Developing Commercial Awareness

Understanding How Businesses Make Money


Kate is a successful HR manager, and she has just applied to become Head of Department. There are many competitors for the open position, but Kate manages to impress the board during her interview.

She demonstrates an in-depth understanding of how the organization works, and she outlines how HR can help strengthen their market position. She explains how she's negotiated with recruitment agencies to bring their fees down from 15 percent to 12 percent, and how she plans to keep rates competitive.

She also outlines several important trends that she has noticed in competitors' hiring practices, and she details her plan to take advantage of this information, so that the organization can recruit top talent.

Boost your business acumen with a crash course in commercial awareness.

These insights are news to the board. But they also show that Kate is focused on the bottom line, that she cares about the organization, and that she's interested in how the HR department can improve the company as a whole.

Kate wins the promotion because she has demonstrated commercial awareness. She saved money where she sensibly could, she knew what was happening with competitors and within the wider industry, and she used this information to help her organization succeed.

Commercial awareness, or business acumen, can make an enormous difference in your career, whether you're just starting out or you're an experienced professional. With it, you'll make sensible, well-informed decisions. Without it, your decisions will be naïve, and people will quickly lose confidence in you.

In this article, we'll discuss what commercial awareness is, and we'll look at how you can build it in your career.

What Is Commercial Awareness?

The Cambridge Business English Dictionary defines commercial awareness as, "the knowledge of how businesses make money, what customers want, and what problems there are in a particular area of business."

In other words, commercial awareness is an understanding of what your company needs to do to be profitable, be successful, and serve its customers well. With it, you know your organization's core values, biggest competitors, key stakeholders, and current business challenges. You also know the organization's strengths and weaknesses, and you can apply that information to make sensible decisions.

Benefits and Uses

Many companies see commercial awareness as a key requirement in potential recruits. People who take the time to understand how the organization operates and makes a profit – as well as how the industry as a whole works – are the sort of people who then demonstrate a high level of motivation, interest, and focus on the bottom line. This awareness helps new hires "hit the ground running" and make informed decisions, right from the start.

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Commercial awareness can also improve your performance in your current role. When you understand the industry that you work in, and know how your role helps your organization compete, you make better decisions, manage risks more effectively, get good prices from suppliers, strengthen your reputation as an expert, and increase your chances of promotion. Also, you're more capable of meeting your clients' needs.

No matter what role or industry you work in, commercial awareness is useful. Even professionals in nonprofits and the government will benefit from building it – in fact, commercial awareness can be a key personal advantage if you want to get ahead in these sectors.

How to Develop Commercial Awareness

Keep in mind that it takes work to build commercial awareness. You can't develop deep understanding overnight; and it should form part of your ongoing professional development. Your goal is to learn more about your organization, your market, and your industry.

Understand the Organization

The foundation of commercial awareness lies in developing a deep understanding of your organization, including how it works, how it makes money, and what it cares about most. Many tools and resources are available to help you uncover this information.

First, download the organization's annual report, and read it carefully. What do your organization's leaders say is important about the business, and how it works? And what metrics do they use to illustrate this? Then look at the financial results – is the business profitable, and where does it make and spend its money? This highlights key areas of attention.

Next, analyze the organization's mission and vision statements, core values , key result areas, and expressed goals. How does the organization make these come to life? (Once you understand these goals, you can use Deming's System of Organizational Knowledge to deepen your knowledge of the organization.)

Perform a PEST Analysis to learn about the political, economic, socio-cultural, and technological factors that affect the organization and its long-term strategy. Then look at the USPs or core competencies that the organization claims. What can you do to contribute to these?

Last, look carefully at your role. How do – or should – you add value to your organization? And what do you do that contributes to its goals, and makes life better for your customers? (If you're not sure, conduct a Value-Chain Analysis to determine which activities create the most value for your customers.)

Understand Resources and Suppliers

Every organization depends on resources and suppliers to operate effectively, and it's important to use resources effectively and get the best price for goods and services.

First, conduct a VRIO Analysis to understand the relative importance of your organization's current resources. This will help you determine which of these you will need to use particularly carefully, and whether access to these is helping or holding back your organization's success.

Next, examine the cost of these resources. Is your organization purchasing strategically? Are you getting the best prices? And are you putting enough effort into negotiating costs and contracts?

Also, are your suppliers giving you the service and support you need? Use the 10Cs of Supplier Evaluation to analyze your organization's suppliers and make sure that they're giving you the right level of service.

Understand Customers and Competitors

To understand your organization, you also need to know about your organization's customers and competitors.

First, make a list of your competitors. What are their strengths and weaknesses? How are they performing, compared with your organization?

Perform a USP Analysis and a SWOT Analysis . How does your organization stand with respect to its competitors? What are its biggest strengths and weaknesses? Are competitors taking advantage of any of these weaknesses? And have you identified a strength that your organization isn't taking advantage of?

Now look at your organization's target market. Who are these people? What do they care about? How does your organization segment the market , or create entirely new market? And what does this information tell you about the way you should work?

Stay Up-to-Date on Industry Developments

Keeping up-to-date on your industry is part of developing commercial awareness.

Start by subscribing to industry trade journals, periodicals, blogs, Twitter feeds, financial reports, and websites, and make time to read them on a regular basis.

Also, keep up-to-date on more general business developments by subscribing to an appropriate business publication or website. Or, watch a reputable business news program that not only reports the news, but that also offers an objective analysis of what the news means. This will help you understand current events and trends on a deeper level, as well as appreciating what those events might mean for your industry or sector.


The Wall Street Journal, in the US, and The Economist, in the UK, are good examples of business publications that you can read to develop your commercial awareness.

Trade organizations and professional networks are also good sources of information about industry events and happenings. For example, you can connect with other professionals in your industry through LinkedIn. This social-networking service also has thousands of industry-related online groups that you can join to expand your professional network, participate in discussions, and learn more about industry trends.


Remember, one of the advantages of developing commercial awareness is that it helps you form robust opinions, which are informed by the factors, influences, and trends that you see around you. When you get your information from reliable, objective sources, or from professionals that you trust, you help to ensure that your judgment is sound.

Evaluate and Prioritize Projects

Another part of developing commercial awareness is learning to evaluate and prioritize projects, so that you can ensure that your ideas are good before you try to sell them.

It's important to make sure that you prioritize projects that fit with your organization's strategy, and that you sense-check them to make sure that the idea is practical – a tool like Mullins' Seven Domains Model can help here.

To help you decide whether projects are likely to benefit your organization financially, carry out a Cost-Benefit Analysis , and use Net Present Values and Internal Rates of Return to decide whether to invest in projects. (Where appropriate, ask for help from your finance department to ensure that your calculations are robust.)

Key Points

Commercial awareness is the understanding of how your business – and your industry – operate and make money. When you demonstrate commercial awareness, you're focused on making money for your business and helping it achieve its aims. You have informed opinions on factors that affect its profitability or market share, and you understand its competitors and customers.

Commercial awareness is important when you're applying for a job. It will also help you perform better in your current role, improve your decisions, strengthen your reputation, and increase your chances of winning a promotion.

To develop commercial awareness, learn about how your organization operates and how it makes money. Stay on top of industry news and events, and use social-networking sites like LinkedIn to reach out to other professionals in your sector, and to participate in groups and discussions.

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