Ability to execute on CSFs
Chapter 7
New Business Road Test
The 7 domains of attractive
opportunities
Market domain
Industry domain
Market
attractiveness
Macrolevel
Industry
attractiveness
Team domain:
•Mission
•Ability
Microlevel
Refresher
•Connectedness
Target segment
benefits and
attractiveness
Sustainable
advantage
Entrepreneurs must be able to:


Identify the critical success factors (CSFs)
specific to their particular industry
Assemble a team that can execute on
these factors
Two key questions to ask to
identify your industry CSFs


Which few decisions or activities are the
ones that, if gotten wrong, will almost
always have severely negative effects on
company performance?
Which decisions or activities, done right,
will almost always deliver
disproportionately positive effects on
performance?
A CSF for retailing: Location



Starbucks’ process of site
selection was enormously
time consuming.
One real-estate error
represented a $500K mistake
Starbucks closed only 2 of
the first 1,000 stores it
opened
3 high-tech CSFs for customer
needs



Anticipating and understanding customers’
real problems or needs
Understanding deeply an area of
technology and what it can and cannot
deliver, both today and tomorrow
Finding ways to harness the technology to
resolve these problems or needs. Can the
customer’s pain be relieved?
3 broad strategic approaches in
mature manufacturing industries



Operational excellence: lead the industry in
price and convenience (Wal-Mart)
Customer intimacy: focused on individualized
service to each customer (Harrah’s)
Product leadership: provide a continuing flow of
state-of-the art products or services to stay at
the industry’s cutting edge (Palm)
Treacy & Wiersema, 1993
CSFs for manufacturing
strategies

Operational excellence


Minimize all costs
Optimize business processes for extreme
efficiency and effectiveness
CSFs for manufacturing
strategies

Customer intimacy


Gather detailed information about each
customer to assign them to a micro-segment;
tailor the offering specifically to that
segment’s needs
Segmentation can be so precise that an
offering may be tailored to a micro-segment of
one
CSFs for manufacturing
strategies

Product leadership



Creativity, to recognize and embrace ideas
that may originate outside the company
Optimize business processes for speed to
bring these ideas to market quickly
Relentlessly pursue new solutions that may
obsolete those that the company has just
introduced.
CSFs for manufacturing
strategies

Effective, efficient value-chain
relationships


From suppliers, manufacturers need
reliability, quality, and on-time delivery at an
affordable price
From resellers, they need a commitment and
sell-through – a commitment that a
manufacturer wins be being a reliable supplier
of quality products itself
Investors want to know that:


The lead entrepreneur has identified and
embraced the CSFs in the industry they
propose to enter, as well as the market
and competitive environments they will
encounter
The lead entrepreneur has assembled a
team that can demonstrate in past deeds
that it can execute on every CSF
Palm Computing (then…)
Palm Computing (…and now)
Jeff Hawkins



Late 1980s: GRiD Systems – 4.5-pound
pen/tablet computer for $2500
1993: Palm’s Zoomer – heavy and
cumbersome handheld device for $700
sold 20,000 units in first two months
1996: Palm Pilot 1000 – fast, easy to use
organizer for $149 sold 1 million units in
18 months
Palm’s CSFs



What did the customers really need?
Palm’s competition was paper, not
computers
What could (and couldn’t) technology
deliver? Graffiti, screen space solutions
Harnessing technology? Design discipline
and better operating system ensured
simple features and design
Palm’s execution on the CSFs



Understanding customers’ real needs: Focused
on small and simple product.
Understanding deeply an area of technology:
Hawkins resolved handwriting recognition with
Graffiti
Finding ways to harness technology to meet
customers’ needs: Passion about the look and
feel of the Pilot prevented compromises