Critical success factor analysis as a tool for strategy execution

Few years ago I participated an executive education program in SIMI, Copenhagen. One of the learnings I’ve used afterwards the most was a strategy audit method introduced by professor Ralf Boscheck.

The key question is What are the critical success factors of your strategy? Now you may say “Hey, we have that kind of list already!”. Most of the critical success factor lists I’ve seen are truly lame. Really, they’re same type as the traditional statement “Our employees are our key success factor”. Yes, that’s very critical success factor, but not really precise. What kind of employees and which part of organization? A real deep dive to critical success factors really pay off when executing your strategy.

This is how it basically goes: Split any of your critical success factor in to three parts: 1) Assets needed to manage the factor, 2) Capabilities – people – needed to execute the factor and 3) Systems (not IT) needed for managing the business process of that particular critical part. If you compare those individual factors to your best competitor or to market ideal you’ll find the gaps to them. Based on the gap analysis you are able to define the precise areas where key strategic initiatives are needed.

This spring I’ve noticed that it is worth of considering to integrate strategy maps and balanced scorecard thinking for above described method. At least a simple strategy map is good solution to communicate growth, process, customer and financial perspectives of the defined strategic initiatives.

Splitting the success factors into three pieces, analyzing the gap and executing initiatives to reach the gaps that your competitors have and pass them. Add P&L, risk analysis, go trough at least couple scenarios and finally map your strategy and there you are. Simple, very efficient and easy to communicate.

Update July 2, 2009: This recent post is related to the topic above.

Picture above used under CC license. Credits to JPhilipson.