What do effective leaders at high-performing companies, such as Amazon, Samsung and Apple have in common? Customers rave about their offerings, competitors endlessly try to emulate them, and their profits are sky-high. To be sure, these leaders have tremendous skills in creating visionary products, attracting and retaining top talent, and forging strong partnerships. None of them, however, would be in their current place without solid business acumen.
Understanding the interconnected internal and external dynamics that drive financial success, as well as the ability to formulate and execute clever strategies, has been vital for these companies’ success and, crucially, for their profitability.
What is business acumen?
If business acumen is so important, what exactly is it, and how can we get more of it? The first thing to bear in mind is that business acumen is essentially an umbrella term for a set of distinct but interlinked skills. By definition business acumen is the ability to take a big picture view of a situation to weigh it up quickly and make a logical, confident decision. The ability to do this and have enough influence for others to agree with you has a positive impact towards achieving the objectives of the organisation.
Business acumen is financial skills
Firstly, financial acumen is key. It is not just the CFO who needs to have a clear understanding of what drives an organization’s cash flow and profits. From frontline managers all the way up to the CEO, a good understanding of how the company makes its money will allow employees at every level to make decisions designed not only to bring value to the customer, but also to ensure a healthy return for the organization. At the leadership level, solid financial skills are necessary in order to effectively manage portfolios, optimally allocate scarce resources, and set result-driven strategies.
Business acumen is knowing your market
As well as understanding the internal dynamics of what drives performance, business acumen entails a thorough understanding of the market and other external factors. Knowing one’s customers and how to create value for them is essential. Business savvy managers must also develop an unbiased and clear understanding of competitive offerings and the ways in which they differ to their own. However, in the VUCA (Volatile, Uncertain, Complex and Ambiguous) world in which many organizations operate today, customer and competitor insights may not be enough. Leaders must also be able to effectively analyse wider social, political and economic trends and disruptions and act decisively to secure their organization’s success.
Business acumen is a connecting strategy
The final core aspect of business acumen relates to strategy. Business savvy managers need to step away from narrow functional silos to focus on a big picture view of their organization. Understanding the complex interrelations and mutual dependence of different functions or business units is vital in developing a clear, decisive and result-driven strategy. Connecting that strategy to tactical execution is, of course, the final prerequisite for developing excellent business acumen.
Creating and developing business acumen within your organization
Business acumen is important for all types of employees and employers, no matter the role or industry. Fortunately, it’s possible to create and develop business acumen amongst your team and there are quite a few effective ways to do so.
Business strategy development and application
The best business acumen initiatives will begin the learning process with the creation of a business strategy, from there learners should be equipped with the best tools, information, models and framework to implement the strategy effectively.
Gain a clear understanding of financial acumen, or ‘financial literacy’.
Once participants have a clear and in depth understanding of business strategy, it is vital for them to be able to understand financial acumen. This can be achieved through presenting participants with the means to be able to make hypothetical financial decisions. Use balance sheets, cash flow data and set metrics to measure business and personal performance.
Tools, skills and concepts of marketing
Today’s complex marketing ecosystem means participants must have the knowledge and understanding to be able to effectively navigate the various tools and pieces of software commonly used to automate and save time on repetitive processes. Tools such as Hubspot and Active Campaign have changed the marketing landscape, so it is important to provide tasks and learning activities to develop things like marketing and sales alignment, utilizing social media, pay per click advertising, digital remarketing, and instant customer usage of data are new concepts that must be part of an evolved business acumen learning strategy for companies to be successful.
Supply chains and and manufacturing
Every industry has a supply chain, in some form, and it’s vital to understand how it works, and how it is relevant to your role. From building relationships with suppliers and internal stakeholders to gathering business intelligence to make better informed decisions. Someone with good business acumen should be able to become more involved in critical thinking, and actions that determine success for their business and industry.
Fortunately, this vital competency is something that can be learned. One of the most effective ways to create strong business acumen among a cadre of managers is through experiential learning. Business simulations, such as those offered by StratX, are an ideal way to develop this skill in a true-to-market yet risk-free environment.
To learn more about the benefits of using experiential learning to develop business acumen, download our free Experiential Learning User’s Guide today.