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In an era of political uncertainty, fluctuating markets and technological disruption, ‘business acumen’ is becoming an increasingly important leadership quality. But what exactly does it mean, and how can it be developed in organizations?
What Is It?
Business acumen is defined as “keenness and speed in understanding and deciding on a business situation”.
Broadly speaking, it can be broken down into three components: market awareness, strategic perspective, and financial understanding.
People who display business acumen are often described as having ‘a head for business’ or ‘good business instincts’. When faced with decisions, they assess the available options, weigh them against long-term objectives, and settle on an appropriate course of action. They rarely make mistakes, but know how to react if something goes wrong, quickly taking steps to resolve the issue.
At face value, it can seem like these people are innately talented, or that their actions result from a ‘gut feeling’ of how to respond in different situations. While there’s no denying that some individuals are better suited to particular roles than others, many of the behaviors associated with business acumen can be learned over time.
Market Awareness
One of the key elements of business acumen is an understanding of the market in which you and your clients operate. By keeping track of competitor activity, as well as trends in the economic and political environment, you’ll be in a better position to identify the risks and opportunities that lie ahead. From a sales perspective, it’s also important to know exactly how your organization's products and services are being used and the need that they fulfill. Indeed, research has shown that commercial awareness is a significant factor in determining an organization’s ability to win new clients and retain existing ones.
Tip:
Whether it comes to crossing items off on your to-do list, attending meetings, or clearing out your inbox, the day-to-day demands of organizational life often make it difficult to step back and consider the big picture. Make a point of scheduling a little time each week for catching up on industry news by reading blogs, chatting with colleagues, or even attending a conference.
Where possible, seek out opportunities to engage with customers directly. If you identify a team member who you feel lacks market awareness, consider involving them in discussions with clients, or asking them to assist the sales team in preparing a pitch to potential customers.
Strategic Perspective
Another key aspect of business acumen is the ability to see how individual actions contribute to broader strategic goals. Developing a sound understanding of the purpose of every department, and how they interconnect, can help ensure your actions and decisions not only meet the needs of your team, but the overarching priorities of the organization. It’s often the case that individuals will be highly proficient in their respective fields, but lack a more general appreciation of the role they play in making the organization a success. Developing strategic awareness within your team can help prevent the formation of ‘silos’, which are harmful to organizational morale and productivity.
Consider:
- How well do you understand the function of each department in your organization?
- Could you or your team members benefit from learning more about other parts of the business?
If so, interdepartmental projects and secondments can help you and your team to develop strategic awareness. If these options are unavailable or impractical, consider approaching a colleague who works in an area you know little about. Ask if you can have a chat to them about what their particular section does, or even ask if you can attend a meeting in their department. When a new start joins your team, arrange for them to meet with representatives from each department.
Financial Understanding
The final component of business acumen is an understanding of the way money flows through organizations, and the financial metrics used to measure performance. When it comes to making decisions, you need to analyze the ‘business case’ for a particular course of action. Having a firm grasp of the numbers allows you not only to maximize potential returns from new initiatives, it will increase your own value within the organization.
Tip:
According to data from the Corporate Research Forum, the best way to improve your financial understanding is through practical, hands-on experience. [1]
Although many organizations will be reluctant to delegate financial responsibility to anyone below a senior-management level, there are other means of developing commercial acumen. For instance, ask if your organization runs any course on financial management. Or ask someone who deals with budgets and forecasts to explain some of the key terms and processes to you. You might also consider giving one of your team members control over the budget of a small, low-risk project. This will allow them to develop their understanding of financial management, and their responsibilities can be increased as they gain experience.
Summary
Business acumen is not an innate quality. Rather, it is a skillset and mindset that is learned over time, and maintained through continuous improvement. By developing your market, strategic and financial awareness, you can make well informed decisions and increase the value you bring to your organization.
