The Critical Success Factor

There are multiple factors that directly influence the health and wealth of business ventures. These factors may be diverse and different depending on the nature of the business. The Critical Success Factor, however, is common to virtually all business ventures.

The Critical Success Factor: Earn Rewards Solving Customer Problems Better than the Competition. It is do, or die. A venture dies for one of three reasons: 1] It didn't earn a profit; 2] It didn't solve its customer's problems; 3] It wasn't better than the competitive alternatives.

Earn Rewards Solving Customer Problems Better than the Competition ... The Critical Success Factor for all business ventures.

Critical ... having the potential to become disastrous
Success ... attains prosperity
Factor ... a circumstance that contributes to an outcome

* Earn ... Teamwork!  A business employs a team of people working together to continually and profitably solve customer problems better than competing alternatives. Healthy, growing ventures follow a clear business model. An educated, experienced, collaborative, communicative team with key core competencies is paramount to success.

* Rewards ... The monetary value captured by a business is appropriately called earnings. After all expenses are accounted, earnings become profit. Profit is a reward for doing a good job solving customer problems. A key source of growth funding for a business venture is earned profit. While the profit reward is "financial", the reward can and should have other elements, too. In a healthy venture culture it can actually be "fun" going to work and being part of the team, and their may well be some "fame" that results from delivering valued solutions to customers.

* Solving ... Solutions to customer problems are typically combinations of products, services, process, and methods. However, the world keeps changing as do customers and competitors. Solving customer problems, new and old, is a continuing process for sustaining a healthy venture.

* Customer ... Customers are the primary source of revenue for a business venture. Some business ventures may have only a few key customers, others may have many. A group of customers that share similar traits comprise a market segment. Many business ventures may serve multiple and varied market segments. A business venture exists to serve its customers.

* Problems ... Customer needs, wants, desires, and situations that can be adequately addressed  and resolved in a reasonable time and expense are good opportunities for a business venture.

* Better ... Continually improving value is critical to sustaining a competitive advantage. Scientists and engineers often think about innovative solutions in terms of the fit, form, function, features, and performance. The entrepreneur thinks in terms of the benefits customers will receive. Value is measured by comparing the benefits to the price. Value can be increased by delivering better benefits to customers, by lowering the price, or both. Customers decide what offers the better value. In the long run, the products, services, processes, and methods that deliver a better value win the business.  In short: Value = Benefits / Price

* Competition ... There are (almost) always competing solutions and ventures from other sources that are directly comparable to our solution. This competition includes indirect alternatives, substitutes, and replacements that could serve customer requirements. Best to assume we have competition, even if we don't yet know who or what. Competition is not always a bad thing ... competitors can help validate and build new markets, and sometimes competitors can become collaborative partners.

Innovation Impact Mindmap

For 20+ years, I taught in a University of Arizona entrepreneurship program.  This Innovation Impact Mindmap started on the whiteboard in my office, a graphic schematic of the course syllabus.  

A syllabus is sequential, but innovation and entrepreneurship usually is not.  They bounce around a bit, from here to there and round again. 

The whiteboard version was fairly simple, but useful.  Students and colleagues took pictures of it for reference.  So, I thought, why not elaborate it just a little bit?  

[OK, OK, so maybe a little bit more than just a little bit!]  

I've added elements that I thought would be most useful, but certainly not all apply to every new venture! The "main highway" is the mission statement, highlighted in yellow.

Think of this Mindmap as a checklist of the elements you might want to visit as you travel around on your new venture adventure! 

High resolution .pdf .jpg and .png versions are available HERE.

--Jim

How to Solve a Problem

Ah, a day without a problem would be ... well, a day without a problem!  Ever have one of those?  Lucky you if you have.

More likely, we'll have a nice set of problems today. Some readily solved, as we've solved them before (what's for lunch?).  Others will be new, unheard of, unexpected. Some easy, some not quite so. 

Here's a little guidance checklist to help us with the problem solving process ...

1. Define the problem.
2. Explore potential causes of the problem.
3. Identify alternatives for approaches to resolve the problem.
4. Select the best approach to resolve the problem.
5. Plan the implementation of this approach.
6. Implement the plan.
7. Monitor the results.
8. Verify if the problem has been resolved or not. If not, back to #1.

BTW, this is the core process for developing a new business venture.

--Jim

Scientific Method

So what do those scientists do to solve a problem?  They're usually pretty good at doing that.  The Scientific Method has been around for years, and is well refined.  Here 'tis ... we can apply it to most any problem. 

1. Purpose ... what do you want to learn?
2. Research ... find out as much as you can!
3. Hypothesis ... try to predict the answer to the problem, an "educated guess" ... "If I (do something), then (this will occur)".
4. Experiment ... design a test or procedure to confirm of disprove your hypothesis.
5. Analysis ... record what happened during the experiment ... collect data.
6. Conclusion ... review the data and check to see if your hypothesis was correct
7. Iteration ... change what didn't work and test it again.

Mission Statement ... The Critical Success Factor!

The world changes ... client needs, wants, desires; competitive offerings; economic environments; et alia.  

Every organization must proactively address change if it is to survive and thrive.  The four elements of the Critical Success Factor are excellent focal points for potential innovation in an organization.  

The Critical Success Factor statement is also an excellent Mission Statement template.

Critical Path ...

Ultimately, the function of a business venture is to satisfy customer needs, wants, and desires by transforming their problems into solutions (products, services, processes, value ...) and capturing a bit of profit along the way. 

How to Solve a Problem

1. Define the problem
2. Define a set of criteria for a good solution
3. Explore potential causes of the problem
4. Explore existing solutions
5. Identify alternative approaches for resolving the problem
6. Select the best approach for resolving the problem based on the criteria for a good solution (number 2 above)
7. Plan the implementation of this approach
8. Implement the plan
9. Monitor the results
10. Verify the problem has been resolved

[1.05]

Crucial Questions (CQs)

They have been called the six most powerful questions in the world.
They are core to journalism, to market research, to building personal wisdom, to ???

• Who?
• What?
• Where?
• When?
• Why?
• How?

Ask them at your own peril!

How to Make a Decision

1. Define the problem, characterizing the general purpose of your decision.
2. Identify the criteria, specifying the goals or objectives that you want to be able to accomplish.
3. Weight the criteria, deciding the relative importance of the goals.
4. Generate alternatives, identifying possible courses of action that might accomplish your various goals.
5. Rate each alternative on each criterion, assessing the extent to which each action would accomplish each goal.
6. Compute the optimal decision, evaluating each alternative by multiplying the expected effectiveness of each alternative with respect to a criterion times the weight of the criterion, then adding up the expected value of the alternative with respect to all criteria.

[Thank you, Paul Thagard]