Analyzing the Industry for Key Success Factors

In our last blog, we took a look at, and charted, how longer-term trends will impact your company and its customers. Armed with this data, we can now undertake a study of the broader industry.

This is a critical step if we are to identify the key success factors (KSFs), and determining how they fit with your company’s strengths and offerings. The work should be undertaken by the full executive team, to ensure diversity in thinking and buy-in to conclusions. This will be a huge help later, in the implementation phase.

Start the work by confirming basic demographics: Count how many competitors there are; determine if they are similar in size, or if the competitive landscape features a few large players with a longer tail of mom and pops. Estimate the size of the market in both volume and revenue dollars and how quickly it is growing (or shrinking). Look at profitability of the current market participants and try to determine if there is a threshold percentage of market share needed to make money.

Thinking in terms of a life cycle, estimate where the industry is on the curve –Development, Introduction, Growth, Maturity, or Decline – this is defined on the graphic below:

Illustration: Marketing-Insider

Look for signs of disruption, either through technology or a changed business model. If the industry is mature or in decline, look for innovations, new products, or processes that could help the life cycle restart.

On a whiteboard or in a spreadsheet, plot how many customers there are and sort them by type. If there are large dominating customers, look for patterns and levels of concentration.

Supply Chain Considerations and Differentiators

Investigate how supply chain and distribution is organized, to understand whether competitors are selling direct or through distribution channels. Are there company sales forces, manufacturing reps, or ecommerce options? Map leading product categories and solutions, then determine the degree of standardization, lead times, and common custom elements.

How do competing offerings differ from each other? Are there both direct competitors and substitutes? Competitors can be regional, national, or international; can have deep pockets; or can be cash-starved. Some might be vertically integrated from raw materials to manufacturing to distribution, while others can be small or highly niched. How does this affect their competitive strength?

Are competitors owned by private equity groups, or are they part of divisions in larger corporations? If so, do they enjoy economies of scale — through volume pricing — in purchasing, manufacturing, or supply chain? Likewise, experience curves may allow unit cost to go down after a large number of units have been manufactured.

A key determination to make is how easy it would be to enter (or difficult to exit) the market. The need for large capital investments can be a powerful barrier to entry, as with pending investments by competitors. Another inhibitor is when the customer and one of your competitors are deeply integrated — even, perhaps, sharing manufacturing assets or overlapping supply chains.

Key Success Factors, Explained

Based on this analysis, you now have the information and insights needed to effectively compete in an industry. These key success factors (KSFs) are the things you must do, and do well, to have success.

To avoid getting lost or overwhelmed, it is important to prioritize your KSFs. The most critical ones should be a small enough number that each one can receive full executive focus.

To jumpstart your thinking, I have listed some typical KSFs I have used at one point or another in the table below:

Examples of Key Success Factors for Industrial Companies 

As you might recall, the purpose of a strategy is to maximize business value with a limited set of resources. Hopefully you now understand that a solid strategy focused around mission-critical KSFs allows a company to profitably grow, while compensating for any internal weaknesses and external threats.  

We hear about companies using different strategies like “growing by acquisition,” “organic growth,” “international expansion,” or “divide and conquer.” These really are not strategies, but rather tactics that can fit under different strategic frameworks. We’ll explore these frameworks in greater detail in our next blog.