Critical Success Factors

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In the development of strategy, numerous factors or elements are involved in the process.

Two major elements are Key or Critical Success Factors and Critical or Strategy-Critical

Activities. These are components of strategy where the organization must excel to

outperform its competition in either attaining or maintaining a competitive advantage.

This also requires a clear understanding of the core competencies that will be needed to

underpin these critical success factors (Johnson, 1999).

Critical Success Factors are those factors, usually three or four in any given industry,

that most affect the ability of an organization to prosper in the marketplace. They are

prerequisites for industry success (Thompson, 1998). These limited numbers of factors

are ones around which managers should have information systems designed and which

provide the basis for the organization’s success (Jenster, 1986). By its very nature, this

would imply a hierarchical structure of constructs. As such, they depict various levels

of decomposed relationships describing a complex organizational situation (Jenster,

1986).

Critical Value Activities

Critical value or strategy-critical activities are those activities in the firm’s value chain,

which are most critical to a firm’s achieving its competitive advantage. These are also

crucial business processes that have to be performed either exceedingly well or in a

closely coordinated fashion for the organization to develop capabilities for strategic

success (Thompson, 1998).

These activities are part of the firm’s value chain and can be classified in one of three

ways: Business value-added activities, which are those that add value to the process

from the firm’s perspective. An example would be the exploitation of economies of scale

in unused process/production capacity. Customer value-added activities are those that

add value to the process/product from the customers’ perspective. An example would

be in the ability to meet the customer’s requirements for product quality or timeliness in

delivery. No Value-added activities are ones in which neither the firm nor its customers

derive any added value and can be considered a candidate for outsourcing. An example

here would be the payroll function in many small and medium-sized organizations.

Paychex, Inc. is a prime example. By outsourcing this function, client firms are able to

redirect resources to those activities that can help their firm increase its competitive

ability.

The degree of success that an organization will realize is based on how well they address

the industry’s Critical Success Factors. Misdiagnosing the industry factors critical to

long-term competitive success greatly raises the risk of a misdirected strategy — one that

overemphasizes less important competitive targets and under-emphasizes more important

competitive capabilities (Thompson, 1998).

As strategy is implemented, the effects of these activities on the success factors may

have a tendency to shift over time given a particular situation the firm is facing. The

resulting magnitude of these effects will depend on the factors in the situation (reaction

by suppliers, competitors, and consumers), and the effect the information system has

that links these areas, and on the outcomes in those areas. The information system used

is one that will form both the linkages between these activities and the firm’s value chain

in addressing the industry’s critical success factors.

Strategy Analysis and Synthesis

When we begin to formulate strategy, we need to be able to identify the components or

elements that comprise a given situation and to understand the relationships between

them. To be able to properly understand and map these relationships requires both

analysis and synthesis. Analysis has been defined in various ways such as breaking

down of a goal or set of intentions into individual or separate steps (Mintzberg, 1994)

and the understanding of a company’s current position, analyzing what forces drive

competition in their industries, and what capabilities can be leveraged to effect a longterm

sustainable posture (DeKluyver, 2000). The level of analysis that we use will

determine at what level of the organization we will begin strategy formulation.

Synthesis has been defined as an ability to combine parts or elements so as to form a

whole, to begin by identifying the components and their relationships to one another,

the limitations imposed by the environment and the system’s resources (Campbell, 1977)

and as an integrated perspective of the enterprise (Mintzberg, 1994). Synthesis is very

important for developing an understanding of the relationships that exist not only at each

level in which strategy is formulated, but also among levels.

It is through analysis and synthesis that we can progress from cognitive mapping to

causal mapping. Using this perspective we can look at those causes and effects of

strategy overall, be able to move down and through the various levels, and develop an

understanding of the degree of integration within a particular level. It is this movement

we will use to drill down in getting to the specifics of a situation. This route is taken for

the simple reasoning that you must be able to understand the context of the situation

before you can develop it fully and then be able to have an understanding of the cause

and effect relationships at any level.

Situational cause and effect outcomes have, in the realm of strategy, two main outcome

components. These are long-term outcomes and short-term outcomes. Every level of the

organization has some aspects of each of these. For example, at the corporate level a

majority are strategic in nature, while at the functional level they tend to be more shortterm

or operational in nature. The business level would have relatively equal amounts

of both. The nature of these components is determined to a great extent by the situational

context and time frame horizon given industry and competitive dynamics. In general, we

can define long-term as a horizon extending beyond five years and short-term as having

a horizon of one year or less (Jones, 2003).

Basic Origins of Causal Mapping

In order to develop a better understanding of the use of causal mapping we need to look

first at its origin from concept mapping. The use of concept mapping as a tool in

understanding the broad-based (general) relationships and then progressing through

cognitive mapping and finally ending with causal mapping is the taxonomy used to

understand these relationships and the effects to strategy. To better understand the

linkages in this progression, these techniques are defined in Table 1.

The reason for this approach is to gain a better understanding of the need for information

in all aspects: quality, quantity, timeliness, relevance, as well as the cause and effect

results in deficiencies in these aspects. The need for developing such a framework comes

from the fact that “quality information is critical to decision making.” (Crockett, 1992)

Technique Definition

Concept Mapping Diagrams indicating inter-relationships among

concepts and representing conceptual frameworks

within a specific domain of knowledge (Novak,

1990; Trochim, 1989)

Cognitive Mapping A general class of physical representations of

thoughts or beliefs. These maps can represent

individual assertions, or those elicited from a group

(Huff, 1990; Montazemi et al., 1986)

Causal Mapping A sub-class of cognitive maps that focuses on the

representation of causal beliefs; A network of causal

relations imbedded in an individual’s explicit

statements, an explicit representation of the deeprooted

cognitive maps of individuals. (Huff 1990;

Nelson et al., 2000)

Table 1. Techniques of mapping