factors. Determine if competing head-on via the KSF is a feasible way of attaining competitive advantage. Determine amount of investment into the KSF required to achieve competitive advantage.

Notes

• The key factors of success are specific to each industry. They are also characteristic of which step in the industry supply chain a firm is in
• Focus on the KSF distinguishes successful companies from unsuccessful ones
• The most necessary and fundamental focus area in business unit strategy

Strengths

• Illuminates the important factors of the where and how to compete
• Identifies the driving forces of the industry
• Much can be learned by studying competitors and how they succeed and failed
• Brings together numerous techniques to create coherent strategic prioritization

Weaknesses

• Can limit innovation if efforts are not made to challenge the underlying assumptions of the industry
• Can lead to stagnation and stalemate in a slow growing industry
• Can leave a company susceptible to innovations by competitors or new entrants
• Forces a competition in which the winner is the one that “does it best,” not necessarily differently