Developing Business Acumen Within Your Organisation

Since its inception, Peoplesource Consulting has worked with some of the world’s leading companies helping them drive their strategy execution initiatives through. One thing we have noticed as a pattern is that while each company’s strategic journey is unique, one issue remains constant: business acumen is required in order to make the right decisions at the right time in turning strategy into action.

With volatility, uncertainty, ambiguity and the rate of disruption increasing to unprecedented levels, business leaders need new skills to help their companies turn strategy into action.

Business acumen, also referred to as commercial acumen, is an intuitive and applicable understanding of how a company makes money and includes strategic thinking, financial acumen, market orientation and innovation, collaboration and influencing skills. It is essentially the thought process, which you need for understanding the key factors behind issues related to a particular business action and the ability to comprehend the consequences of particular actions. It’s the ability to pick the right reactions and actions in complex situations, as well as the understanding of how different parts of a business relate to each other.

Developing business acumen will afford business leaders to have a comprehensive understanding of their business and how it creates value in order to achieve successful strategy execution. Leaders need to have a thorough understanding of their business model(s) and company strategy. They need to have a firm grasp of key success factors for both their core business and their emerging businesses. Within this context, they also need to have the financial acumen and strategic thinking skills to know how to drive growth, profitability and cash flow.

In accomplishing a company’s strategy, there are hundreds of decisions across multiple functions and management layers that have significant implications for revenue, profit, assets, cash and competitiveness. These decisions cannot be mandated by a top-down approach. Decision rights must be broadly distributed for an organization to maintain agility. This means all non-financial managers and leaders need to know how to manage budgets and forecasts and understand financial statement implications.

We have seen many clients pushing ownership of business and financial trade-offs deeper into their organization and even out to the frontline. To do this successfully and not create additional risk, decision-making capability must be intentionally developed. By fostering a “run it like you own it” mentality, you can improve decision making at all levels.

Business leaders today need to be able to see around corners and seize opportunities to be more collaborative with organizations outside of their traditional spheres of influence. The old do-it-alone “business fortress” mindset is being replaced by the need to share business insights and priorities between customers, suppliers and alliance partners.

In rapidly evolving industries like healthcare, for example, the interplay between insurance companies, hospitals, pharmaceutical suppliers and government officials needs be understood and navigated successfully by managers across all the connected organizations.

The Economist Intelligence Unit found that over 65 percent of surveyed senior leaders agreed that insufficient business acumen was a primary factor in limiting their organization’s ability to realize strategic goals. In addition, those who were market leaders in revenue growth were significantly less constrained with business acumen than those who performed below average, highlighting that business acumen capability may directly impact a company’s overall performance.

This essentially means that people with business acumen can create larger frameworks and use them for the benefit of the business. They are able to see the big picture and use the finer details to their advantage in the event of problems. When you are developing your business acumen, you therefore must focus on improving your analytical capabilities, enhance your logical thinking and remain disciplined in the face of tasks.

The emphasis on business acumen in today’s marketplace is a clarion call for line managers and talent leaders to think differently about what employees and leaders need to compete and win. Senior leaders and Managers all need these capabilities to lead their companies to sustainable growth. Developing these capabilities will create strategic alignment, improve business decision making, focus leaders on customers and markets, and teach leaders how to manage risk and embrace innovation. Imagine your leaders and managers at all levels having the capabilities listed above? What would the implications be for the company’s top-line growth, margins, cash flow, speed and agility in execution, customer loyalty and market share, company’s ability to navigate and influence industry control points to its advantage, rate of innovation in product, process and business model innovation?

Unfortunately, many leaders and managers are not educated about the big picture of their businesses. They have a narrow focus on their own departments and job functions. As a result, they aren’t able to make the link between their actions and the company’s success. This means they make decisions and take actions that don’t align with business objectives. For many companies around the world, implementing training in financial literacy and business acumen has helped bridge this gap.

When business acumen spreads through an organisation, leaders and managers begin to ask the right questions. They direct questions not only at the organisation, but also at themselves and their departments. These questions about processes, products, systems, staffing and more can lead to necessary and innovative decisions and actions. For example, questions that could get to the root of disappointing operating ratios include:

• Why have production costs gone up?
• How would a price change impact our margins?
• How do we compare both internally against other plants or business units and externally against our competitors?
• If our costs per unit produced have gone up, can we better control the efficiency of our production or service delivery?

When managers are asking the right questions, they become engaged in the process of impacting financial results. This, therefore, leads to more innovative ideas and better decisions.

Thinking of implementing these ideas in your strategy execution process or considering ways to train leaders and managers in your organisation to become more commercially savvy? Our Commercial Awareness for Managers training programme could be the solution you are looking for. Send us an email at [email protected] or give us a call on 08052727684 or 08098216501 for a conversation in confidence about your specific needs.